Following fourteen long months of speculation, Amazon finally announced its HQ2 destinations in early November, giving the spoils to Long Island City (a section of Queens in New York) and Crystal City (a Virginia town just outside of Washington D.C.). Amazon publicly announced their search for an HQ2 location back in September 2017, which was quickly followed by the clamor of cities vying for the e-commerce giant’s attention. After narrowing down to a list of twenty cities earlier this year, many were surprised when the rumor of two HQ2’s began to swirl and was finally confirmed by Amazon. 

Ever since the HQ2 announcement in fall 2017, market experts and the local media have expressed concern about how Seattle’s real estate market would be impacted. Would hundreds of Amazonians suddenly pick up shop and move to the newer, shinier HQ2? Was Seattle preparing itself to play second fiddle to this new destination?

As it turns out, Seattleites can breathe easy; HQ2 will not likely rival Seattle’s primary headquarters. Consider this: each East Coast city stands to gain approximately 4 million square feet of office space over the next few years as offices open. That figure, while impressive, is equal to planned expansion that’s already been announced in Seattle. And even if some Amazon tech workers relocate and other cities grow to rival Seattle’s footprint, greater job growth is ahead in the Emerald City for other tech companies including remote offices for Google and Facebook and the headquarter locations of Microsoft and Expedia.

The Great Divide

After promising the crowning city a staggering 50,000 lucrative tech jobs and $5 billion in investment, Amazon had 238 cities scrambling to put together offers for the tech giant to consider. And following the announcement of a split HQ2, the company drew criticism from many of its former candidates, who claimed they’d have altered their proposals had they been aware of a potential two-location outcome.

So, why divide? As The Wall Street Journal speculated in an article following the news, talent recruitment played an integral role, with executives hard pressed to find a destination they felt would lend itself to tech worker recruitment and retention. In addition, the Journal notes that splitting between two cities will help “ease potential issues with housing, transit and other areas where adding tens of thousands of workers could cause problems.”

To be sure, Amazon Founder and CEO Jeff Bezos seemed to reflect this sentiment in a statement following the announcement. “These two locations will allow us to attract world-class talent that will help us continue inventing for customers for years to come,” Bezos said. “The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities.” 

Emerald City Outlook

As Realogics Sotheby’s International Realty and others have predicted, the two new Amazon HQ locations will serve as additions to, rather than competitors with, Seattle. By dividing into two campuses, Amazon is set to expand in smaller outposts rather than building a bigger, better version of the Seattle base.

“This effectively resolves fears that Seattle’s rising star may someday fade as less expensive markets draw jobs away,” said Dean Jones, president and chief executive officer of RSIR. “I don’t find Long Island City or Crystal City to be particularly compelling for Seattleites or a bargain.”

Fundamentally, the Seattle metro area will continue to experience high housing demand, as the economy is fully entrenched in the tech boom, which was recently covered in a special RSIR feature, Trendlines vs. Headlines. And as Jonathan Sposato, co-founder of GeekWire, adds, “the

issue of Amazon hiring fewer people into Seattle will be what us tech people call a ‘null op.’ In other words, it will over time be a non-issue because our region will continue to birth new hiring engines regardless. The deal pipeline for startups getting capitalized has been so robust the last few years that another Amazon, Microsoft, Expedia, Zillow, Redfin or Tableau will emerge out of the last 10 years’ cohort.”  

To be sure, looking at Seattle alone, Amazon will reportedly occupy 15 million square feet of office space in downtown Seattle with current commitments, Apple is set to expand 70,000 square feet of office space with 500 additional employees, Google is working on 1 million square feet of office space in South Lake Union, Facebook opened a new campus at South Lake Union and plans more in SODO, and the list goes on and on.

The same may be said for the Eastside Tech Corridor, as Amazon will potentially add 2,500 employees to their Bellevue branch in the next two years, Vulcan Real Estate is developing 3 million square feet of office space to target tech clients, Tableau Software will open 180,000 square feet of space at Kirkland Urban next year, Facebook is looking at 650,000 square feet in Redmond, Microsoft is renovating its sprawling campus, and more.

We will continue to report on Amazon HQ2 as more details become available.

 

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