Amazon Suddenly Pulls Out of New York HQ2 Plans

Other technology hubs are expected to see the benefits of the Seattle-based company’s decision not to open its second headquarters in the the Big Apple. The online giant said it will not conduct another national city search.

by Maria Halkias, The Dallas Morning News / February 15, 2019
Shutterstock

(TNS) — Amazon technology hubs already in Dallas and Austin could gain new jobs as a result of the surprise announcement Thursday that the online retailer had canceled its major expansion into New York City.

Amazon says it won't open half of its new headquarters in New York City in a stunning reversal prompted by growing criticism there of lucrative incentives to entice to e-commerce giant's 25,000 jobs.

The Seattle-based company also said Thursday that it will not reopen its HQ2 search, which lasted more than a year and attracted bids from 238 cities. Dallas and Austin were among 20 finalists named in January 2018.

Dallas Mayor Mike Rawlings said Amazon's decision was obviously "fluid" since they didn't pick New York in order to pull out a couple months later. Still, he didn't know what it might mean.

"They know we love them," he said to a group of reporters Thursday. Rawlings has said that he believed Amazon's site selection team had a strong positive view of Dallas, but was after more tech talent than the local region could offer. "A phone call," he said, would get things rolling in Dallas again.

Amazon ultimately chose to split the headquarters and its 50,000 new jobs in New York and Washington D.C. At the same time, it selected Nashville as an operations hub with about 5,000 jobs.

The Washington and Nashville plans will move forward, Amazon said, and it will start hiring and expanding its 17 tech hubs around the U.S.

Amazon Web Services' office in North Dallas is one of those hubs and employs more than 500 people.

There may be some cause for optimism that Dallas will hear from Amazon, but company's spokesman Adam Sedo declined to address it. Amazon has more than 11,000 employees in Dallas-Fort Worth at fulfillment and sorting centers. It also owns Whole Foods Market which is based in Austin. Many believed that Dallas was a strong contender for HQ2 up until the end. It was one of a few cities that was visited a second time by Amazon's search team.

Ultimately, what pushed Amazon away from New York will be debated for sometime. Other cities and states offered bigger incentives than the $3 billion offered Amazon to go to the Long Island City neighborhood of Queens.

Rawlings and other local officials maintained that Amazon didn't seem pressed about incentives when speaking to them. And now Amazon has walked away from those long-term incentives. Amazon said it was after the talent already in New York and that the region will continue to attract. It praised that workforce in its Thursday statement saying it had canceled its plans.

Asked Thursday if he believed incentives are going way, he said, "Maybe in New York" but that he expected the practice to continue in Dallas-Fort Worth.

Amazon could have rejected incentives and stayed in New York City.

From the start, the HQ2 effort seemed that Amazon might be "escaping from pubic pressure and overbearing government intervention in Seattle," said Michael Farren, a research fellow at George Mason University's Mercatus Center, who has been following the HQ2 search closely. The Virginia site picked by Amazon is near the university.

"Amazon probably had déj... vu as it saw its NYC HQ2 expansion turning into a repetition of the contentious political and cultural atmosphere in has experienced in Seattle," Farren said. Seattle passed a head tax and then revoked it and even though Seattle is home to several other big companies, such as Starbucks and Nordstrom, it was often blamed for the lack of affordable housing.

In it's statement, Amazon said that polls showed that 70 percent of New Yorkers support its plans, but "a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City."

Reaction

New York Mayor Bill De Blasio said Amazon's competitors will recognize that its talent base is worth "growing a strong and fairer economy for everyone."

"You have to be tough to make it in New York City," De Blasio said. "We gave Amazon the opportunity to be a good neighbor and do business in the greatest city in the world...Amazon threw away that opportunity."

Bankrate.com's senior economic analyst Mark Hamrick called Amazon's decision "a stunning development" and one of those "be careful what you wish for" moments.

For New York, the move could also prompt other businesses to "think twice before setting up shop or expanding in the region," Hamrick said. "From a broader view, this decision will do nothing to resolve the challenges associated with housing affordability voiced by critics of the Amazon decision and the generous tax incentives offered by government. That requires a bigger conversation which could very well unfold along with the 2020 election cycle."

The almost $3 billion in tax incentives that Amazon was awarded stirred backlash from a number of activists.

Deborah Axt, co-executive director of anti-poverty group Make the Road New York, called Amazon's withdrawal a "landmark victory."

"This announcement ... shows the power of the people, even when taking on the world's richest man," Axt said. "Our members and allies stood firm against Governor Cuomo's plan to give away more than $3 billion in taxpayer giveaways so that Amazon could force its empire-building on our neighborhoods."

Economic development watchdog group Good Jobs First said New York citizens stood up to incentives granted by elected officials with no community input and called it "a huge victory for community organizing."

"It will also go down in history as a turning point in the debate" about how the corporate-dominated site location system should be dismantled, the group said in a statement.

Others think Amazon gave up a fight.

"Rather than addressing the legitimate concerns that have been raised by many New Yorkers Amazon says you do it our way or not at all, we will not even consider the concerns of New Yorkers - that's not what a responsible business would do," said Chelsea Connor, a spokeswoman for the Retail, Wholesale and Department Store Union (RWDSU) in New York.

Dallas view

Dallas has a different view of growth, said Dan Noble, CEO of architect firm HKS, which was involved in the local effort to bid on HQ2 led by the Dallas Regional Chamber. Three different downtown sites came together after Amazon narrowed its local choice. The three sites together covered 245 acres of downtown from Reunion Tower to behind City Hall.

"We know the ropes here. We're used to growth. It's part of our culture," Noble said, adding Dallas-Fort Worth is the only U.S. metro area with three of the top 10 Fortune 500 companies based here. "They'd be in good company,"

Right before Amazon started the HQ2 process in September 2017, the company put together state-by-state economic impacts. That information is on its website. After the decision, Amazon began analyzing its economic impact in metropolitan areas and Dallas-Fort Worth was one of the first.

D-FW ranks among the top 10 metro areas where Amazon created new jobs, said Amazon spokesman Sedo. The $2.6 billion investment -- which includes more than $700 million in new facilities and $1 billion in payroll -- "makes D-FW one of the fastest growing investment hubs for Amazon in the last decade," he said.

The number of Amazon D-FW employees increased from 200 in 2013 to 11,500 in 2017. That number is higher now, but Amazon's economic analysis only includes those years. Amazon said that makes it one of the 20 largest employers in D-FW.

Its job growth represented 3 percent of North Texas' overall gains during those years and 35 percent of the job gains in the advanced logistics industry, Amazon said. Using economic multipliers, Amazon said its local spending resulting in $3.5 billion in additional economic activity from 2013 through 2017.

Amazon heaped praise on New York City in its statement Thursday.

"We are disappointed to have reached this conclusion--we love New York, its incomparable dynamism, people, and culture--and particularly the community of Long Island City, where we have gotten to know so many optimistic, forward-leaning community leaders, small business owners, and residents."

Here is the full statement:

"After much thought and deliberation, we've decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens. For Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term. While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.

We are disappointed to have reached this conclusion--we love New York, its incomparable dynamism, people, and culture--and particularly the community of Long Island City, where we have gotten to know so many optimistic, forward-leaning community leaders, small business owners, and residents. There are currently over 5,000 Amazon employees in Brooklyn, Manhattan, and Staten Island, and we plan to continue growing these teams.

We are deeply grateful to Governor Cuomo, Mayor de Blasio, and their staffs, who so enthusiastically and graciously invited us to build in New York City and supported us during the process. Governor Cuomo and Mayor de Blasio have worked tirelessly on behalf of New Yorkers to encourage local investment and job creation, and we can't speak positively enough about all their efforts. The steadfast commitment and dedication that these leaders have demonstrated to the communities they represent inspired us from the very beginning and is one of the big reasons our decision was so difficult.

We do not intend to reopen the HQ2 search at this time. We will proceed as planned in Northern Virginia and Nashville, and we will continue to hire and grow across our 17 corporate offices and tech hubs in the U.S. and Canada.

Thank you again to Governor Cuomo, Mayor de Blasio, and the many other community leaders and residents who welcomed our plans and supported us along the way. We hope to have future chances to collaborate as we continue to build our presence in New York over time."

©2019 The Dallas Morning News. Distributed by Tribune Content Agency, LLC.


Platforms & Programs