Amazon chooses Virginia and NY as new headquarters

Amazon HQ

Amazon estimates that over the next 20 years, these cities can expect to see a combined $14.2 billion in incremental tax revenues.

Virginia Governor Ralph Northam said Amazon's investment was a "big win" which would bring "investments in our education and transportation infrastructure that will bolster the features that make Virginia so attractive: a strong and talented workforce, a stable and competitive business climate, and a world-class higher education system".

According to a report from the Atlanta-Journal Constitution, the city tried to woo the e-commerce giant with $900 million in public financing for the $3.5 billion development.

The contest drew 238 bids, as local officials leapt at the chance to land a potentially transformative investment. "The idea that it will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need MORE investment, not less, is extremely concerning to residents here", she wrote. The state choices were only finalized after approval by Treasury Department officials in July.

More specifically, the locations are Long Island City in New York City's Queens borough and National Landing (a rebranded name for the Crystal City neighborhood) in Arlington, Virginia.

The two areas already have relatively low unemployment rates, and Fitch Ratings has noted that even a full HQ2 only represented 1.5% of the Washington area and 0.5% of the NY area's labor force.

"I was surprised the package wasn't bigger", said John Boyd, a site selection consultant who wasn't involved in the Amazon search.

But investors were already pouncing.

Employees at the Seattle headquarters will be given the option to stay there, or relocate to the new HQ2, Amazon said previous year.

"This will help expedite the process of building up the surrounding area", Bernstein said.

The online retailer has whittled down over 230 proposals, and chose to split its second North American headquarters over two sites, the Wall Street Journal reported overnight, citing unnamed sources. But once Amazon established its presence over the next seven years, median rental rates skyrocketed over 41 percent, while rental prices nationwide went up just 17.6 percent.

The development projects, which could be announced as soon as Tuesday, promise to bring the cities a giant infusion of jobs and tax revenue, but are nearly certain to draw fire from critics concerned about their impact on infrastructure and property values.

Investors who plow capital gains into Opportunity Zone projects can defer taxes on those gains up to 2026.

In addition, Amazon will receive $23 million cash from the local Arlington County authorities based on an expected increase in hotel taxes, which needs to be approved by the County Board. The benefits will reduce Amazon's tax burden and are created to offset some of the costs of construction.

Long Island City was quickly gentrifying before the new tax law. Also according to Kimmelman, tech workers, "increasingly.demanded the diversity and benefits of city life". Thousands more units are planned.

Despite the new supply, prices are high. That puts it on par with rent in some buildings on the Upper East Side across the East River in Manhattan. The estimated initial tax break for Amazon looks to be $1.5 billion spread over 10 years depending on hiring targets, construction, and occupancy of their property as outlined below.

But the retailer made it clear that it was tax incentives and grants that is was looking for.

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