The cities that are vying to host Amazon’s next big campus should be careful what they wish for.
Landing the project, dubbed HQ2, will undoubtedly create an economic boom, with the $5 billion headquarters expected to employ some 50,000 workers.
But the project will also come with major costs, especially as the new workers look for homes and ways to get to work. Just ask Seattle, Amazon’s central corporate home.
“It’s a big transition with regard to both housing costs and getting people in and out of the downtown core,” said Mike McGinn, who served as Seattle’s mayor as Amazon began building its mega-campus.
A decade ago, Seattle’s South Lake Union neighborhood was an industrial backwater, full of half-empty warehouses and rundown buildings.
{mosads}Today, it is home to dozens of high-rent apartment buildings, coffee shops, hip restaurants and a trolley system — and, at its heart, tens of thousands of workers on Amazon’s sprawling campus.
The degree to which the presence of Amazon and other tech companies has changed Seattle is shocking. Median home values have skyrocketed, rising by more than a third since 2010. The average renter in Seattle pays $1,749 a month today, up from $1,114 in 2011. Rents are now rising just as fast in outlying suburbs.
Mike Rosenberg, a Seattle Times reporter who covers the real estate market, rattled off a list of superlatives directly related to Amazon’s growth: The city now has more construction than any other city in America, more cranes on the horizon and home prices rising faster than any other city.
Any city that wins the right to host Amazon’s next big expansion will have to contend with similarly rising home and rent prices, said Chris Erickson, chief operating officer at Apartment List, which connects renters with open apartments.
“With the number of workers and the higher than average median income that’s expected, there is going to be pressure on rents and housing,” Erickson said.
The influx of tech workers has been great for Seattle’s bottom line, but it has come at a cost. Middle class families are being squeezed out of the city and into nearby suburbs.
“It’s transformed Seattle from a place where your average middle-class person could afford to get a house to a place where only a person with an upper income can afford to survive in the city, for the most part,” Rosenberg said.
Between 2010 and 2015, the number of people in Seattle who made less than $75,000 a year grew by about 6,000. The number of those making over $75,000 a year grew by five times that amount. The median household income has risen by almost $10,000 over that same period, at a time when the national median income has risen by just 4 percent.
“If you as a city woo Amazon, it comes at a price,” said Kshama Sawant, a member of Seattle’s city council. “It is not a rising tide that lifts all boats.”
Amazon is also dominating the commercial real estate market in the city. The company now occupies 19 percent of the prime office space available in downtown Seattle, about 8.1 million square feet, according to a Seattle Times analysis. That is 20 times more prime space than the University of Washington occupies, and more than twice as much as Citibank occupies in New York City, the second-largest commercial real estate landholder in any major U.S. city.
And the online retailer’s footprint is only going to grow. This week, Amazon leased another 312,000 square feet in an iconic building in the heart of downtown Seattle.
All those new workers in downtown Seattle have worsened the city’s congested traffic. The average commuter takes 26.5 minutes to get to work in Seattle, according to the U.S. Census Bureau, up two minutes from the average in 2010.
Whichever city wins Amazon’s new headquarters will have to contend with a plethora of transportation and infrastructure-related costs — especially if it does not already have a subway or light rail system.
“How are you going to add those jobs without adding all those commuters by car?” McGinn asked. “A grade-separated transit system is a multibillion dollar effort.”
Tracey Seslen, a senior lecturer at the University of Washington’s Foster School of Business, said the new headquarters site will take time to build, which will give the eventual host the time to consider how to build its own capacity.
“In some sense, the time it takes for building an HQ2 will be beneficial to the city that wins the bid because it gives them time to get a head start on figuring out inevitable infrastructure problems related to traffic and housing,” Seslen said.
Seslen said the size and scope of the economic boom that will come from winning HQ2 is uncertain, but that has not stopped cities from showering the company with offers.
New Jersey Gov. Chris Christie (R) said Monday that state and city agencies would offer Amazon a package of incentives worth up to $7 billion if the company chooses Newark for its new hub. Maryland’s incentive package is estimated in the billions as well.
California Gov. Jerry Brown (D) outlined hundreds of millions in incentives available to the company, including up to $100 million to train new employees and a 15-year abatement from local property taxes. The city of Chula Vista offered another $400 million in incentives on top of the state incentives.
As many as 100 other cities and localities said they intended to submit bids ahead of Thursday’s deadline. Amazon has not said how or when it will narrow the finalists.