No One On Amazon's List Has More Talent Than NYC, But It's Still Considered A Long Shot
It has been nearly nine months since Amazon announced its whittled-down list of cities for its second headquarters, and most analysts of the search have put New York City’s odds of winning the bid somewhere between slim and none.
Analysts say high prices are what could ultimately cost New York the $5B campus, dubbed Amazon HQ2. Average rents in Manhattan hover at $4K per month, while the average price of a condominium or a co-op in the borough is above $2M. The city’s construction costs are the highest in the world, and in a recent ranking of the most construction-friendly HQ2 finalists, New York didn’t even crack the top 10.
Meanwhile, few analysts believe Newark, New Jersey — less than 15 miles from Manhattan and also on the shortlist — will score the campus either, and some fear that, if it did, the city’s $7B tax break package could worsen the state’s already poor credit rating.
But some think the area is still very much in the running, with as good as chance as anywhere else of scoring the headquarters and the promised 50,000 well-paying jobs that come with it.
“If cost were a disqualifying factor for large tech companies, large tech companies wouldn’t be growing in New York City,” said RXR Realty Executive Vice President Seth Pinsky, a former New York City economic development executive. “[New York City] never comes up on the list of the outside experts who are analyzing the selection process. But I’m not sure these outside experts know Amazon’s true priorities.”
There is no denying tech giants are expanding their presence in the city. Earlier in the year, Google paid $2.4B to acquire Chelsea Market, which is directly across from 111 Eighth Ave., a building the company bought for $1.9B in 2010 to serve as its New York headquarters. Facebook expanded to a total of 880K SF at 770 Broadway in May. Music streaming service Spotify committed to a 378K SF lease at 4 World Trade Center last year.
Amazon itself has already expanded in the city, taking 360K SF at Brookfield’s Five Manhattan West last year, and is building a nearly 1M SF fulfillment center on Staten Island.
Companies like Amazon need access to the talent pool that the city provides, Pinsky said. While cost is obviously a consideration, it certainly hasn’t stopped the tech firms from coming here. New York ranked fifth in CBRE's latest tech talent for site selection ranking. The Big Apple had 1,655 job listings in April, more than 600 more than the second-ranked city on the list, San Francisco, according to hiring website Monster.com.
“New York City has the talent base and the mix of skills that major companies are looking for. That’s not a guarantee that Amazon will choose New York, [but] it’s the reason — in my mind — it is as strong of a candidate as any other city,” Pinsky said. “People misunderstand that New York is expensive because people are choosing to be here.”
The Economic Development Corp. has suggested four separate locations that could house the new campus — Midtown West/Hudson Yards, Long Island City, Brooklyn's Tech Triangle and the area around the World Trade Center.
Unlike Newark, New York City officials did not make public statements about tax incentives they may have offered, though the state has reportedly put together a package of undisclosed sweeteners in its bid.
In a statement, Empire State Development President and CEO Howard Zemsky said that New York “continues to attract top companies” and EDS is looking forward to “building on this incredible momentum.” Representatives for NYCEDC and Amazon were not available for comment.
While the manner in which Amazon is running this HQ2 search is unprecedented, the fundamentals of the decision are the same as any company weighing a new headquarters, some sources said.
“You hear a lot about taxes and incentives when people are talking about relocating business [but] all that stuff is, like fifth or sixth on the list. No. 1 is the ability to attract the talent that is going be able to do what you need to get done for the next 20 or 30 years,” Anderson Economic Group Senior Consultant Jason Horwitz said.
The New York metro area topped the list of Anderson’s HQ2 Index, released in October last year, which analyzed how cities stack up in relation to Amazon’s demands as outlined in its request for proposals. Access to talent and strong transit is what puts the city ahead, with Chicago and Los Angeles coming in second and third.
But the city still performs the worst in the cost of doing business, according to this particular index, because of the high cost of commercial real estate and labor, as well as the tax burden on businesses.
Anderson will release an updated index soon, but Horwitz said the top three cities have not changed.
“We don’t know how Amazon is going to weight these different issues,” he said. “To me, the real question is, how much does Amazon care about the cost of doing business?”
Horwitz said New York prices may be good news for Newark’s chances, where the talent pool could still be readily available, but where it is not as expensive to build or lease space.
However, Newark’s eye-popping tax break offering has unnerved some.
“Some research has shown that tax incentives in competitions like these — not just Amazon’s, but a lot of them — produce this sort of prisoner’s dilemma,” said Urban Institute Research Analyst Megan Randall, adding that cities left in the dark are sometimes tempted to offer more than they need to in order to lure firms.
“Some research has shown it can lower the tax base for the region [and] it can actually result in a net loss for the region as a whole.”
Commentators, analysts and the media have feasted on any scrap of news about the HQ2 whereabouts all year.
An Amazon job posting in D.C. was considered a potential sign, for example, and various theories have sprung up online. There were reports that Amazon would release an even shorter list last month in an attempt to push cities into sweetening their incentives.
Amazon representatives visited New York in April to tour possible sites, as Bisnow previously reported, but there has been no news since. So, speculation aside, there is no real information about the bid and people continue to guess at the tech behemoth’s next play.
Not everyone thinks the top talent argument is persuasive.
Economics research and consulting firm Pulsenomics surveyed 100 economists on the likelihood certain cities would score HQ2. Northern Virginia and Atlanta came in tied at the top, Austin was third. New York and Newark were down at the bottom of the list.
“I agree with the prevailing consensus that both Newark and New York stand little chance of getting the bid,” Pulsenomic founder Terry Loebs said. “At the end of the day, if Amazon is going to stay true to its most important criteria, I don’t see how New York or Newark can be competitive.”
New York developer Matthew Baron, president of Simon Baron Development, agreed the city has a lot working against it, including aging infrastructure, high taxes and housing costs.
But, he pointed out, the Big Apple still has something special.
“There’s only one New York,” he said. “It’s always got a shot.”