Details Emerge On Massive New Construction Projects, Future Development Sites For Amazon In Northern Virginia
Northern Virginia won half of Amazon's second headquarters, the tech giant announced Tuesday, and after over a year of anticipation, the details about what exactly the company's presence in the region will look like are finally coming to light.
Amazon refers to its new Northern Virginia hub as National Landing, a newly coined neighborhood that includes Crystal City, the eastern portion of Pentagon City and the northern piece of Potomac Yard. The company said it will invest $2.5B, create over 25,000 high-paying jobs and occupy 4M SF of office space, with the opportunity to expand to 8M SF.
The Seattle-based tech giant will lease space in Crystal City and Pentagon City from JBG Smith, which owns 6.2M SF of existing office space and 7.4M SF of future development sites in the neighborhood. Additionally, a Virginia Tech Innovation Campus will be developed in the Alexandria portion of Potomac Yard.
The company will lease roughly 500K SF of existing office space at 241 18th St. South, 1800 South Bell St. and 1770 Crystal Drive, JBG Smith said. It expects to begin construction before the end of the year on the renovations at 1770 Crystal Drive, which include 272K SF of offices.
Amazon also plans to purchase sites from JBG Smith, including the long-planned Pen Place site in Pentagon City that could support up to 4.1M SF of total development. It said it will begin planning the first office building this year and expects to begin construction next year. JBG Smith would serve as Amazon's development partner, property manager and retail leasing agent.
“You might ask why National Landing? Well it has a lot to offer," Amazon Vice President of Public Policy Brian Huseman said at public event announcing the headquarters in Crystal City Tuesday afternoon. "It has some of the best transit access with three Metro stations, commuter rail access and Reagan National Airport all in walking distance. The community has a variety of hotels, restaurants, high-rise apartment buildings, retail and commercial offices. It has abundant parks, open spaces with sports and cultural events for residents of all ages throughout the year. In this location, Amazon will be able to attract the top-tier talent that will help us innovate on behalf of our customers."
Virginia and Arlington County will provide Amazon with roughly $573M of direct incentives based on job creation, the company said. The incentive package is highlighted by up to $550M in the form of a workforce cash grant from Virginia, providing $22K for every job created over the next 12 years with an average wage of $150K. Arlington County will also provide a cash grant of $23M over 15 years, which Amazon said will come from revenue growth of its tax on local hotel rooms.
Amazon will begin hiring next year, the company said. Beyond the 25,000 jobs, Virginia estimates it will create over 22,000 additional direct and indirect full-time jobs.
To help grow the area's talent pipeline, Virginia committed to double the annual number of graduates with bachelor's and master's degrees in computer science and related fields. It plans to invest $375M for new master's programs at George Mason University's Arlington campus and establish a $1B Alexandria innovation campus for Virginia Tech. Additionally, Virginia said it will invest $50M over 20 years in K-12 education and internship programs.
The commonwealth also plans to invest up to $195M in infrastructure, including a new entrance to the Metro station in Crystal City and funding for Potomac Yard, a future infill station that is still in the planning stages. It will also put money toward a planned pedestrian bridge from Crystal City to Reagan National Airport and improvements to Route 1.
Arlington County and Alexandria plan to fund over $570M of transportation projects, such as transit facilities and connections and streetscape upgrades.
“Innovation is the lifeblood of our commonwealth, and it is the driving force of Amazon’s work," Gov. Ralph Northam said at the event Tuesday. "Together we will think big, create a world-class model for public-private partnership and test and implement the technological solutions that will drive Amazon, our communities and the commonwealth forward.”
In addition to the office space for Amazon, JBG Smith is also accelerating its plans for retail and multifamily projects in Crystal City. It aims to begin construction before year-end on 130K SF of redeveloped retail space, anchored by Alamo Drafthouse Cinema, in what it calls the Central District, between 15th and 18th streets South on Crystal Drive.
JBG Smith plans to begin construction next year on two multifamily buildings totaling 750 units at 1900 Crystal Drive. The REIT has another 6.2M SF of development opportunities in its future pipeline in the area.
“Amazon’s selection of National Landing will enable us to accelerate these plans and deliver on the promise of a more walkable, amenity-rich, mixed-use environment with abundant green space and local retail," JBG Smith CEO Matt Kelly said at the event.
Amazon's presence in Northern Virginia is expected to have wide-ranging impacts on the area's economy, office market, hospitality sector, housing landscape and transportation network. The benefits and challenges it brings will be debated for months to come, but what can be calculated now is the impact a 4M SF office tenant has on a market that has long suffered from elevated vacancy rates.
“Amazon coming to National Landing will help stabilize an almost 20% vacant office market that struggled to recover from BRAC, the global financial crisis and sequestration," Kelly said. "Amazon’s presence will diversify our local economy and will anchor our growing technology sector for decades to come. This is a total game changer for our local economy, for National Landing and for JBG Smith."
Office vacancy in Crystal City is expected to fall from 15.5% to 7.2%, according to a study from Transwestern and Sage Policy Group. Arlington County Economic Development Director Victor Hoskins said the county expects its overall office vacancy to drop from 18% to 14% directly from Amazon's footprint, and potentially more with other businesses that choose to locate near the tech giant.
Hoskins said he believes the top factor in Amazon's decision was the area's existing talent base, followed by the future talent pipeline from education investments and the transportation accessibility of Crystal City.
“When we found out, I was blown away," Hoskins told Bisnow. "I almost fell out of my chair. I was absolutely delighted. Oh, my God, you have no idea how incredible it felt. I was absolutely exhilarated after working for 14 months with our team.”
UPDATE, NOV. 13, 2:45 P.M. ET: This story has been updated with comments from Amazon's public announcement in Crystal City Tuesday afternoon.