Visions of a Tech Hub? Landing Amazon is usually Just a Start

When Amazon announced plans to build a second headquarters somewhere in North America, the item set off a competition for a sort of completely new-economy golden ticket, a chance for one city to become, almost overnight, a magnet for the high-paying jobs along with entrepreneurial spark which are hallmarks of urban success inside 21st century.

Critics were just as quick to highlight potential downsides: soaring housing costs, clogged roads along with strained public resources.

A year later, Amazon appears poised to transform two communities, not just one. yet the central question — will which transformation be for the Great or the bad? — has not changed. Economists, urban planners along with additional experts say the answer could hinge on decisions inside coming months by the company along with by the state along with local officials who worked so hard to woo the item.

“which is usually not about a one-time deal,” said Amy Liu, director of the Metropolitan Policy Program at the Brookings Institution. “which is usually about whether Amazon along with these winning communities are going to create a long-term partnership to minimize the negative impact of supersonic growth.”

Amazon may have made which job a bit easier. Splitting the project, known as HQ2, between two cities should ease the pressure on housing along with infrastructure which critics have feared. along with the company seems to have zeroed in on places able to handle an influx of workers.

Amazon’s list of 20 finalists, announced in January, included midsize cities like Indianapolis, Nashville along with Columbus, Ohio, which many experts said might struggle to absorb what was then required to be about 50,000 jobs. yet Amazon is usually reportedly completing plans for sites in completely new York City along with the Washington area, megalopolises with multiple airports, extensive if strained public transit systems along with elite universities.

The likely locations — Long Island City, a neighborhood in Queens, along with Crystal City, a part of Arlington, Va. — are outside their regions’ central business districts along with have room for development. along with while Washington along with completely new York rank among the country’s most expensive housing markets, both have experienced a recent boom in apartment construction, along with rents there have fallen slightly over the past year, according to data by the real estate site Zillow. Even the full, undivided HQ2 project might have pushed up rents less than 1 percent per year in completely new York along with Washington, according an analysis performed by Zillow which year.

“Those two markets were inside leading edge of rental slowdowns,” said Aaron Terrazas, a Zillow economist. “There is usually definitely a lot more supply in those markets than there was in Seattle a decade ago.”

The specter of Seattle has loomed over the HQ2 debate. Its economy has boomed since Amazon moved into the South Lake Union neighborhood in 2007. yet many residents complain which growth has come at the cost of affordability along with livability. Although Amazon has never said so explicitly, its tense relationship with its native city may have contributed to its decision to search for a second home.

In completely new York along with Virginia, Amazon incorporates a chance for a fresh start. along with those places have an opportunity to learn by Seattle’s mistakes.

“When Amazon moved into its South Lake Union headquarters, no one knew which the item was going to become the global phenomenon which the item is usually today,” Mr. Terrazas said. “In Seattle there was a lot of catch-up in housing development, catch-up in infrastructure.”

completely new York along with Virginia, by contrast, can start planning immediately to build housing, expand infrastructure along with improve transit systems. If they do, Amazon could be the nudge which regions needed to address longstanding challenges, said Sarah Rosen Wartell, president of the Urban Institute, a Washington-based think tank.

“There is usually a way which something like which focuses the mind,” Ms. Wartell said. “Amazon or no Amazon, all of our major housing markets along with communities which are thriving are dealing with the consequences of growth.”

The key is usually ensuring which policies benefit all residents, not just highly paid tech workers which Amazon will employ directly, Ms. Wartell said. which means building housing for low- along with middle-income families, not just luxury condominiums, along with improving transit options in poorer neighborhoods.

Critics are skeptical of which prospect. Lauren Jacobs, executive director of the Partnership for Working Families, a network of local advocacy organizations, said Amazon should make specific promises to train along with hire workers locally, rather than just bringing them in by out of town.

“Many of our neighbors are still struggling in which economy, along with which could be an amazing transformational thing to have 25,000 jobs come to the community,” she said. “yet we have to ensure we don’t see another wave of mass displacement of working-class residents.”

Some of the HQ2 finalists promised enormous tax incentives to try to lure Amazon to their cities — a strategy criticized by many economists, who say such deals rarely pay off. the item isn’t yet clear what subsidies Virginia along with completely new York offered Amazon, yet there are signs the project didn’t come cheap. Gov. Andrew M. Cuomo of completely new York said Monday which the state had offered “a great incentive package,” along with quipped which he might change his name to “Amazon Cuomo if which’s what the item takes” to land the deal.

Timothy J. Bartik, an economist for the Upjohn Institute in Kalamazoo, Mich., who has studied tax incentives, said comments such as Mr. Cuomo’s were concerning. He along with additional economists worry about a “race to the bottom,” where state along with local governments compete to offer ever-bigger subsidies.

In one case, Wisconsin offered billions of dollars in incentives to attract a manufacturing plant by Foxconn, a Taiwan-based technology company. Since the project was announced last year, the cost tag has grown, while the number of jobs has not. Mr. Bartik estimated which year which Wisconsin was paying more than eight times as much per job for the project as the item did in earlier deals.

“the item’s easy to hand out cash, along with the item’s especially easy to hand out cash if the item’s going to be the next governor’s problem,” Mr. Bartik said.

yet not all incentives are created equal, he noted. Efforts to streamline regulatory along with permitting processes, for example, can make projects more attractive to companies without costing taxpayers much if anything. along with investments in infrastructure or job training can reap benefits for the community even if they are initially promised as a way to help a specific company.

“I might be trying to leverage which into improvements which wouldn’t just benefit Amazon yet benefit you more broadly,” Mr. Bartik said.

Boosters of the Amazon project expect for even more transformational results. inside late 1990s, for example, Alabama offered large tax incentives to attract a factory by Mercedes-Benz, along with South Carolina did the same with BMW. Those deals helped create vibrant automaking industries which employ thousands along with have helped lift regional economies. In some counties inside region, one in 10 workers is usually employed inside auto industry.

completely new York along with Washington, of course, are a far cry by the rural Southeast. along with white-collar tech jobs at Amazon require different skills than the factory jobs created by Mercedes along with BMW.

yet Mark Zandi, chief economist for Moody’s Analytics, pointed to parallels. Amazon along with additional technology companies employ not just hotshot graduates of Stanford along with Caltech yet also thousands of lower-level programmers, data analysts along with additional workers who have technical skills yet not advanced degrees.

Amazon’s decision could change the pecking order among technology hubs, in which completely new York along with Washington have lagged behind San Francisco, Seattle along with Boston.

“I think the item does set these cities up to be rivals to Silicon Valley a generation or two down the road,” Mr. Zandi said. “the item could be the catalyst.”

Amazon’s arrival will also mean more demand for the pool of tech workers in completely new York along with Washington. which worries some start-ups, who already compete with Google, Facebook along with additional giants which have set up offices there.

yet Sam Mandel, senior vice president at Betaworks, a company which develops along with invests in start-ups, said Amazon might be a net benefit for the tech sector.

“There will be more people leaving Amazon along with wanting to do earlier stage start-ups than there will be people leaving start-ups to go work at Amazon,” Mr. Mandel said.