What’s remarkable to me about Amazon’s statement about abandoning its plan to build a second (or third) corporate headquarters in New York is how many times it says “Long Island City.”
“We’ve decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens,” the company said, adding that “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.”
Amazon has to specify that it won’t be going to Long Island City because the company still intends to grow in New York City. Specifically, it says it expects to boost the current workforce of 5,000 Amazon employees who work in Manhattan, Brooklyn, and Staten Island.
Amazon is still coming here. They’re just not going there.
Not to brag, but this is consistent with what I wrote last week: that the deal could fall apart because neither party truly needed the other. New York City didn’t need a new corporate headquarters campus, particularly one it would need to subsidize to the tune of $3 billion. And while Amazon needs to have a large and growing workforce in New York City, it doesn’t necessarily need as many as 25,000 employees here, and those employees don’t need to form the anchor of a new office district the city had hoped to foster in an outer borough.
There are some lessons here for New York policy-makers.
One is that it’s not good enough for the mayor and the governor to decide something is a good way to spend billions of dollars; they can’t necessarily commit extensive financial resources to a deal that doesn’t enjoy broad political support.
Another lesson is that one of the valid goals of the Amazon plan is going to be very hard to achieve. For a number of reasons, the city would like to spread more office jobs outside the Manhattan office cores. There are particular benefits for use of our subway infrastructure: A large corporate campus in Long Island City would not add new peak-hour commuters through already taxed tunnels into Manhattan, and would allow more reverse commuters to use under-capacity trains running from Manhattan to Queens in the morning.
But as I noted in November, Long Island City has had trouble attracting and retaining corporate office tenants. MetLife moved to the neighborhood and then moved back to Manhattan; JetBlue has happily made the neighborhood a home, but the airline is an unusual case because of its need for proximity to the airports in Queens.
One company that is planting a stake in Long Island City is Macy’s, which has signed a lease to take nearly 1.1 million square feet of office space in two new buildings near Queensboro Plaza. That’s right across the bridge (and one subway stop) from Macy’s flagship Bloomingdale’s store, and allows the company to enjoy lower rents than it would in Manhattan. On the other hand, Citibank is planning next year to vacate 1 million square feet of office space in LIC. The bank had been hoping to leave a little early and hand much of its space to Amazon for a temporary headquarters; presumably, they now need a new plan.
Rob Speyer, the CEO of Tishman Speyer, which is developing the buildings where Macy’s will locate, told the Commercial Observer in November that “the Amazon deal will help every piece of real estate in Long Island City.” It was good timing for the company to get an expansion of the Macy’s lease done while everyone expected Amazon to come to the neighborhood.
Amazon was willing to take millions of square feet of office space in Queens at a price, and as the deal’s detractors correctly noted, Amazon is willing to site a substantial operation in New York City without being given a special price. But the company wasn’t willing to go to Queens on less favorable terms than it had negotiated.
If New York policy-makers deem it important to have a lot of offices in Long Island City, they’re probably going to hand a bunch of subsidies to someone at some point to get it done. It won’t have to be Amazon, and it probably won’t have to be $3 billion. But it won’t happen for free.