The Good, Bad, and Ugly in Amazon's New NYC Office

Amazon is proving HQ2 critics right, but taxpayers are still getting stuck with a big bill.

Tech giant Amazon announced on Friday that it is going to be leasing some new office space in New York City. That announcement led to an Internet victory lap for the activists and lawmakers who opposed New York City’s $3 billion bid to bring Amazon’s second headquarters — known as HQ2 — to the Big Apple: You see, they noted, Amazon wanted to be in NYC anyway, with no incentive money at all!

As a reminder, Amazon initially picked New York City to receive one half of its split-up second headquarters, but deep-sixed those plans in the face of popular protests, for which New York Rep. Alexandria Ocasio-Cortez receives a lot of credit. And Amazon’s subsequent move to expand in the city anyway indeed shows that the HQ2 deal was a bad one for New York.

But there’s more to it than that. Here’s the good, the bad, and the ugly when it comes to Amazon’s new office space.


1) The good: It’s proof HQ2 would have been a raw deal. AOC and other critics of New York’s HQ2 plan — myself included — have been pilloried ever since Amazon took its ball and went home. But the corporation’s intent to open a New York office shows we had it right all along: There are good business reasons for Amazon to be in New York that have nothing to do with tax incentives.

New York checked many of the boxes Amazon said it wanted in its initial HQ2 request for proposals. That the global capital of finance felt it had to subsidize a hugely profitable corporation bent on global domination was more than a little embarrassing.

Now, it’s true that the 1,500 or so jobs Amazon has planned for its new office aren’t the 25,000 it said it would bring to HQ2, prompting Amazon booster and New York Gov. Andrew Cuomo to call the new office “crumbs from the table compared to a feast.”

The issue, though, is that people like Cuomo act as if those 25,000 HQ2 jobs were an ironclad guarantee. But they were not. One needs look no further than the recent high-profile bait and switch the Taiwanese manufacturer Foxconn pulled in Wisconsin to realize that corporations don’t keep their promises regarding future plans. And that’s fine! Business conditions change, as do consumer sentiments, interest rates, and all sorts of things that might alter where a big corporation plans to invest.

But while some of New York’s incentives were based on outputs from Amazon such as hiring numbers, others were straight-up capital outlays. That money was never coming back regardless of what Amazon did, and it could have been used on more pressing transit or housing needs, which Amazon’s HQ2 would have likely exacerbated.

Fostering a climate that works not just for Amazon but for all companies and their workers is a far more effective way for New York to build its economy than throwing gobs of money at one corporation. And Amazon will continue to expand in New York City, sans tax breaks, presumably for years to come. (Read more here on all the reasons AOC’s critique of HQ2 was correct.)

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2) The bad: Amazon’s new office space was also hugely subsidized. Amazon will be expanding into a building in Hudson Yards, a new development that also received large tax breaks and other subsidies from the city. The total cost to New York taxpayers will be around $2.2 billion, according to researchers at The New School. (A New York Times report citing $6 billion in subsidies for Hudson Yards has some problems, so it’s not a number I’ll be using.)

That’s a lot of money for a high-end Manhattan development, and some of the tax breaks received by a who’s-who of big corporations will last for literally decades. So while it’s not Amazon-specific, Amazon is still benefiting from a New York boondoggle. In much the same way no one really has to incentivize global corporations to be in the world capital of finance, neither do luxury real estate developers need much of a carrot to ply their trade in Manhattan.


3) The ugly: Virginia really looks like a sucker now. While New York residents chased HQ2 away, Northern Virginia has continued to move ahead with its half of HQ2 with nary a regret expressed by local leaders. But that Amazon is still expanding in New York post-HQ2 should make Virginia officials wonder if they could have driven a much harder bargain with the tech giant.

Spoiler alert: They could have.

Like New York, Northern Virginia, due to its proximity to Washington, D.C., has huge advantages over other HQ2 aspirants: International airports, good public transit, world-class universities, access to the halls of power in Congress and the Pentagon, and proximity to CEO Jeff Bezos’ new mansion, to name a few. There’s no reason for any city or state in the D.C. metro area to be paying Amazon to be where it wants to be anyway.

Alas, New York is going to get away with not footing the HQ2 tab, while Virginia will not, with dire consequences for the people who live there.

FYI: There’s an interesting situation under way in Anaheim, California, where the owner of Major League Baseball’s Los Angeles Angels intends to buy Angels Stadium and the surrounding land from the city for about $325 million. Neil deMause at Field of Schemes breaks down what’s known about the deal and whether it’s a good one.

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— Pat Garofalo