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A sign in Crystal City promises good things to come. (GeekWire Photo / Monica Nickelsburg)

ARLINGTON, Va. — After more than a year of reconnaissance, frenzied speculation, and non-stop media coverage, Amazon’s remarkable “HQ2” search is over.

But the high-stakes project really is just beginning, with a twist.

Instead of the 50,000-person, $5 billion second headquarters Amazon promised when announcing the search for a second home more than a year ago, Amazon will split HQ2 in two. Amazon plans to open massive offices in the Crystal City neighborhood of Arlington, Va., and Queens in New York City.

Amazon CEO Jeff Bezos was a driving force behind the HQ2 search. (GeekWire File Photo)

“We are excited to build new headquarters in New York City and Northern Virginia,” said Amazon CEO Jeff Bezos in the official announcement. “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come. The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities.”

The announcement also revealed the incentives both cities offered to land the new headquarters, a controversial issue since the HQ2 announcement was made. Amazon said it will receive up to $573 million in Arlington and up to $1.525 billion in the Long Island City neighborhood of Queens, based on the potential creation of 25,000 jobs in each location.

Both regions are already major hubs of activity for Amazon, and they signal that the fast-moving company wanted East Coast operations to counter its 45,000-person strong headquarters in the heart of Seattle. It also indicates that Amazon wanted a strong presence in two of the country’s power centers: the financial capital of New York and the political capital of D.C.

“The new locations will join Seattle as the company’s three headquarters in North America,” the company said in its announcement, saying that hiring will begin at both locations in 2019.

In another surprise twist, Amazon said it will also put a new “Operations Center of Excellence” in Nashville, Tenn., promising 5,000 jobs and more than $230 million of investment.

The City of Alexandria and Arlington County partnered to form National Landing, a new community that will be Amazon’s second home. A 10-minute drive from Washington, D.C., it positions Amazon near the seat of the federal government.

Amazon has been ramping up its lobbying spending and soon executives will share a zip code with many of the nation’s decision-makers and The Pentagon, where the company is competing for a $10 billion contract to migrate the Department of Defense’s IT infrastructure to the cloud. Amazon’s Crystal City office will also be a stone’s throw from the year-old Amazon Web Services campus in Northern Virginia, and close to Amazon founder Jeff Bezos’ recently-purchased $23 million mansion in D.C.’s tony Kalorama neighborhood.

A news release from Virginia Gov. Ralph Northam revealed additional details of the incentives Amazon will receive for moving into the area. Once Amazon creates at least 25,000 jobs with average minimum wages of $150,000 per year, the company will receive incentives of up to $22,000 per job created, capped at $550 million. If Amazon creates more than 25,000 jobs and invests up to $195 million in transportation projects in the region, the company is eligible for additional incentives.

Virginia is also making investments in its homegrown tech talent, promising to double the number of graduates in computer science and related fields to 25-35,000 additional workers in those industries. Virginia Tech will establish a new Innovation Campus in Alexandria tied to Amazon’s project. Virginia, Arlington, and Alexandria are also funding transportation improvements in the area.

Cautious optimism pervaded Crystal City as news swirled that it had won what could be one of the biggest economic development prizes in recent history.

“That would be an economic boost,” said Kwabena Danso, who moved to Crystal City from Austin a month ago and now works in IT security.

“It’s a nice area,” added Kevin Chen, a recent transplant who is looking to buy a condo in Crystal City. “We were hoping to stay here, but it seems like there might be a lot of competition in the near future.”

JBG Smith, the top real estate developer in the Crystal City region, controls more than 8 million square feet in National Landing. Amazon will lease existing office space and purchase land for its new office.

With up to 25,000 new employees heading to Crystal City, things will change, as they will in New York City where Amazon plans to move into the Long Island City neighborhood of Queens, just across the East River from Midtown Manhattan.

Amazon named Crystal City, a neighborhood in the city of Arlington, in Northern Virginia, as one location for its second headquarters. (GeekWire Photo / Monica Nickelsburg)

New York proposed four sites across three different boroughs for Amazon HQ2: Two in Manhattan, one in Long Island City, and one in Brooklyn for HQ2.

Amazon already has a big presence in the Big Apple, including corporate office space and a fulfillment center. Last September, Amazon announced plans to open a 360,000-square-foot office in at Five Manhattan West, a 16-story office building in the city.

Locating HQ2 in New York allows Amazon to further develop its fashion and advertising businesses. New York is already the home base for both. The company is also eyeing New York City as the third market for Amazon Go, the cashierless grocery concept piloted in Seattle. As the financial center of the country, Amazon also will be able to tap a well educated talent pool, not only engineers and developers, but marketers and sales executives.

Amazon also will face additional competition for those high-tech workers. On Monday, Google said it plans to double its workforce in New York City over the next 10 years to 14,000 people.

“Not everybody—big surprise—wants to live in Silicon Valley, so we want to make sure we have the opportunity to build vibrant centers across the country,” said Google CFO Ruth Porat at the The Wall Street Journal’s WSJ Tech D.Live conference.

The 14 months since Amazon announced it would open a second headquarters in another North American city have been nothing short of remarkable. In September 2017, Amazon launched its unprecedented HQ2 competition publishing a public request for proposals which detailed the company’s wish list for its second home. Preferences included robust public transportation, access to great talent, and government incentives.

It sparked a frenzy of publicity stunts seeking to get Amazon’s attention. Tuscon mailed Bezos a 21-foot cactus, Birmingham placed giant Amazon packages around town, and Stonecrest, Ga. offered to rename 345 acres the “City of Amazon.”

None of those stunts swayed Amazon though.

In January, the Seattle e-commerce giant narrowed the 238 applicants down to 20 finalist cities still in the running for the coveted HQ2. The shortlist showed Amazon’s preference for a city in the East Coast time zone; Los Angeles was the only West Coast city to make the cut.

The intense, high-profile bake off among major cities for one of the world’s largest employers also brought criticism.

“My general take on this whole process was that it was madness,” said Nathan Jensen, a professor at the University of Texas-Austin and co-author of the book Incentives to Pander. “The Amazon public call and then giving cities two months to (respond) was crazy. Cities can barely put together presentations in that time-frame, much less make meaningful changes.”

Even the final outcome — with two HQ2 cities — left others questioning the motives of Amazon, with Jensen noting that it “really does feel like a bait and switch to me.”

William Harkins, left, and Clif Leach at Don Tito in Arlington (GeekWire photo / Monica Nickelsburg)

“It never was about a second headquarters,” added urbanist Richard Florida in a recent interview with GeekWire. “I think this was always about sourcing, siting much more than just a single headquarters.”

Echoing concerns of economists, some residents in the HQ2 cities are also wary of the incentives that were provided, and what type of corporate citizen Amazon will be.

“Unless they donate some money to the infrastructure, improve Metro, donate money to schools, if they do a bunch of community building stuff, then it’ll be worth it,” said William Harkins, a senior consultant at Deloitte who had gathered at the local watering hole, Don Tito, in Arlington on Monday night.

Clif Leach, who works at a hardware store in Arlington, said that traffic is “bad enough” around Amazon’s new northern Virginia home. “If you make Crystal City and D.C. walkable, then I’m all for it,” he added.

Amazon selected these 20 cities to move onto the next phase of its HQ2 competition. (Amazon Image)

While cities across the continent were envisioning their future with Amazon, Seattle reflected on its complicated relationship with its largest private employer.

Seattle’s mayor at the time, Ed Murray, and Washington Gov. Jay Inslee were surprised by the news that Amazon wanted to see other cities. Leaders in the tech industry weren’t quite as surprised.

“The negative attitude of many citizens and of our government to business in general and to Amazon, in particular, has created an environment for Amazon and, even more importantly its employees, that is unpredictable and outright hostile,” said Seattle venture capitalist and civic leader Heather Redman at the time.

The search forced Seattle to confront its often fraught relationship with Amazon, which has grown at a breakneck pace in the heart of the city, contributing, in part, to rising housing costs and congestion. A city famous for its progressive values, Seattle grappled with growing income inequality, where Amazon is often painted the poster child of the tech boom.

It’s a message not lost on some of those in the HQ2 cities, who understand the impact Amazon has had on Seattle.

“(Amazon) raised the cost of living in Seattle, pushed everybody to the outskirts of Seattle, roads got worse, traffic is ridiculous out there and the whole impetus for creating the headquarters two was to relieve that burden on Seattle and distribute it elsewhere,” noted Harkins, while sipping on a drink at Don Tito on a rainy Monday night in Arlington.

Leach, his buddy who works at the hardware store, echoed those thoughts, worrying about Amazon recruiting people from elsewhere who take $100,000 jobs in Crystal City.  “So they get the wealth and we get the scraps?” he asked.

But Amazon’s meteoric rise has also meant huge job growth, infusing economic vitality into its hometown.

The company estimates it has invested $3.7 billion in capital associated with its Seattle headquarters. Amazon HQ1, in Seattle, is home to more than 45,000 out of Amazon’s global workforce of more than 613,000 people. Faced with losing such a powerful job creator, the Seattle region ended up submitting a half-hearted bid for HQ2 before Amazon winnowed the field to 20 finalists.

Amazon global workforce as of Sept. 30, 2018. (GeekWire graphic)

Amazon says it will continue to grow in its hometown and the 18 satellite offices it has set up across North America in recent years, which employ a combined 17,500 people. The vision is that HQ2 will be the “full equal” of HQ1, though some speculate that the new headquarters will eventually become Amazon’s center of gravity.

Developing story. Check back for updates. 

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