ARLINGTON, Va. — Why not? What if?
It’s hard not to read those words, emblazoned on a piece of street art concealing a construction project in Arlington’s Crystal City, as a direct message to Amazon. After all, it comes from the real estate developer that could transform this Washington D.C. suburb in Amazon’s image.
Punctuating the words are colorful bicycles suspended along a wall painted with modern black and white designs. This, too, feels like a message: We’re building the kind of place hip, trendy, urban employees want to be, the kind Amazon CEO Jeff Bezos has repeatedly said he wants to attract.
The art comes from JBG Smith Properties, a real estate developer that owns 44 percent of Crystal City. The firm put up the façade to cover projects under construction. In the days since The New York Times and Wall Street Journal reported that Amazon is in advance talks with Crystal City as one half of its second headquarters project, JBG shares have jumped to record highs.
Amazon is not commenting publicly on the reports, and it’s still possible that the company might not land here. But that hasn’t stopped investors from betting on the future of this Arlington neighborhood, originally developed in the 1980s as a hub for defense contractors because of its proximity to The Pentagon, Reagan National Airport, and Washington D.C. proper.
With Amazon’s “HQ2” announcement expected any day now, GeekWire traveled to Crystal City to get to know a community that might be poised for a radical transformation.
We discovered that the tech giant is already having an impact on the neighborhood, even without any official confirmation of its plans. In the past week, activity has picked up noticeably in both the commercial and residential real estate markets, according to developers and agents in the city.
There has been a “surge of interest” from companies looking to lease office space since reports surfaced that Crystal City was nearing the Amazon HQ2 finish line, said Charles Lancaster, a developer who is opening a new suite of corporate offices in Crystal City this week called Accelspace, geared toward tech startups.
“The market picked up quite a bit in the last week and homes that sat on the market started moving,” said real estate agent Bic DeCaro, team leader with Bic DeCaro & Associates, who focuses on Northern Virginia. “I don’t think it was just a coincidence. I think buyers that were on the fence decided they better not wait in case prices go up.”
That could be just the beginning if Amazon chooses Arlington for HQ2, even if the project doesn’t turn out to be as big as once envisioned. HQ2 was originally expected to total as many as 50,000 employees, but recent reports say the company is thinking about splitting the expansion between Crystal City and the Long Island City neighborhood of the New York City borough of Queens. But even at 25,000 employees, the impact on Crystal City could be huge.
Crystal City at a glance
Crystal City is a small neighborhood in Arlington, Va., just across the Potomac River from Washington D.C. Some 230,000 people call Arlington County home, and they’re a well-educated bunch. According to U.S. Census data, 75 percent of residents over 25 years old have a Bachelor’s degree or higher. The median household income in Arlington was $108,706 in 2016.
Of the 20 cities in the running for Amazon HQ2, Arlington’s housing market is among the most expensive. The median home price is $664,400, according to Zillow data. That’s comparable to Amazon’s current headquarters city, Seattle. The e-commerce giant is often a target of frustration in its hometown over skyrocketing housing costs that have tracked with the company’s growth over the past decade. But if Amazon selects the D.C. region for its new home, it will be gambling that access to the federal government and a deep talent pool are worth the frustration it may hear from residents for driving up housing costs and traffic.
The Washington, D.C. region’s talent pool scored high on a recent analysis from workplace data firm PayScale. Researchers identified the top 25 most common skills and jobs at Amazon’s HQ1 in Seattle, then compared them to each of the 20 cities in the running for the Amazon offices. PayScale also studied the percentage of workers in those talent pools who report being “dissatisfied” with their current employer and are therefore ripe for poaching. The greater DC area came in second in the analysis, followed by the other rumored HQ2 finalist, New York City.
Justin Matherson, a government contractor who manages projects for the District of Columbia, was surprised to learn that Amazon is reportedly planning to hire 25,000 people at each of its new offices.
“That’s going to have a direct impact on the entire area,” he said, sitting at the Whole Foods lunch counter at the base of the Crystal City building where he lives. “Wow. I hope that the cost of living, the inflation, I hope that how much they bring in increases our rates as well because if it doesn’t, we’re all going to be homeless.”
Despite that trepidation, Matherson said he welcomes Amazon. “I think there’s going to be pros and cons regardless but I don’t think you should ever turn away new business,” he said.
In the shadow of the Pentagon
An attractive workforce isn’t the only weapon in Crystal City’s arsenal. The neighborhood is home to the Pentagon, and it is a hub for the federal defense industry. That proximity could give Amazon an advantage as it competes for a massive Department of Defense contract.
The project, called Joint Enterprise Defense Infrastructure or JEDI, is a 10-year, $10 billion deal aimed at modernizing DoD’s cloud infrastructure. Amazon is seen as a frontrunner but faces competition from Microsoft. DoD is expected to announce the winner in April 2019.
In addition to moving in next door to the federal agency Amazon is courting, the rumored Crystal City campus is a stone’s throw from the massive Amazon Web Services facility that is already underway in Northern Virginia.
If Amazon locates in Crystal City, it will be in a position to poach tech talent from the federal government. Matherson, the defense contractor, welcomes an offer from Amazon. “That would be a game changer,” he said. But it could prove an expensive endeavor for Amazon. He added, “I don’t think that their rates would compete with government.”
A neighborhood poised for transformation
Crystal City’s defense roots already make it a hub for STEM fields. That work has long been geared toward the federal government but Arlington is working to transform itself into a private sector tech hub as well.
“Historically we are best known for being a government contracting hub but that has evolved and changed over the years,” said Kate Bates, President and CEO of the Arlington Chamber of Commerce. “We’ve really seen our economic base diversify and our businesses evolve to really suit the evolving needs of today’s economy.”
The neighborhood is already home to the Consumer Technology Association, the organization that puts on the massive Consumer Electronics Show in Las Vegas every year. It’s also home to startups like ByteCubed and Mobile Posse, as well as larger tech firms like Accenture and BAE Systems.
But to truly become a tech hub in league with San Francisco, Seattle, or New York, Arlington needs a big anchor tenant. Enter Amazon, which plans to bring between 25,000 to 50,000 new tech jobs to the city — or cities — that win its remarkable second headquarters competition.
Lancaster, the developer with Gould Property Co. who is opening the new Accelspace project this week, is naturally bullish about Crystal City’s future.
“If you look at the history of Silicon Valley, the Stanford Industrial Park started as a military defense business,” he said. “It then became a tech hub. So I feel like Crystal City is destined to be one of the great tech hubs of the East Coast, if it’s not already.”
Accelspace is geared toward tech companies that have exited coworking spaces and are ready for the next phase. Lancaster couldn’t comment directly on Amazon’s plans in Crystal City because Gould Property has signed a non-disclosure agreement with the company. Asked about the timing of Accelspace opening the same week Amazon is rumored to make its announcement, Lancaster said, “that would be a happy coincidence.”
Amazon’s arrival would help put Arlington on the map as a global technology hub, but that’s not the only change it would bring. Seattle’s tech boom, led by Amazon, resulted in housing market whiplash and a rapid rise in traffic congestion that transportation officials have struggled to keep up with.
Even without actual confirmation of Amazon’s plans, real estate speculation has already begun. Real estate agent DeCaro has had several investors reach out this week seeking to purchase property in Arlington because of the reports.
She said she’s “excited and hopeful” about the prospect of Amazon coming to town, but she knows not everyone is thrilled about the news.
“Buyers that are purchasing as owner occupants are very nervous that homes inside the beltway will become less affordable,” she said.
Another common concern — from Lyft drivers to longtime residents — is traffic. The D.C. region already has some of the worst traffic in the nation — with a stretch of I-95 in Northern Virginia experiencing 23 traffic jams a day.
But D.C. does have a more robust train and Metro system than Seattle had at the outset of Amazon’s growth. The company has said from the beginning that it has a preference for cities with strong public transportation and airport access. Crystal City is a short Metro ride from D.C. and the airport.
Waiting for Amazon
Amazon has said it will reveal its second headquarters plans by the end of the year. With the holiday shopping season rapidly approaching, the news is expected any day now.
In the meantime, uncertainty continues to swirl around how Amazon HQ2 will take shape. The reports that Amazon plans to split its second headquarters between two cities raised even more questions. The cities competing for HQ2 offered incentive packages, office sites, and other amenities under the expectation that Amazon would be building a $5 billion second headquarters with room for 50,000 employees. It isn’t clear whether cities are negotiating different terms for half of the project.
Nathan Jensen, a professor at the University of Texas who specializes in incentives, said that any public money offered will likely be tied to the capital invested and jobs created.
“The few public incentives that we have seen as well as proposed special legislation generally included tax abatements (which increase with capital invested) and then per job incentives,” he said in an email. “We haven’t seen either incentive offer, but I can’t think of any incentive package for HQ2 that wasn’t largely performance-based.”
Though the announcement hasn’t been made, Arlington residents eager to see the city’s tech industry take off are already celebrating.
“I think it will be transformational,” Lancaster said, later adding, “I think it will be amazing for the business community.”