Enduring Effects of Amazon’s Crystal City HQ2 Not Crystal Clear

As CO reported yesterday, four months after Amazon announced the Northern Virginia HQ2, the Arlington County Board unanimously approved up to $23 million over 15 years for the tech giant, according to a press release from Chevy Chase, Md.-based JBG Smith, which will develop Amazon’s new offices in Crystal City and Pentagon City.

When Amazon listed Arlington as one of the finalist cities for its so-called second headquarters, known as HQ2, some streetcar supporters worried about the fact that the county does not have a streetcar and wondered if this would dissuade Amazon decision-makers from setting up shop in Arlington.

In the end, Amazon’s desire to plant its HQ2 in Arlington turned out to be stronger than the need for a streetcar.

The imminent arrival of Amazon has irritated some in Arlington and pleased others. Those pleased include most state delegates and Arlington County Board members.

On Jan. 28, Virginia delegates voted on a $550 million incentive package for Amazon by an 83-16 margin, which was later proudly signed by Gov. Ralph Northam. That day, the sign on Northam’s podium read, “Virginia is for Amazon Lovers,” a play on the state’s motto, “Virginia is for Lovers.” Three of the four Arlington representatives at the House of Delegates voted in favor of Amazon’s incentive package. rom the perspective of those in favor of Amazon’s move to Northern Virginia, including the majority of lawmakers, the retail giant’s decision is a major win for the area because Amazon has pledged to invest $2.5 billion, create 25,000 new jobs and develop 4 million square feet of commercial real estate in the area, with a potential to double all this to receive further incentives, per Washington Business Journal.

On the other hand, in light of Arlington’s plans to house HQ2, some are more concerned about Arlington County’s insufficient affordable housing. Rep. Alfonso Lopez, whose district will be housing part of HQ2, cast one of the 16 no votes. He voiced concerns for his constituents’ current housing issues and “prospects of displacement,” and said he is worried that HQ2’s arrival will worsen these existing woes. Lopez’s campaign also reportedly returned a cash donation from Amazon in October 2018. (Amazon contributed to all of Arlington representatives’ campaigns, as well as that of several state lawmakers.) Another no voter was Virginia State Rep. Lee Carter, who warned of increasing traffic in the area and overcrowded schools, according to U.S. News & World Report. Michelle Winters, the executive director of the Alliance for Housing Solutions, an Arlington-based affordable housing policy organization, wrote about the shortage of affordable homes in Greater Greater Washington, adding that the problem is now more pressing with the arrival of Amazon.

According to a September 2018 analysis released by the Metropolitan Washington Council of Governments, the D.C. metropolitan area requires upward of 100,000 new housing units by 2045 to meet the demand, which needs an annual housing production of at least 25,600 units each year. Critics such as Lopez and Carter said that once HQ2 is established, the price of Arlington properties will increase, and the county will move further away from meeting lower-income residents’ housing needs.

Another concern is that Amazon’s high-paying jobs would deepen the wage gap among Arlington’s population. In fact, Carter mentioned that as one of the reasons he is opposed to Amazon’s move to the area, warning that “thousands [would be] priced out of their homes with the influx of high-paid tech workers.” In a tweet, Carter criticized the deal for the expenses it will impose on the area’s residents, and called it corrupt.

Hoskins said that he does not agree with the notion of a deepening socioeconomic divide within the county, which some believe will occur once HQ2 is established. Regarding the risk of a housing shortage, Hoskins said Arlington already has long-term plans underway for thousands of new residential units in Metro corridors, offering a range of new housing options. He added that “the State of Virginia, Alexandria and Arlington County will invest a combined $250 million to produce 2,000 affordable housing units over the next 10 years.”

As CO has reported, Amazon is leasing 500,000 square feet of office space from Maryland-based commercial developer JBG Smith. The first phase of its HQ2 will be moving into three buildings in Crystal City. The retail giant has also entered an agreement to purchase up to 4.1 million square feet of land owned by JBG Smith for one of its new HQ2 buildings.

Matt Kelly, JBG Smith’s CEO, called the development “a game-changer for our local economy, [which] will breathe new life into a market that is still recovering from the headwinds of the global financial crisis and sequestration,” per WTOP. The real estate company said it will spend $80 million to renovate one of the three locations Amazon has leased, 1750 Crystal Drive. According to its agreement with JBG Smith, Amazon is expected to begin construction of its first office building this year. JBG Smith will also serve as property manager and retail leasing agent for all Amazon buildings in the area.

Another one of the three HQ2 locations, 1800 South Bell Street, is a 50-year old mostly vacant commercial building that houses Synetic Theatre, founded in 2001, a popular part of the bustling art scene of Arlington. The theater partnered with the Crystal City Business Improvement District and Charles E Smith, a major real estate company in the area, which became part of JBG Smith in 2017, to secure itself a home. In November 2018, Synetic Theatre announced that its lease would not be renewed in light of plans for part of HQ2’s move to the building, but on Feb. 21, it reported a lease renewal, CO reported, stating that it is excited to be Amazon’s neighbor in the building.

Arlington’s Amazon opponents have other still more objections, traffic among them. Crystal City already has fairly congested streets. The whopping 25,000 new employees who will start working at Amazon in Arlington (albeit over the course of a few years) will undoubtedly affect the area’s traffic, even if those employees don’t end up living in Arlington. According to the last census in 2015, Arlington County, with a land area of slightly less than 26 square miles, has a population of almost 229,000 and it’s projected to increase to 287,600 by 2040. Many have pointed out the definite effect of Amazon’s HQ2 on both the state of traffic and housing prices in nearby Fairfax County.

One Arlington County resident who works in the county told CO that she does not think she would be able to enjoy living in Crystal City once Amazon settles in. She is worried about the increase in rent and the inevitable congestion of both foot and car traffic in the area when Amazon employees start working in Arlington. She said she and her husband were looking forward to raising her twins in Arlington, but are already looking for housing in other neighboring counties.

In contrast, Hoskins said that “much of the workforce will be comprised of people who already live in the region and the local talent pool is one of the main reasons Amazon executives said they chose Arlington for the new headquarters.”

Naturally, most businesses owners in south Arlington are thrilled about Amazon’s arrival and the prospect of prosperity on the horizon. And Virginia Smith, the owner of Arlington Realty, whose work is mostly focused on commercial properties, said she expects real estate prices to rise in general, and real estate business to thrive. Smith, who has done business in Arlington for over two decades, said “although it’s almost impossible to predict exactly what will happen in the coming years,” she expects an overall positive effect on Arlington’s commercial real estate both in the long and short term. Hoskins also mentioned the looming increase in commercial real estate prices as a positive factor.

“On the commercial rental side, the entry of Amazon in a 12-year period will likely mean a gradual rise in the depressed commercial rents in Crystal City and other parts of Arlington County,” Hoskins said.

Virginia and New York were selected from 238 applicants for Amazon’s HQ2, although Amazon backed out of Gotham on Feb. 14. Some Northern Virginians envy New Yorkers because they no longer have to weigh the possible ramifications of the tech giant setting up shop in their state. Others feel excited and proud, partly because, according to Hoskins, “95 percent of the proposed incentives consist of investments in affordable housing, transportation and infrastructure as adopted by the County Board as part of the county’s Capital Improvement Program.”

The final outcome of the move, which bears imminent changes in the area, remains to be seen by the residents and their wallets. Change, particularly such a colossal one, frequently feels bizarre and tough to deal with. Time will tell if the county just outside the nation’s capital will positively adapt to such change.