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It was an anticlimactic end to what started as a frenzied corporate competition.

Fourteen months after Amazon.com Inc. called for bids for its second headquarters, the e-commerce giant announced on Tuesday it was splitting HQ2 between Long Island City, a neighbourhood in the Queens borough of New York, and Arlington, Va., just outside of Washington. Rumoured for days, the decision officially ended a high-stakes contest that drew hundreds of bids from across the continent, and dashed any hopes that Amazon would shower the spoils on an underdog bid in need of economic upheaval.

Even then, an HQ2 split among New York and Washington – both undisputed centres of power and wealth in the United States – will prove a transformational event for both cities, given that Amazon is liable to become the largest corporate tenant in each, setting off a ripple effect that extends beyond the commercial real estate market.

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When Amazon announced the search for HQ2, it planned to build a “full equal” to its Seattle headquarters. The company said on Tuesday both locations would have at least four million square feet of office space, with the opportunity to expand to as much as eight million.

In time, that could make Amazon the largest tenant in both New York and Northern Virginia, dwarfing the likes of Wall Street giants and government contractors. As it stands, Citigroup Inc. is the largest tenant in New York at 3.2 million square feet of office space, while the U.S. Department of Defence is tops in Northern Virginia with roughly 2.8 million square feet, according to data provided to The Globe and Mail by real estate firm CoStar. (Co-working startup WeWork has more than five million square feet in New York, but in turn rents space to other businesses and freelancers.)

How HQ2 sites will stack up

New York City

Full HQ2 build

Minimum HQ2 build

Citigroup:

3.2M sq. ft.

Northern Virginia

Full HQ2 build

Minimum HQ2 build

Dept. of

Defense:

2.8M sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, COSTAR

How HQ2 sites will stack up

New York City

Full HQ2 build

Minimum HQ2 build

Citigroup:

3.2M sq. ft.

Northern Virginia

Full HQ2 build

Minimum HQ2 build

Dept. of

Defense:

2.8M sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, COSTAR

How HQ2 sites will stack up

New York City

Northern Virginia

Full HQ2 build

Full HQ2 build

Minimum HQ2 build

Minimum HQ2 build

Citigroup:

3.2M sq. ft.

Dept. of

Defense:

2.8M sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, COSTAR

Of course, Amazon could blow past expectations and need more space, a situation that has played out time and again in its hometown.

The company’s footprint in Seattle has multiplied several times over since 1998, when it moved into its first major headquarters of 190,000 square feet. Come 2007, the company agreed to lease up to 1.6 million square feet of office space, spread across 11 new buildings, in South Lake Union, once an underused neighbourhood in the city. Those plans proved modest. By the time the HQ2 search was under way, Amazon was spread across 33 buildings and 8.1 million square feet.

It’s not done, either. Today, it occupies 10.7 million square feet, according to the Downtown Seattle Association, with another 3.6 million in development.

Amazon’s Seattle footprint

Amazon’s first

major Seattle HQ:

190,000 sq. ft.

2017 footprint:

8.1 million sq. ft.

Current: 10.7 million sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, DOWNTOWN

SEATTLE ASSOCIATION

Amazon’s Seattle footprint

Amazon’s first

major Seattle HQ:

190,000 sq. ft.

2017 footprint:

8.1 million sq. ft.

Current: 10.7 million sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, DOWNTOWN SEATTLE

ASSOCIATION

Amazon’s Seattle footprint

Amazon’s first

major Seattle HQ:

190,000 sq. ft.

2017 footprint:

8.1 million sq. ft.

Current: 10.7 million sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, DOWNTOWN SEATTLE ASSOCIATION

Here’s another way of visualizing Amazon’s Seattle space – versus the Parliament Hill grounds, along with all floor space in the 102-storey Empire State Building.

Amazon’s Seattle footprint, in context

Parliament Hill

grounds:

290,289 sq. ft.

Empire State

Building

floor space:

2.8 million sq. ft.

Amazon’s 2017 footprint:

8.1 million sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, GOV. OF CANADA,

CTBUH

Amazon’s Seattle footprint, in context

Parliament Hill

grounds:

290,289 sq. ft.

Empire State

Building

floor space:

2.8 million sq. ft.

Amazon’s 2017 footprint:

8.1 million sq. ft.

Current: 10.7 million sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, DOWNTOWN SEATTLE

ASSOCIATION, GOV. OF CANADA, CTBUH

Amazon’s Seattle footprint, in context

Parliament Hill

grounds:

290,289 sq. ft.

Empire State Building

floor space:

2.8 million sq. ft.

Amazon’s 2017 footprint:

8.1 million sq. ft.

Current: 10.7 million sq. ft.

THE GLOBE AND MAIL, SOURCE: AMAZON, DOWNTOWN SEATTLE ASSOCIATION, GOV. OF CANADA, CTBUH

As such, Seattle is a company town without peer in urban America. Amazon occupied 19 per cent of all prime office space in Seattle as of 2017, more than any company in a U.S. city, according an analysis conducted by CoStar for the Seattle Times. In overall terms, Amazon’s Seattle footprint is more than triple that of the No. 2 company, Citi in New York.

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Not surprisingly, the commercial real estate market has tightened considerably. Prime office space rented at an average of US$43.58 a square foot in 2017, up from US$26.13 in 2005, according to Broderick Group, a commercial real estate services firm. Over the same span, the office vacancy rate ebbed to 6.3 per cent from 10.5 per cent.

Amazon is “a big part of why vacancy rates have come down as much as they have,” said Oscar Oliveira, principal at Broderick Group. (His company has worked on behalf of landlords that have leased space to Amazon.) “A lot of the newer buildings that have been constructed, [Amazon has] taken the entire building.”

But it’s not just Amazon. Lured by the city’s deep talent pool, tech giants such as Alphabet Inc. and Facebook Inc. are bolstering their downtown Seattle outposts, right in the heart of a neighborhood transformed in Amazon’s image. It’s not inconceivable to think that others will follow Amazon to New York and Washington, where office rents already tend to run higher than in Seattle.

Amazon’s meteoric growth has also coincided with surging home and rental prices in Seattle, and affordability has become a pressing local issue. Seattle has experienced robust population growth in recent years, raising concerns about how effectively it is absorbing newcomers. Undoubtedly, some newcomers are very well compensated. Amazon is Seattle’s largest employer, and its 45,000-plus workers are paid an average of more than US$110,000, the Seattle Times reported earlier this year, based on data from job review site Glassdoor. That’s well in excess of the median household income of roughly US$75,000 in 2016.

In both HQ2 locations, Amazon will be incentivized to create tens of thousands of high-paid jobs, a situation that could threaten to exacerbate affordability issues in those areas.

In New York, the company would receive a tax credit of up to US$1.2-billion, based on the creation of 25,000 jobs based in Long Island City with an average wage of more than US$150,000. In Northern Virginia, the company would receive incentives of up to US$573-million based on the same targets, with the positions based in Arlington. (Amazon would receive an additional cash grant of US$325-million in New York, based on a square footage target over the next decade.) The median household income in Queens is just more than one-third of Amazon’s target; wages are substantially higher in Arlington County, but still well below the target.

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“The arrival of a major new employer, such as Amazon HQ2, would increase pressure on the D.C. region’s housing market,” said the Urban Institute, a Washington-based think tank, in an October report. “Without substantially more housing production at a wide range of rent levels and price points, the challenges of rising affordability pressures and lengthening commutes will intensify, and more households will experience hardship.”

Amazon’s impending arrival has likewise drawn ire in New York.

“The idea that [Amazon] will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need MORE investment, not less, is extremely concerning to residents here,” congresswoman-elect Alexandria Ocasio-Cortez wrote on Twitter on Monday night, as news of the announcement seemed imminent.

“It’s possible to establish economic partnerships [with] real opportunities for working families, instead of a race-to-the-bottom competition.”

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