As Amazon’s decision to split its second headquarters between New York City and metropolitan Washington, D.C., draws plaudits and criticism regarding incentives used to lure the e-commerce giant, contractors are weighing the impacts of major new construction programs in what are already the nation’s top two construction markets.
Announced Nov. 13 following a 14-month location search that attracted 238 proposals from cities, Amazon’s plans to build 4 million sq ft of new office space in both Long Island City, N.Y., and Arlington, Va.’s Crystal City/Potomac Yards area. Each campus will support more than 25,000 workers and have capacity for further expansion to 8 million sq ft. Amazon’s total investment at both locations will top $5 billion, the company says.
In addition, Amazon selected Nashville, Tenn., for a 1-million-sq-ft Center of Excellence for customer fulfillment, transportation and supply chain activities. The $230-million facility will be located in the historic Gulch district near downtown.
The New York Building Congress, which previously forecast area-wide annual construction spending of at least $53 billion through 2020, praised Amazon for providing “a tremendous boost to New York’s economy.”
Gordon Dixon, CEO of AGC of Virginia, likewise anticipates a ripple effect on regional construction activity, which recorded $16.1 billion in new starts during the first half of 2018, according to Dodge Data and Analytics. “It’s not just a major corporate activity,” Dixon says.
While construction on all three projects is expected to begin next year, little is publicly known about Amazon’s procurement plans and processes. Over the past decade, the company’s Seattle headquarters has grown to approximately 8.5 million sq ft, helping transform the former low-rise industrial area. Industry observers familiar with the region say the company used locally based contractors for those projects, and expect a similar approach in both New York and Virginia.
Amazon’s agreement with New York development officials calls for at least 1.5 million sq ft of mixed-use office facilities to get underway within 12 months after regulatory final approval of a general project plan. Additional construction would then be completed over the next 48 months, barring unavoidable delays. Along with donating space within its planned 20-acre campus for a tech startup incubator, Amazon will donate a site for a new public school and invest in infrastructure improvements and green spaces.
In Virginia, Amazon will initially lease 500,000 sq ft in three buildings owned by developer JBG Smith, owner of a 150-acre swath now rebranded as National Landing. Amazon will also purchase four JBG Smith-owned development parcels for new construction.
Virginia will invest up to $295 million in previously planned transportation projects in and around National Landing. They include additional entrances at two Metrorail stations, upgrades to the area’s primary north-south arterial, expansion of an existing transitway and a pedestrian bridge connector to Reagan National Airport.
Nearby, Virginia Tech plans to build a $1-billion, 1-million-sq-ft academic, research and development campus at the southeast end of National Landing. George Mason University will also spend $125 million on graduate programs in computer science and related fields at its Arlington campus.
While the Amazon-fueled construction activity will unfold over several years, AGC’s Dixon worries about staffing in Washington’s already tight market. He adds that the volume of construction activity in a relatively confined area such as National Landing will present contractors with “a big logistical issue, as well as new pressures on traffic congestion.”
Meanwhile, several groups have criticized New York and Virginia for their publicly funded incentive packages, which could approach $2.18 billion in New York and just under $1 billion in Virginia.
Despite the pushback, Dixon is “cautiously optimistic” that Amazon’s plans will become reality.