Tags: amazon | nyc | real estate | threat

'You Gotta Be Kidding Me!' Amazon's Threat to Back Out Shocks NYC Real Estate

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Sunday, 10 February 2019 06:16 AM

Bill Montana was schmoozing with real estate brokers Thursday at an industry event in New York, talking about the biggest deal in years: Amazon.com Inc.’s decision to build a major campus in Queens.

By the next morning the euphoria had evaporated. Reports the tech giant was reconsidering its plans amid a fierce public backlash sent a jolt through the real estate community that was pinning their hopes on a significant pickup in activity.

“You gotta be kidding me!” Montana, a senior managing director at brokerage Savills Studley, said when reached by phone Friday. “Amazon would be exceedingly foolish to actually pull out of this deal.”

After a highly publicized search for a second headquarters, Amazon in November announced it was splitting the expansion between the New York neighborhood of Long Island City and Northern Virginia’s Crystal City. The company touted upwards of 50,000 jobs that the deal would create, while the real estate industry salivated over prospects for massive office developments.

They didn’t account for Alexandria Ocasio-Cortez, the 29-year old freshly elected congresswoman, and other New York politicians who slammed the subsidies the city and state offered. That whipped up a political firestorm that may now be calling the deal into question.

“It would be somewhere between a terrible shame and a devastating loss,” said Michael Cohen, tri-state region president at brokerage Colliers International Group Inc. “It’s not the end of the world, but it’s a self-inflicted wound that will possibly send the signal to others that might have wanted to follow in Amazon’s footsteps.”

Citigroup Inc. said in November it would move about 1,100 employees from its One Court Square building in Long Island City to make room for Amazon. The building’s owner, Savanna, said at the time it had entered into a letter of intent with the tech giant to lease about 1 million square feet. Savanna founder Christopher Schlank declined to comment on Amazon’s reported reconsideration.

Euphoric Offers

“A lot of euphoric offers have come in for buyers that wanted to be in the area,” said Adelaide Polsinelli, a broker at New York City-based Compass. “People made serious bets on Amazon being there, and there’s not much of a local office market there right now.”

Polsinelli said she’s been contacted by about 20 new buyers showing interest in seeing properties in Long Island City. She said some owners raised prices as much as 20 percent after Amazon’s initial announcement, but expects values to be challenged if the company goes elsewhere.

Without a boost from Amazon, the number of condominium sales in Long Island City will probably slow, said Patrick W. Smith, a Stribling & Associates broker. Since Amazon announced its plans, homebuyers had signed 132 contracts in the neighborhood as of Feb. 3, his data show, up from 40 signed in the same period a year earlier.

“We have to expect that if Amazon did pull out of this deal altogether, that sales velocity might go back to the pre-Amazon number,” Smith predicted.

For now, people are trying to assess whether it’s all just a bargaining tactic. Amazon has used the threat of slowing down its growth to win policy concessions in Seattle, where it’s headquartered and employs tens of thousands of workers.

In May, when the city council was planning a vote on a new tax on large employers to fund homeless services, Amazon said it was halting work on one office tower and considering subleasing another space it intended to occupy downtown. After the threat, local officials scaled back the tax before passing it. Amazon and other area businesses then mounted an effort to overturn the measure at the ballot box. The city council scrapped the tax about a month later.

“The report is probably just a trial balloon being floated to scare people in New York to fall into line,” said Tom Stringer, who works on corporate relocations as a managing director at BDO Consulting. But, he said, “I can tell you definitively that numerous state agencies are watching this closely and are in contact with Amazon and are looking for a chance to poach it.”

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Reports that tech giant Amazon was reconsidering its plans to build a major campus in Queens amid a fierce public backlash sent a jolt through the real estate community that was pinning their hopes on a significant pickup in activity.
amazon, nyc, real estate, threat
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2019-16-10
Sunday, 10 February 2019 06:16 AM
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