FUTURE AMAZON HEADQUARTERS PALACE CONJURES UP HERNDON DREAMS

We hear so much talk these days about decisions and events that are “game changers”. Decisions or events that will forever change the arc of our lives, our communities, or our way of life.

 

In the development world, Amazon’s recent decision to open a second headquarters has communities around the country scrambling to be the anointed one; the community that Amazon chooses to build a projected $5 billion palace that will house more than 50,000 employees. Among the supposed leading candidates to house this new corporate campus are Fairfax and Loudoun Counties. Specifically, speculation is centering around Herndon, in the upper North and West section of Fairfax, bordering on Loudoun County.

 

Amazon has sent out an RFP, with proposals due by October 19, 2017. The terms of the RFP appear to be tailor-made for both Herndon and adjacent Loudoun Counties. In fact, they hark back to my days in Government contracting, when there were often claims of an RFP being “wired” to the specifications only one company could meet. For example, Amazon is demanding a minimum of the following:

  • An airport no more than 45 minutes away (Dulles is five-ten minutes from proposed sites in Herndon and Loudoun).
  • A large metropolitan area.
  • An educated labor pool.
  • Abundant housing (builders in the West of Fairfax and into Loudoun will love this).
  • A diverse population.
  • A good “quality of life.”
  • A strong educational system, especially college and university systems.

Given the massive growth already planned for the “Dulles corridor” from Tyson’s to past Dulles Airport, this Amazon campus would help solve a looming problem with proposed development in the area: the potential of over-supply of residential units. In fact, the Seattle-based Amazon proposal ironically answers part of the question I raised recently about development in Reston: “Reston As the Seattle of the East: Why Not?”  https://raywedell.wordpress.com/2017/06/25/reston-as-the-seattle-of-the-east-why-not/

But there are always uncertainties and always potential glitches. Amazon’s solicitation points out several “incentives” any potential bidders will need to provide, and suggest that other incentives are also welcome. So for the Herndon and/or Loudoun County proposals to gain preference and win, these would be considered minimum requirements:

  • Special incentive preference from legislatures. This implies subsidies, tax breaks, and other forms of corporate welfare. Amazon did not reach a market capitalization of nearly $500 billion by giving away money.
  • Amazon has used this tactic very well in the past, reportedly extracting over $1 billion in incentives from various localities on other projects, including the data centers already located in Loudoun.

So the question becomes this: how much of a subsidy will Loudoun County, Fairfax, or the state of Virginia be willing to provide to sweeten any offer to bring Amazon to our area? How much “incentive” is really necessary, given the obvious advantages for Amazon to locate here versus other areas of the country?

Keep in mind that Jeff Bezos, Amazon’s CEO, has purchased the Washington Post, and owns residential real estate in D.C. worth over $20 million. As a believer in watching what people do rather than relying on what they say, I would assume Mr. Bezos would look favorably on a move to the D.C. area.

 

All of which opens the door to the fascinating discussion revolving around the “game changing” nature of the Amazon project. Whatever the costs and benefits, this will be a major driver to future development and life in our area for decades to come. Let’s hope and pray that our elected leaders and their advisors get this right.

 

 

Ray Wedell, CFA

Samson Properties

703-855-7299

ray.wedell@gmail.com

 

 

 

 

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