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Amazon cancels HQ2 New York: The impact on real estate

Amazon canceled it’s $2.5 billion plan to build a New York City headquarters. One of the country’s most substantial development deals fell through because Amazon said “it was troubled by growing political opposition to subsidies.”

 

According to Laura Stevens of The Wall Street Journal, Amazon said “it wouldn’t restart the process and hunt for a new city, and instead would add jobs in other offices around the country, including Seattle.”

 

Kathryn Brenzel of The Real Deal reports that this reversal has left local real estate developers scrambling, with Amazon having agreed to lease 1 million square feet of the Savanna One Court Square office tower. Brenzel continues, “The tech giant also tapped TF Cornerstone to develop part of its campus and planned to redevelop the northern portion of a site owned by plastics company Plaxall for its HQ2 headquarters, which would initially span 4 million square feet.”

 

Keiko Morris of The Wall Street Journal reports on this announcement’s implications for local real estate, noting “Open houses for Long Island City condos were overflowing. Brokers said customers made offers via text messages on units, site unseen.”

 

Source: WSJ

 

Morris furthers that “Developers with office space in Long Island jockeyed to attract the thousands of workers that were expected, and local residents cheered the promise that new restaurants, fashion boutiques and other new stores would flood the retail-starved neighborhood.”

 

The announcement made by Amazon will hurt developers who had already purchased lots and planned new multi-family construction. According to Morris and the WSJ, “since Amazon had chosen Long Island City, 31 commercial and multifamily properties have sold in Long Island City for a combined $553 million.”

 

According to analysis by Sara Ashley O’Brien and CNN Business, “Amazon’s sudden decision to cancel its HQ2 plans for Long Island City has dealt a big blow to the area’s real estate agents, who were seeing an influx of eager buyers to the area.”

 

Legislation watch: New York, California, and OZs

 

California Governor Newsom has called for rent-stabilizing legislation during his first state of state address, according to the California Apartment Association (CAA). “Beyond sparing the businesses of small rental housing owners, it was not immediately clear what would constitute a good legislative package in Newsom’s view,” the CAA notes. It’s worth noting however that leading up to the fall election, Newsom publicly opposed rental control measure Proposition 10.

 

Katie Honan of The Wall Street Journal brings us back to New York, citing two council members who introduced a package of bills aimed at making rent more affordable. “The bills, introduced by Councilman Keith Powers and Councilwoman Carlina Rivera, would limit brokers’ fees and security deposits on apartments. They also would set standards on repayment of these fees for renters.”

 

And finally, we’ve discussed the topic of Opportunity Zones extensively, but there’s a new reporting from John Banister of Bisnow citing a recent hearing where OZ experts had voiced concerns over the OZ rules. “Without more regulatory clarity the marketplace is somewhat frozen,” according to one attendee. “This hearing focused on the first set of proposed opportunity zone regulations the IRS and Treasury Department released in October. It was originally scheduled for Jan. 10 but was delayed over a month because of the government shutdown. The administration plans to release a second set of regulations in the coming months and hold another public hearing before finalizing the rules for the program.”

 

#PropTech Update: OpenDoor and Google

 

According to Connie Loizos from TechCrunch, the online platform OpenDoor—which allows users to buy and sell residential real estate completely digitally—has confirmed a massive $400 million investment from SoftBank’s Vision Fund. This brings Opendoor’s total funding to just over $1 billion, the majority of which has been raised in the last 6 months.

 

Also, although not exactly a #PropTech startup, Google made a very interesting announcement this week related to new data centers across the US, ultimately affecting a number of key real estate markets. Katherine Kallergis of The Real Deal reports that Google “plans to spend more than $13 billion in data centers and offices across the U.S., including major expansions in 14 states. Google CEO Sundar Pichai noted the new data centers and offices will create over 10,000 construction jobs in Nebraska, Nevada, Ohio, Texas, Oklahoma, South Carolina and Virginia. “By the end of the year, the company will have locations in 24 states and 13 data centers.”

 

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