A Look at the NYC and DC Office Markets Before HQ2
When the search for Amazon’s second headquarters search kicked off, there was a lot of discussion about how the tech giant’s new offices would transform the economics of the metro area on which it decided. Many pointed to the home of its current operations, Seattle as a model on what it could like for a new HQ2 host. In Seattle, Amazon takes up 19% of all office space, is the city’s largest employer, and has impacted housing prices.
Instead, Amazon chose the two metropolitan markets that are least likely to be impacted by its arrival from an office-leasing and big-corporation-presence perspective — New York City and Washington, D.C.
Read on for a look at the Q3 2018 metrics of each overall market and to get some color on the respective neighborhoods that Amazon will call home: Long Island City Queens, in New York; and Crystal City, in Arlington, Va.
Manhattan office activity never sleeps…
Right on the heels of Amazon’s Queens choice, Google dropped a bomb, announcing it is spending $1 billion on a new campus in Manhattan’s Hudson Square neighborhood and plans to take up 1.7 million square feet and double its employee total of 7,000.
Amazon coming to New York is a big deal, but it’s one of many. Though its Long Island City location is technically in Queens, it’s also just across the East River from Manhattan, essentially making it an extension of that larger market.
And there’s plenty of activity there right now. A JLL report on Manhattan’s office market in Q3 of 2018 says there’s just under 21 million square feet of product under construction with an overall supply of just under 449 million square feet. Most of the construction, 18 million square feet, is taking place in Midtown, which includes Hudson Yards, a $25-billion mixed use project and will take up four city blocks.
on Manhattan’s office market in Q3 of 2018 says there’s just under 21 million square feet of product under construction with an overall supply of just under 449 million square feet. Most of the construction, 18 million square feet, is taking place in Midtown, which includes Hudson Yards, a $25-billion mixed use project and will take up four city blocks.
Meanwhile, Manhattan office vacancy rates are at 7.8%, the lowest since 2008.
…Long Island City won’t soon
Amazon has already made a big statement in Long Island City. It’s leasing one million square feet in the 53-story One Court Square tower, Queens’ tallest building. The building is currently occupied by Citigroup and adorned with the institution’s signage.
On the development front, Amazon is going to build in the neighborhood’s Anable Basin site, where it will reportedly initially construct about four million square feet of offices that will turn into eight million square feet over the next 15 years.
Long Island City hasn’t exactly been sleepy over the last several years. It has been the site of extensive multifamily development. On the office front, developer Tishman Speyer Properties is building The JACX, a 1.1-million square foot tower that has signed Macy’s and WeWork as anchor tenants. Smaller projects are also underway.
D.C. and NOVA experience no lack of activity
Washington and Northern Virginia combined have an overall office inventory of about 345 million square feet.
In D.C. proper, 2018 vacancy rates dropped to 12.7% during the Q3, down from 13.1% in the same year-ago period, according to a Colliers International report. There’s just under 5.5 million square feet of construction taking place due to tenant demand fueled by a strong overall economy.
In NOVA, Capitol One opened its 470-foot tall headquarters in the Tysons Corner area. Around the overall area, there is 1.6 million square feet of office development underway, according to another Colliers report, and there’s more product expected to break ground next year.
Vacancy stood at 17.4% at the end of the quarter, up slightly from 2017’s Q3.
A ‘National Landing’ in Arlington
In Arlington, it’s believed Amazon chose its 115-acre site in part because of the National Landing project that developer JBG Smith has in the works. Amazon already reportedly has plans to lease 500,000 square feet of existing office space on the site and a 130,000-square-foot retail center is in the works.
But that will only be a drop in the bucket in the long run: Amazon’s campus is expected to total about six million square feet. JBG already owns 6.2 million square feet of existing office and 2,850 multifamily units on the site, which it’s revamping into an urban community. With the tech giant as its anchor tenant and 25,000 employees, retail and restaurants are sure to follow.
A plus for Crystal City is that it’s right across the Potomac River from Washington, D.C. In its case, as well as that of Long Island City, businesses that want to be near Amazon probably already have a presence in the metro area. If not, they’ll be setting up offices in cities with more options than any other markets in the country.