This is Why Washington, D.C. Won the Amazon HQ2 Competition

In the spring, Washington, D.C. is dusted with cherry blossoms and crammed with tourists eager to experience the city’s museums, newly impressive food scene and abundant live-entertainment options in areas such as the District Wharf. Yet just across the river in northern Virginia, the scene is very different: Crystal City, a wishfully named sea of unremarkable glass-and-steel office buildings, is an underutilized corporate wasteland in the lee of Reagan National Airport. “You’ll feel the emptiness of some of the buildings and you’ll see the drapes on a lot of the buildings,” says Arlington Economic Development director Victor Hoskins.

All that may be about to change. After a multiyear search process and in a much-anticipated announcement in November 2018, tech titan Amazon announced it would create a second headquarters in northern Virginia. Proponents say HQ2 will bring tens of thousands of high-paying tech jobs to the region, help revitalize the unremarkable Crystal City district with modernist architecture, walkable streets and hip eateries and fuel an economic boomlet throughout the metro area.

But the selection of northern Virginia was far from a foregone conclusion. More than 200 cities around the country competed to win Amazon’s business, and another planned headquarters expansion in New York was torpedoed by local opposition. Winning the Amazon deal required a potent combination of demographic, real estate and long-term strategic factors for the Washington, D.C. metro area.

“Historically, Washington is a company town,” with the federal government driving growth, says Stephen Fuller, director of the Stephen S. Fuller Institute for Research on the Washington Region’s Economic Future at George Mason University, which created the economic forecasts for the HQ2 bid. In 1980, the federal government spent $4.2 billion on services from area companies. By 2010, that amount had soared to $81.5 billion. The increase, Fuller says, was the result of “a shift of federal budgetary policy from doing all of the work themselves to contracting it out.” Consequently, from 2000 to 2010, government spending on services from local companies surged 8 percent per year, and by 2010, federal spending accounted for 40 percent of the metro’s economy.

Construction work for Amazon HQ2 in Crystal City. Photo by Evgenia Parajanian/Shutterstock

That expansion reversed in 2011, as the Great Recession began to provoke GOP-led austerity measures. Federal contractors would shed 100,000 jobs in the region. The cost-cutting hit northern Virginia and the Crystal City district particularly hard. Office vacancy rates in Crystal City climbed as high as 15 percent, according to John Kusturiss, vice president of regional developer Penzance, which is building a major mixed-use condo development nearby.

In the Washington area economy, like in New York, people work first and play second.

The combined pressures of austerity and recession forced local economic development officials to step up their efforts to lure major corporations to the region without relying on government contracts as bait, with significant success. Hilton, Gerber and, a year and a half ago, Nestlé all relocated their HQs to the area. In developing the forecast used in the Amazon proposal, Fuller interviewed CEOs at 50 companies based in the area. “Those companies told me exactly what the CEO of Hilton told me: They said, ‘I moved to Washington because of the labor pool that was there. They had a hardworking, overworking talent pool. In the Washington area economy, like in New York, people work first and play second.’”

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