Apple and Amazon could be neighbors.
Apple CEO Tim Cook has been much quieter about the search for Apple’s second campus than Bezos has been about Amazon’s hunger games for an HQ2, but the two parallel hunts might soon collide.
On Wednesday, the Washington Post reported that Virginia governor Ralph Northam has been courting Apple just as ardently as Amazon—and that Apple is interested. This news comes four months after Amazon announced Northern Virginia, D.C., and Montgomery County, Maryland, were finalists in its quest for HQ2, and as more evidence points to its preference for the region. To be clear, neither company has made any definitive announcement regarding their ultimate intent, but their whispers have inspired real panic (and hope).
Amazon’s new campus is projected to employ 50,000 workers paid an average of six figures, and, eventually, occupy up to 8.1 million square feet of office space. Just as Apple’s selection process has been more opaque, its future footprint is harder to measure: The company says the new headquarters will employ 20,000 people in a 4 million-square-foot space, but the nature of the jobs and the timeline of construction hasn’t been announced.
If nothing else, it’s a hypothetical that at some point soon is likely to apply to the real world: What might happen to the region if two tech giants were to wind up in the Washington area, at around the same time? It’s likely that their arrival would send out seismic shocks for transportation, housing, and community demographics. But according to experts from Brookings and Zillow, the Washington area’s infrastructure can handle it better than most.
“The really critical question for predicting impacts of both of them independently and then together is where in the metro area they would pick,” said Jenny Schuetz, a David M. Rubenstein Fellow with the Brookings Institute.
The locations of the companies’ first headquarters offer a hint at those geographical preferences. Amazon’s HQ in Seattle is a sprawling urban campus, well-integrated into the city’s downtown. Apple’s Cupertino HQ is flung far into the suburbs, 175 acres filled with flat-lying office buildings. Construction on a shiny new “Spaceship” at the heart of their $5 billion campus expansion, Apple Park, is nearing completion.
This supports one hypothesis: That Apple might settle in Northern Virginia, and Amazon could lean towards D.C. Or, as CityLab’s Amanda Hurley hopes, HQ2 could swing suburban, too, helping “build a model of an inclusive urban suburb” just outside D.C.
Northam’s team has suggested office buildings in Crystal City, Loudoun County, and Alexandria for both Amazon and Apple, writes the Post. Northam also pitched Apple a Tysons Corner mixed-use development, Scotts Run—the same site developers had proposed to Amazon early in the bidding process. In D.C. proper, Amazon is considering at least four sites proposed by Mayor Bowser, in Capitol Hill East, along the Anacostia Riverfront, near Shaw-Howard University, and adjacent to NoMa-Union Station.
The Washington metro area’s rent is already projected to rise $113 over the next 10 years if left in homeostasis, according to a Zillow analysis of the effects an Amazon HQ2 would have on housing prices. If Amazon HQ2 were to locate there, rents would rise $251. The number was significant, but much lower than Los Angeles’ $1,679 or Denver’s $1,590.
That’s partly because the analysis focused on the historical relationship between worker inflows, which are smaller in Washington, and rents. “D.C. already has a rich pool of workers across the skill spectrum,” said Aaron Terrazas, who ran the Zillow rent forecast analysis. “It also has a deep set of universities within the area, so fewer people will have to move to the D.C. area for these jobs and there’s not as much of an impact.” (That’s also true of places like L.A. and Boston, but their non-Amazoned rents are already projected to jump by more than $1,000). If workers come from within, they may get pay raises and upgrade their housing, thereby swelling the housing market, but fewer will move.
Critics of Washington’s bid for Amazon argue that a large subset of the jobs the company will create won’t be locally sourced at all, and certainly won’t provide opportunity for low-income or less-educated city residents. “The city administration and Amazon leadership are trying to play it off like wherever Amazon HQ2 ends up, that will generate new jobs for the citizens of the city,” Margaret McLaughlin, the chair of Metro DC DSA and an organizer of ObviouslyNotDC, told CityLab in March. “Those jobs will be coming from the Bay Area, from Seattle, mostly white, and very well educated.”
Adding the effects of Apple to the mix is more complicated, because it’s less clear where its workforce will originate: Cook hasn’t described the nature or wages of the 20,000 pool (the promise of six-figure salaries hasn’t been made), nor how quickly they will be created.
One thing’s for sure, though: The region will need more housing to hold them. Projections by the Washington Lawyers’ Committee for Civil Rights and Urban Affairs indicate that by 2032, 491,000 new housing units would be needed to match regional job growth even without Amazon, which has been estimated to bring in 390,000 residents from direct employment and associated economic growth. “We’re already seeing high rents and high home prices, and we don’t have enough housing for the number of people we expect in the next five to 10 years, even without Amazon,” Yolanda Cole, the chair of Urban Land Institute Washington, told the Washington Post.
Those projections would likely only further increase if Apple comes, too, with its 20,000 jobs. (Other estimates have suggested that Amazon would add between 300,000 to 1 million new residents to the region over 10 to 15 years, accounting for the “contagion effect” of new massive tech projects attracted. Apple is one of the companies that might catch the bug.)
Still, “some markets have a historical record of being better able to respond to those demands than others,” said Terrazas. “The D.C. area was among the better able markets that has the capacity and the historical record of adding new units in response to demand.”
Loudoun County (attractive for its wealth of data server farms, including a potential 600,000 square-foot Amazon Web Services Center), has a track record of upgrading infrastructure and building housing in response to business development and the extra demand it compels, says Schuetz—even more so than the District itself. “The question is, how much can they absorb and how much support are they going to have from the state to do infrastructure updates,” she said. “Will they be willing to change the zoning around the campus?”
And, while localized effects on rent will vary depending on the physical setting of each campus, they are also likely to be gradated throughout the region. “If you look at Seattle, the neighborhoods directly adjacent to the Amazon campus have seen more of a jump in rent than neighborhoods further out,” said Terrazas. “If Apple picks Northern Virginia it will have less of an impact the further away you go out.”
Schuetz agrees. “If Apple picks a suburban model—somewhere in Fairfax or Loudoun County—it probably will have a smaller impact [on housing markets],” she said, “because people are not going to live immediately within walking distance, they’ll be likely to live in more suburban locations and drive.”
That’s Hurley’s argument, too. “Many suburbs also have lower housing costs than the cities they border, and they’re resistant to the sudden spikes in ‘hotness’ that lead to gentrification,” she writes. “HQ2 would push up rents in Fairfax County, no doubt. But I’d bet that Herndon, Virginia, is not going to become the next Williamsburg (Brooklyn), RiNo (Denver), or Shaw (D.C.) anytime soon.” The same goes for Apple—or the combination.
If more workers choose to locate in the D.C. metro, however, the brunt of the spike will be felt there. “I think a lot of this is going to depend on the age profile of the workers,” Schuetz said. The distribution could skew towards 20-something software engineers, who are more likely to choose to live in urban D.C., rent, and take public transit, she says. Or it could skew towards older, upper management types, who would locate in the suburbs and drive to the office, wherever it might be.
An Amazon-D.C., Apple-Nova pairing could spell the most doom for Arlington, Virginia, however, just across the Potomac from the city and just east of Tysons Corner. The city was rated “most walkable” in 2016, transformed from a car commuters’ nightmare after the improvement of the Metrorail and an investment in more sidewalks and urban parks. Being caught in the crosshairs of two tech campuses could turn it into a locus of congestion; or saddle it with the burden of meeting much of the housing demand.
“Arlington is certainly likely to get some spill-over from a D.C. or Fairfax site,” said Schuetz. “If either of them [Apple or Amazon] moves to downtown I’d imagine there would be more demand for locations along the Orange Line, which are neighborhoods already in high demand.”
In recent years, Arlington has already aggressively up-zoned and developed their metro corridor, so finding more room to grow could prove challenging. They’d have to look at expanding housing along the Columbia Pike, says Schuetz, something they planned to do anyway—“but then you’re talking about a more car-oriented development than transit, necessarily,” she said.
Tens of thousands more workers, wherever they’re living, could spell tens of thousands more commuters clogging the Washington area’s transportation network.
“The Metro system absolutely has the capacity to move this many workers, especially if along the Silver Line or the VRE commuter rail lines,” wrote Adie Tomer, a fellow with the Metropolitan Policy Program at the Brookings Institute, in an email to CityLab. “The existence of Metro plus suburban transit systems could also ensure ample express buses serve the campus during rush hours.” The one exception he noted was the “notoriously crowded” Orange line, which connects Northern Virginia to the heart of D.C. and could experience the greatest capacity issues.
With an HQ or two in the suburbs—or, indeed, one in the city—cars would congest during rush hour in the already traffic-heavy Fairfax, Tyson’s Corner and Loudoun County areas. But “[t]he major curveball here, as it is everywhere, is pricing,” said Tomer. “If it ever became more expensive to drive alone via congestion pricing or some other approach, transit would instantly become more attractive to many suburban commuters.”
So from a transit and housing perspective, Washington can technically handle an Amazon, and it can handle an Apple, too, far better than some of the other cities on Amazon’s list. But it’s also true that the city’s personality would change dramatically (however “cool” D.C. is or isn’t now, a two-headed tech bubble would certainly up the Philz quotient), and that local businesses and residents would be replaced and displaced, in potentially dramatic ways that exacerbate inequality.
And, if the pair were both to locate in the vicinity, growth is unlikely to stop there. In the years after Amazon arrived in Seattle, other tech giants followed, along with 12,000 homeless residents and a rising median home value of $800,000. The city is still working to mitigate those effects, and looping in a reluctant Amazon for support: On Monday, the city unanimously passed a head tax on the biggest businesses to fund more affordable housing and homeless initiatives.
Critics and city activists have watched Seattle’s struggles, and are wary. “Rents are going to rise for everyone and continue to push out poor and majority minority residents,” said ObviouslyNotDC’s McLaughlin. The city could become “a millennials’ oasis, a little Amazon island of these folks making $100,000 a year, surrounded by people making less than half of that, or even a third of that,” Rev. H. Lionel Edmonds, a founder of the Washington Interfaith Network, told the Washington Post. Add Apple to the mix, and these fears are only exacerbated.
The region itself has mixed feelings. But the last question is whether Apple and Amazon would actually want to locate so closely at all, competing for labor, talent, and cultural and political influence. Bezos has already begun a slow Amazonification of D.C. with his purchase of the textile museum and the city’s paper of record; Amazon’s political office is bringing lobbyists there by the dozens. And Amazon has coexisted peacefully enough with Microsoft, its suburban mirror in Bellevue, just outside of Seattle. The two might well decide that the region is too good to sacrifice for breathing room—or they might both choose North Carolina instead.