By Y. David Scharf, real estate and restructuring partner, MorrisonCohen
The paltry new job numbers announced in February—a mere 20,000 nationwide versus an expected 200,000—place a spotlight on the failure of Amazon and New York City to strike a deal. Consider this: Amazon would have created more jobs at its proposed New York City headquarters than the entire nation created in February.
As that sinks in, let’s try to be positive. New York City is still the premier location for the vast majority of businesses—large and small, new and old. Companies seek New York’s energy, its creativity and its talent. Indeed, the failure of Amazon to locate HQ2 here is not the end of opportunity in New York City—it’s the end of an opportunity in New York City. But everyone—business leaders, politicians and community advocates—must learn some basic lessons from this failure or be doomed to repeat it.
Meet with the other side.
From Amazon’s perspective, trying to evade community involvement by negotiating directly with the Governor and the Mayor seemed like a smart idea. It wasn’t. Not only did key stakeholders feel cut out of the process, but it meant that when the deal ran into opposition, there was only limited buy-in from local leaders. Amazon did not take the time to understand its audience and the community it was entering. Unions are a longtime staple of the New York workforce and Amazon’s anti-union language was bound to cause outrage.
Amazon, to its credit, tried multiple times to meet with local elected officials, including State Senator Michael Gianaris. They were rebuffed or ignored. It does not take my 27 years of experience as an attorney focused in the real estate sector to understand that a lack of dialogue and face-to-face negotiation was a clear recipe for disaster.
See opportunity where it is.
While it’s true that some real estate prospectors were immediately trying to get out of their deals once Amazon announced its withdrawal, the opportunities that Amazon recognized in Long Island City in the first place still exist—from its proximity to New York’s media, finance and talent pool to its manageable costs. Amazon’s consideration of Long Island City put the long-overlooked neighborhood on the map.
In the five weeks following the announcement of the Amazon deal, 18.8 percent of homes for sale in Long Island City increased in price. As buyer interest in Long Island City returns to normal and prices revert to pre-announcement levels, buyers have a new opportunity to invest. I predict smaller scale companies will take advantage of this moment. Buyers and businesses alike would be smart to recognize the advantages of this underutilized area and seize this second chance to get ahead of the curve.
Be careful what you fight for.
Civic advocacy is a great thing. By fighting for workers, families, and children across New York, community advocates have made the city more inclusive and competitive at the same time. And yet, most protests are pure kabuki theater. Many advocates are more interested in fighting and losing the good fight than they are in creating a winning strategy for the city. That is a big part of this Amazon situation. Many progressives wanted to hold Amazon’s feet to the fire, but not have the company and its 25,000 new jobs flat out leave. Now what?
Tearing down is easy; building up is hard.
Doom and gloom stories about the death of New York City are grossly exaggerated. While cities like Nashville, Atlanta and Dallas are on the rise, none of them stand on the global stage quite like New York. At least, not yet. New York continues to be the premier destination for all industries—including tech. For example, Google, which already has a significant campus in New York, plans to double its workforce and build a $1 billion campus in Manhattan. Companies like Uber and Facebook have also expressed plans to expand their presence. While this Amazon deal was a missed opportunity for accelerated growth, the New York City economy will survive and continue to thrive, despite the withdrawal.
New York City faces some serious challenges—from high taxes and enormous infrastructure costs to lack of affordable housing and rising competition from up-and-coming regions. Let’s hope we learn these lessons and hope others do as well.
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