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Real estate brokers despair over Amazon's abrupt NYC reversal

Bloomberg logoBloomberg 2/14/2019 Ben Foldy, Sydney Maki and Lily Katz
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Video by CNBC

Let the finger pointing begin.

Amazon’s decision to drop its expansion plans in the Long Island City neighborhood of Queens plunged local real estate brokers into despair -- just months after the euphoria that followed the company’s announcement that it would open offices there and bring thousands of jobs. But not just despair. Also anger.

“I think those local politicians, their careers are over,” said Eric Benaim, chief executive officer of Modern Spaces, a Long Island City brokerage, who distributed pins and posters supporting the Amazon deal. “They’re responsible for losing 25,000 jobs.”

Amazon in November announced it would split the expansion between Queens and Northern Virginia’s Crystal City. The company touted up to 40,000 jobs while the real estate industry salivated over prospects for massive office developments and surging residential demand.

Mayor Bill de Blasio and New York Governor Andrew Cuomo lobbied hard for the deal, drawing backlash from local politicians and community organizers who objected to $3 billion in government incentives for a company run by the world’s richest man, at a time when the city faces budget cuts.

Sign Removed

The sign displayed in the storefront of a Douglas Elliman brokerage in Long Island City summed up the real estate industry’s attitude toward the controversial deal. “This business supports Amazon,” it read. Someone inside pulled the sign down after the company released a statement Thursday that it was pulling out.

Amazon Scraps Plan to Build a Headquarters in New York City

“I was sitting down, so I had nowhere to fall,” said Adrian Lupo, manager of Nest Seekers International next door on Vernon Boulevard. “We thought they were playing poker to get more concessions, but in the end it was not the case.”

Without the boost from Amazon that could have transformed Long Island City into a 24/7 district, Benaim said he thinks it’ll remain just a place for Manhattan commuters to sleep.

“It’s still going to be a bedroom community, and I feel bad for all the local restaurants, all the local mom-and-pop shops who were counting on this,” he said. “They needed this.”

Terrible Signal

Amazon’s withdrawal “sends a terrible signal to the marketplace about the ability for companies to expand in New York,” said Seth Pinsky, an executive vice president at RXR Realty. “The people who are younger and don’t remember the fact that New York was not always thriving, I think don’t understand that as bad as the problems of growth are, the problems of decline are even worse.”

Jason Haber, a broker with Warburg Realty Partnership Ltd., said at least 10 clients have already called to discuss what Amazon’s absence from Long Island City means for them. He said he hopes none of them back out of deals over the news, but “real estate is an emotional thing.”

“We literally just threw the baby out with the bath water, Haber said. “You want the Rockefellers, the Carnegies, the Bezos coming to our shores and that economic growth that comes with them. We’re not setting up New York for success in the 21st Century. What happened today is a real tragedy.”

At a contentious City Council meeting on Tuesday, Amazon’s public policy director Brian Huseman touted the deal’s benefits for the city, but also said that Amazon wants to invest in a “community that wants us.” And state Senator Michael Gianaris, who had been appointed to a committee that would have had veto power over the deal, called the $3 billion in incentives “extortion.”

“They think they can sit there in Seattle and dictate terms and hope that governments bend to their will,” Gianaris said in a Feb. 8 interview on Bloomberg TV. “Well, it’s not going to work."

Amazon “did an extremely poor job of preparing local officials and bringing them into the fold,” said Tom Stringer, who works on corporate relocations as a managing director at BDO Consulting.

Urban Politics

New York City politics are a very different environment to the cities where the tech industry has typically operated, said Margaret O’Mara, a professor at the University of Washington in Seattle.

Amazon "wanted as little friction as possible,” O’Mara said. “Tech companies are used to low-friction environments. They’ve, by and large, been in small suburban communities that have done their bidding. I’m sure none of this played out in the way the protagonists anticipated. But, hey, this is urban politics."

Chad Sinsheimer, a managing director at Ackman-Ziff Real Estate Group, who was on the subway when he heard the news.

“This definitely sets back the commercial market for Long Island City for sure,” Sinsheimer said. “My partner and I looked at each other and we said, ‘Boy are we glad we don’t have anything that’s being negotiated in Long Island City right now because it’s got to be chaos.”’

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