After HQ2 decision, Amazon plans suggest expansion, and then a big hiring slowdown

SEATTLE – Amazon’s announcement that its headquarters expansion would be in New York City and Northern Virginia answered one question that had been hanging over the Seattle company.

A big one remains for Amazon’s hometown: What happens next here?

Seattle’s economic growth since the 2007-09 recession might as well be called the Amazon Boom. Fueled by rapid expansion in online retail and cloud computing, Amazon grew into the biggest corporate tenant of any American city, becoming a center of gravity that drew thousands of well-educated, well-paid workers and other tech firms near the company’s home base.

With Amazon’s gaze shifting to the East Coast, Seattle is in for something different.

The company’s construction and lease plans point to continued hiring here for the next two years. After that, people who have spoken with Amazon executives and close observers of the company say Amazon is likely to shift most of its hiring to its second and third campuses.

That promises a drastic shift for a city that has grown accustomed to Amazonians moving in by the truckload. From 2010 to 2017, the company added an average of 5,000 employees to its workforce each year, not counting hires to replace employees who left.

“Their expansion in these last four or five years has been kind of astounding,” said Michael Jensen, a senior planner with the Puget Sound Regional Council, which works on regional growth issues.

Exactly how much Amazon slows that pace will have far-reaching consequences for Seattle’s economy, helping determine the direction of the housing market, the makeup of the region’s workforce and the fate of a construction boom that reshaped and expanded downtown, economists and executives say. Seattle city planners, restaurateurs, construction workers and advocates for low-income housing all have a stake in the plans of the city’s largest corporate resident.

The HQ2 search makes one thing clear, observers say: Amazon grew up in Seattle, but it is no longer dependent upon it.

Exactly how much of a role Amazon plays in the Seattle economy is up for debate. But employment data suggest an outsized role for Jeff Bezos’ company.

Amazon accounted for 29 percent of the workers Seattle added from 2010, the year the company moved to its South Lake Union headquarters campus, to 2017, according to an analysis of data from the company and city-level employment estimates from the Puget Sound Regional Council.

That share, large as it is, undercounts Amazon’s impact. Using government economic models, the company figures that its investment in that time helped create an additional 53,000 jobs outside Amazon – positions in food and building services, construction and suppliers of all sorts, part of a $38 billion infusion into the Seattle economy.

Nowhere has the effect of that influx been more hotly debated than in the housing market, where price increases led the nation for nearly two years, pricing out many people in what had long been an affordable big city.

Seattle-based broker Redfin last month wrote that much of the growth in the local housing market can likely be attributed to expansion by Amazon.

Assuming the company halves the pace of its hiring in Seattle, and 5 percent of the company’s existing Seattle employees opt to decamp for HQ2, the supply of homes coming on the market would outpace demand, providing relief for buyers after a decadelong boom, said Tim Ellis, an analyst for real estate broker Redfin.

Others disagree that Amazon is the chief force behind Seattle’s rapidly rising cost of housing.

“Amazon is kind of a small but important part of what’s been driving this region’s housing market,” said Aaron Terrazas, an economist with real estate tracker Zillow. “What happens next? So much of that answer really depends on the ecosystem that has emerged around Amazon.”

Complicating any analysis of the impact of HQ2 on Seattle is that Amazon hasn’t offered much in the way of specifics about its plans for balancing life between Seattle and its two new headquarters campuses.

The company said characteristically little when it announced its move to Arlington County, Virginia, and the New York City borough of Queens in a news release Tuesday, saying only that it continued to hire in Seattle, and listing the number of open positions (about 8,000) and jobs there (more than 45,000).

Jay Carney, who oversees Amazon’s communications and government affairs groups, said the new headquarters campuses were designed to capture future growth, rather than serve as places to move current employees.

“I think what we’ve always said is that Seattle is our original headquarters, it remains now one of our three headquarters, and we’re continuing to grow,” he said in an interview. “This is about projected future growth of the company; this is not about moving existing employees around.”

Amazon real estate plans offer other hints at the company’s growth trajectory.

By the end of 2020, work will be finished on the company’s $4 billion Seattle headquarters campus. Along with other buildings under construction that Amazon plans to lease, the company will have room for about 55,000 people in the city, a spokesman said.

Amazon, by then, will be building out its presence in Northern Virginia and New York. Documents Amazon and elected officials in each city signed to firm up tax breaks and other considerations suggest the company will start slow in its new campuses, adding a combined 1,100 workers to the two cities next year.

That pace will pick up quickly, to about 3,400 in 2020 and 5,000 in 2021, essentially matching the pace of the company’s peak growth in Seattle in recent years.

The company by then will also have more options to expand near its Seattle base, but outside the city limits. Office space the company plans to occupy in 2020 in Bellevue and Vancouver, British Columbia, brings a combined 3,500 jobs, part of a hiring binge at satellite offices that will likely total more than 10,000 people in coming years.

Some in the Seattle business community framed Amazon’s headquarters search as a warning to local policymakers, a bad thing for the region’s economy and an indication of a hostile environment to corporations. The Seattle Metropolitan Chamber of Commerce said in a statement Tuesday that “we cannot take our homegrown companies for granted.”

Others say a hiring slowdown at Amazon would be good for the area.

“They’re at a size and scale where it wouldn’t be productive to double their head count here,” said Bill Bryant, a longtime technology industry investor and Seattle-based partner with Silicon Valley venture capital firm DFJ.

“We’d become a company town,” he said. “The history of those is not good.”

That includes Seattle, a town that for decades was heavily dependent on Boeing, and saw its fortunes rise and fall with the order book of the airplane maker. Boeing’s recent retrenchment, which cut tens of thousands of jobs, would likely have been more widely felt in the Puget Sound region if not for Amazon’s rapid rise, economists say.

Bryant and other technology industry observers say even if Amazon’s demand for new workers slows, the region’s appetite for software developers – since 2016, Seattle’s most common profession – will remain strong.

In contrast to the first years of Amazon’s rapid growth in Seattle, the company is joined today in its hometown by more technology giants. That includes Facebook and Google, both expanding in South Lake Union, and a raft of startups growing into midmarket companies, including many run by former Amazon employees. Microsoft, riding a cloud-computing resurgence, also continues to hire in Redmond.