NEW YORK CITY — The New York City condo market will likely take the biggest hit after Amazon announced Thursday that it would not move forward with plans to build a second headquarters in the city, according to one REIT analyst.
The online retail giant cited a lack of support from state and local elected officials as its reason for pulling out of a massive headquarters plan in the Long Island City neighborhood of Queens.
“While polls show that 70 percent of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City,” wrote Amazon in a blog post.
Amazon does not intend to reopen the HQ2 search at this time. The company will proceed with its plans for a headquarters in Northern Virginia and operations hub in Nashville.
James Sullivan, managing director of equity research for BTIG, says that there are a lot of residential units in the development pipeline in the Long Island City market.
“The Amazon decision to open in Long Island City had an immediate positive impact on pricing and transactions in the condo market,” he says. “What happens to those transactions, who knows, but there are going to be a lot of unhappy brokers and potential buyers based on Amazon’s decision.”
Sullivan suggests that private and local/regional residential developers are positioned to take the largest hit from this move, while the REITs will largely be fine.
For REITs, Sullivan says, the negative impact on demand and pricing in New York City’s apartment market due to Amazon’s departure will be “more than offset by the positive impact it will have in the Washington, D.C. market.” (Amazon’s headquarters in Crystal City, Va., will be located just five miles south of downtown D.C.) A number of major apartment REITs have a presence in both New York City and Washington, D.C., he argues.
Looking ahead, Sullivan believes that Long Island City will continue to serve as an area for development, but more so in the life sciences industry than the technology space that Amazon would have promoted.
Amazon’s stock price closed at $1,622.65 on Thursday, Feb. 14, up from $1,461.76 per share one year ago.
— Kristin Hiller and David Cohen