NEW YORK CITY—After setting up almost a “Charlie and the Chocolate Factory” nationwide competition for the golden ticket, maybe Amazon shouldn't have been surprised by the attention, scrutiny and vocal opposition in New York City that ultimately led to their breakup.

After Amazon called it quits on the New York City HQ2, GlobeSt.com caught up with NYU Schack Institute of Real Estate's associate dean and the founder of Chandan Economics, Sam Chandan. We asked the economist, who also teaches at the Wharton School, what will result from the biggest recent real estate story in New York City—that wasn't.

“The long lasting impact of this is that firms will pursue location strategies in a way that is much more sensitive to the needs of the community and to the optics of how they are presenting their decision-making process,” says Chandan.

“The degree of community and political opposition doesn't come as too much of a surprise,” he says. “It's not that such opposition will arise in any community but there are circumstances or conditions that contributed to the strong response.” Chandan points out that the challenges of housing affordability, displacement, congestion and infrastructure are very significant in New York.

“When you see those conditions present to varying degrees there is always the possibility that the community responses to tax incentives for a large corporation can lead to conflict,” he explains.

The approximately $3 billion in incentives would have been a reduction of Amazon's state and city tax obligations for a finite period of time. Amazon, Governor Andrew Cuomo and Mayor Bill de Blasio had stated the HQ2 would bring in 25,000 jobs and billions in tax revenue.

“What's unfortunate is that most cities would want to attract a major corporation, an anchor like Amazon that has the potential to create jobs long-term, to expand the tax base and attract other complementary firms,” says Chandan.

He also points out that large corporations like Amazon need to acknowledge the concerns of the communities where they want to invest. “They can engage in partners in this process to say we know that by entering this market, there is impact on home prices, apartment rents. There is the potential for displacement. How can we not only choose to locate in this city but how can we be a partner to its constituents?”

A large company choosing to locate in a major metropolitan area needs to carefully plan its messaging of the corporation's commitment to the community evaluating how a partnership will develop, says Chandan. He adds, “We'll see a lot more of this as corporations open second headquarters.” The companies may also head to secondary markets with fewer complexities.

But urban areas like New York City and large companies or forces of gentrification can have a relationship status of “It's complicated.”

On one hand, New York needs to remain a thriving, diversifying, evolving economic capital.

“It becomes important to convey to large businesses like the tech sector and emerging firms that New York is open for business and that we will work with firms to facilitate their location easily,” says Chandan. He comments that this needs to be addressed immediately, so companies thinking about locating in New York do not hesitate in a way that could hurt the city's long-term outlook.

For large firms partnering with the community will be an important element of the overall investment strategy, according to Chandan.

But can a corporation and the city adequately address community concerns?

High paying companies entering a neighborhood while providing an economic boost, can also drive up housing prices, displace residents, push housing out of the financial reach of people, and change a neighborhood's character. New York City's lure as an urban center includes economic diversity which often fosters more cutting-edge, creative arts with a broader spectrum of people living in close proximity. Do solutions such as more schools, parks or “80/20” mixed-income developments respond to these fears? Who gets to define a neighborhood, and cumulatively New York City's identity?

Chandan says the balance of these concerns requires not only public investment in the city, in infrastructure but also working on novel and creative ways of engaging the private sector to address housing affordability.

Instant Insights /

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