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HQ2 and You

Finance Expert Predicts How Amazon Will Affect the Region—Including UMD

By Maryland Today Staff

Crystal City

Photo by Mark Wilson/Getty Images

Pedestrians cross Crystal Drive in the Crystal City area of Arlington, Va., where Amazon announced Tuesday it would locate part of its secondary headquarters.

A yearlong battle royale between cities to host Amazon’s secondary headquarters ended Tuesday in a split decision, with one of two “HQ2” locations headed for Arlington, Va.’s Crystal City area—or as it’s suddenly been dubbed, “National Landing.”

David Kass, a clinical professor of finance in the Robert H. Smith School of Business, has been monitoring the Seattle-based online retail leviathan for years—ever since his hero, investor Warren Buffet, pronounced Amazon founder and CEO Jeff Bezos the best manager he’s ever met. And Kass has also been tracking Amazon’s potential move to the Washington, D.C., area since the company announced plans for a new secondary headquarters over a year ago.

He spoke to Maryland Today yesterday about the pros and cons—mostly pros, as he tells it—of Amazon's big entrance.

Who is this going to be good for?
The primary beneficiary will be Northern Virginia, but the close geographic proximity to both the District of Columbia and nearby suburban Maryland will create positive overflow effects. Many of the 25,000 employees who will be added over a number of years will undoubtedly choose to live and pay taxes in Maryland.  One beneficiary right here at the University of Maryland, I anticipate, could be the Smith School’s part-time MBA program, which has classes at the Ronald Reagan Building in D.C., a 15-minute Metro ride from Crystal City. And employees might want to take graduate-level or other courses at the main campus in College Park, which is only 30 or so minutes away.

How will this change the area, economically and culturally?
I think it would boost the entire metropolitan economy, because the area would be attracting other STEM-related and technology companies. One reason I believe we were selected was the large, base of recent graduates who are well educated in the technology area. That will attract other companies, as well. As that develops, we’ll be viewed less as a government town than in decades past.

Arlington and Virginia together offered over $500 million in incentives to Amazon to move there. Is the cost worth it to taxpayers?
I’m not privy to the analyses that were performed, but I assume that decision was made based on a cost-benefit analysis. From what I've read, there were other geographic locations that were offering considerably greater financial inducements to attract Amazon. One of the benefits of Amazon's presence is that it likely will attract other companies coming in and hiring more people at considerable salaries, all paying into the local economy. I think that led to the conclusion being reached by the political leaders that it would be a worthwhile investment.

What gave Virginia an edge over Maryland or D.C.?
Part of it was likely the availability of space very close to Metro and very close to Reagan National Airport. You also have several vacant office buildings available almost immediately to be occupied in Crystal City as the Defense Department had moved out.

Any downsides?
Housing is expensive in Seattle, and Amazon's growth in Seattle has resulted in making housing even more unaffordable for people at the low end of the income spectrum. Something similar is likely to happen here as housing prices and rental prices increase. Another downside of this will be roads becoming more crowded, and traffic during rush hour is going to be worse in the short run. Hopefully there'll be infrastructure improvements over time to alleviate that. For current homeowners, however, there is certainly a bonus. Overnight, almost, the value of their homes will skyrocket.

Maryland Today is produced by the Office of Marketing and Communications for the University of Maryland community on weekdays during the academic year, except for university holidays.