Amazon is laying off hundreds of employees — and it shows the danger Seattle and HQ2 face by hitching their prosperity to the tech giant

  • Amazon will reportedly lay off hundreds of employees, primarily at its Seattle headquarters.
  • Amazon employs more than 40,000 people in Seattle and has radically changed the city over the last decade.
  • The cuts point to the danger of a city being too dependent on a single company, an issue Seattle and whatever city wins HQ2 will face in the coming decades.

Amazon is laying off hundreds of employees, primarily at the company’s Seattle headquarters, according to the Seattle Times.

The cuts will primarily affect the company’s retail division. Amazon is America’s second-largest employer with around 566,000 employees as of December. More than 40,000 of those are in Seattle alone.

While the cuts are hardly sweeping, they point to the precarious position that Seattle, and whatever city wins the competition for the company’s new $5 billion headquarters dubbed HQ2, will face in the coming decades.

Amazon dominates Seattle, sprawling across downtown and upsetting locals with snarled traffic, soaring housing prices, never-ending construction, and accelerated gentrification.

At the same time, the city has seen an unprecedented economic surge, adding 220,000 jobs over the past decade. Many of those jobs have been due to Amazon’s growth and are high-paying.

But for many Seattleites, they’ve seen this story before. The city was once even more dominated by another company — Boeing.

In 1968, Boeing employed more than 100,000 people in the Seattle area. By 1971, that number had plummeted to 32,500, leading to an infamous billboard exclaiming: “Will the last person leaving Seattle turn out the lights.”

While Amazon’s layoffs of a few hundred are nowhere near that level, they are a solemn reminder that pinning a city’s future on the ebbs and flows of a single company is a precarious place to be.

I recently spent a day in the Seattle neighborhood locals call Amazonia to see how Amazon has affected the city.

In the ’90s, Seattle’s South Lake Union neighbourhood was a mess of parking lots, warehouses, and industrial buildings. Amazon has transformed the neighbourhood and its surrounding areas, Belltown and Denny Triangle. Each of those pins on the map is an Amazon office.

Google MapsAmazon’s corporate buildings in South Lake Union, Seattle, Washington.

Amazon’s offices are spread across more than 33 buildings throughout the area, though some say the number is closer to 40. The company leases 100,000 square feet of office space in this building, nicknamed Otter.

Source: SF Gate

It’s hard to overstate how thoroughly Amazon dominates downtown. The company is up to occupying 8.1 million square feet of office space in Seattle, reports say. Day 1 Tower, opened in 2016, is one of two towers that form the heart of Amazon’s campus.

Source: Geekwire, SF Gate, CNBC

Amazon employees are literally everywhere. They’re easily spotted by the ubiquitous blue badges hanging from their belts or around their necks.

Amazon has about 20% of Seattle’s prime office real estate, more than any other employer in a major US city. It occupies more square feet than the next 40 largest employers in the city combined.

Source: The Seattle Times

Construction on Amazon’s third and fourth towers is underway. The biggest employer in a city usually occupies less than 5% of office real estate — but having just one take up so much space has its consequences.

For example, when the headquarters of Washington Mutual, the previous major officeholder in Seattle, was dispersed by its new owner, JPMorgan Chase, it took years for downtown to recover.

The most iconic part of the campus is the Spheres, glass domes that will be filled with diverse and exotic plants, a waterfall, and 45-foot-tall rusty-leaf fig tree. The interior will be kept at a pleasant 72 degrees, and employees will be able to work there.

Source: The Seattle Times

Amazon’s real-estate director, John Schoettler, told The Seattle Times that Amazon built the domes not just for employees, but “for the city.” They will not be open to the public, but Amazon has said it is looking for ways to bring in visitors.

Source: The Seattle Times

The dog park, however, is open to the public. Amazon is a famously dog-friendly workplace.

Source: The Seattle Times

Amazon has commissioned several sculptures that dot public spaces, like “Petros” by the artist Julie Speidel. But they tend to conform to Amazon’s sleek aesthetic, which many say lacks the colourful character of the rest of Seattle.

There is a strange vibe that Amazon controls everything. Amazon security guards questioned this photojournalist about what she was doing — on public property. Shortly after, the guard began filming me, saying Amazon documents all media personnel. I hadn’t identified myself as a reporter.

It’s possible this is a case of security guards on a power-trip.

“This is not our policy,” Amazon spokesman Adam Sedo told Business Insider in a statement Wednesday. “We’re investigating why this happened and taking steps to ensure it doesn’t happen again.”

Amazon is “almost juicing” the office market, Matthew Gardner of Windmere Real Estate told The Times. Office space for non-Amazon employers has at times shrunk, but because Amazon keeps growing, its demand keeps increasing. Amazon has leased this entire building on Westlake, the main thoroughfare, since it was built.

Source: The Seattle Times (1,2)

Developers are capitalising on the demand to build a host of new skyscrapers. In May, the city was home to 58 construction cranes, by far the most in the US.

Source: CNN

The Times reported in July that 74 projects were under construction in downtown Seattle. Two-thirds of the buildings will be residential towers, with most being apartments for rent, not condos.

Source: The Seattle Times

Seattle has gone from one of the most affordable West Coast cities to one of the least, Aaron Terrazas, a senior economist at Zillow, told CNN Money. The city and developers have tried to alleviate that by building tons of apartments. Downtown has added 20,000 units in the past decade, with another 27,000 on the way.

Source: CNN Money, The Seattle Times

But nearly all the buildings are considered luxury real estate, with rents 40% higher than in older buildings. The dueling 41-story Insignia towers include amenities like a “sky retreat,” an indoor lap pool and sauna, and a screening room.

Source: The Seattle Times

From 2005 to 2015, Seattle’s median rent jumped by three times as much as the national figure did. In downtown Seattle, average rent has climbed to $US2,400 a month, meaning you’d need to make about $US96,000 to afford it.

Source: Business Insider, The Seattle Times

Big and small businesses in the neighbourhood have to cater to Amazon employees if they want to survive — even strip clubs and sex shops like Little Darlings and Fantasy Unlimited.

Source: Geekwire

High-end furniture stores like West Elm and specialty grocers have moved in to service the new luxury renters, but they didn’t seem too busy when I was there.

Restaurateurs have flocked downtown to capitalise on the Amazon workforce, but business hasn’t shown up as promised. Last January, Josh Henderson closed his tacos-and-drinks spot, Bar Noroeste, when Amazonians didn’t bite. He reopened as a ramen shop months later.

Source: Eater Seattle

Amazon has reportedly done its part to help. The company’s cafeterias are kept to a smaller capacity to encourage employees to go out into the neighbourhood and spend at restaurants.

Source: The Stranger

Amazon has created a booming lunch crowd that a fleet of food trucks feast on every day. When I walked around the neighbourhood, it seemed as if everyone on the street carried a blue badge and a takeout box.

With so much real estate under its belt, Amazon has become one of the biggest landlords in the city, dictating which businesses rent its spaces. It has, however, has rented out to local businesses and avoided chains.

The company is determined to turn its surrounding area into a thriving all-day neighbourhood. As of August, the company rents out space to 32 businesses, with 24 of those being restaurants and cafes.

Amazon’s lease agreements require restaurants to stay open late into the night. But the area is said to turn into a ghost town after work, and many restaurants have found they can’t generate enough business at night to justify the cost of staying open.

Source: The Seattle Times

Some former restaurant employees said Amazon security guards micromanaged shops and tracked when they close. One restaurant owner likened Amazon to “Big Brother.” Chris Keff, a James Beard Award-winning chef, sold her restaurant Flying Fish when she found she was just breaking even.

Source: The Seattle Times, Marketplace

Amazon’s massive pull has brought other tech companies like Google, Facebook, Apple, Microsoft, Uber, and others to downtown Seattle to snap up local talent. But some say that has only made it harder for small businesses and startups.

Eric Blohm, a senior managing director for the commercial-real-estate firm Savills Studley, said some developers wouldn’t even talk about leasing floors  — they’re looking for companies that will take up whole buildings.

Source: The Seattle Times

The neighbourhood is a microcosm of Silicon Valley cultural trends. Bulletproof Coffee, the company that masterminded the idea of putting a slab of butter in your morning coffee, opened an outpost earlier this year.

Source: Eater Seattle

With so many techies in the city, Seattle has become a testing ground for some startups like LimeBike and Spin, which offer dockless bike sharing. Green bikes were scattered through the neighbourhood.

Source: PRI

The neighbourhood seemed to move to the rhythms of Amazon. At lunchtime, the streets were bustling. In the hours after, they were practically empty, save for a couple people grabbing coffee.

The load of employees hasn’t snarled just traffic, but public transportation. Buses are reportedly packed at rush hour, and this summer they were so overcrowded that Seattle added extra ones to accommodate demand.

Source: The Seattle Times

Amazon has tried to alleviate the traffic issue with a private fleet of shuttles to ferry employees to and from the farther suburbs. Unlike other companies, Amazon has kept the shuttles white and without signage.

Source: Geekwire

In the past decade, South Lake Union has invested $US668 million in infrastructure improvements, including a new streetcar line. Most of that came from public funds, and some critics have questioned whether that money might have been better spent on education or housing.

Source: The Seattle Times

Amazon has pushed the city to install more cycling paths and tracks throughout the city, even funding the ones around its campus. But some Seattleites have complained that the new lanes burden already gridlocked streets.

Source: MyNorthwest

Amazon has tried to warm its relationship with Seattleites. Since 2015, the company has given out more than 1.7 million bananas at “community stands.” While well-intentioned, the effort upended the local economy for bananas.

Source: The Wall Street Journal

Amazon has given tons of retail space to FareStart, a nonprofit that offers jobs and training at its restaurants to people in poverty. Maslow’s is one of five restaurants run by FareStart in the area.

Source: The Seattle Times

Amazon has let Mary’s Place, a nonprofit homeless shelter, operate here for free since 2016. It will soon come down to build more Amazon buildings. When those are complete, Amazon will gift the nonprofit six stories and 47,000 square feet in one of them.

Source: The Seattle Times

Cities across the country have put together extensive economic incentive packages to lure Amazon. But critics say that giving away too much could eliminate benefits to the city and that cities need to plan for the inevitable side effects: increased traffic, housing shortages, and skyrocketing rent.

Source: Business Insider, CNN Money

Tim Burgess, a former Seattle mayor who has long been on the City Council, said in November that while Amazon had overall been a positive for the city, the downsides had affected “people who are traditionally marginalized anyway — or already — in our system: people living in poverty, people of colour, immigrants, and refugees.”

Source: Geekwire

Seattle reminded me of stories I’ve read about Seoul, South Korea, where anything and everything is made by or somehow tied to Samsung, which dominates the economy there. Amazon’s purchase of Whole Foods last summer seemed to hint at that future.

When I speak to family and friends from Seattle about Amazon’s dominance, they sound ambivalent. For decades, Boeing dominated, putting workers and the city at the mercy of the company’s layoff cycles. In the early 1970s, for example, the company cut its workforce in half, devastating the local economy. People fear that history will repeat itself.

Source: The Seattle Times

It’s hard to deny that Amazon has been a positive for the city, but there is definitely an uncomfortable feeling that the area is Amazon’s fiefdom, subject to Amazon’s rules. My run-in with Amazon’s security guards reinforced that. Cities trying to win HQ2 might want to be careful what they wish for.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.