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Silicon Valley’s Newest Rival: The Banks of the Hudson

When Facebook was searching for another New York office, one big enough to fit as many as 6,000 workers, more than double the number it currently employs in the city, it had one major demand: It needed the space urgently.

So after the company settled on Hudson Yards, the vast mini-city taking shape on Manhattan’s Far West Side, existing tenants were told to move and a small army of construction workers quickly began to revamp the building even before a lease had been signed.

Facebook’s push to accommodate its booming operations is part of a rush by the West Coast technology giants to expand in New York City. The rapid growth is turning a broad swath of Manhattan into one of the world’s most vibrant tech corridors.

Four companies — Amazon, Apple, Facebook and Google — already have big offices along the Hudson River, from Midtown to Lower Manhattan, or have been hunting for new ones in recent months, often competing with one another for the same space.

In all, the companies are expected to have roughly 20,000 workers in New York by 2022.

Cities across the United States and around the world have long vied to establish themselves as worthy rivals to Silicon Valley. New York City is certainly not anywhere close to overtaking the Bay Area as the nation’s tech leader, but it is increasingly competing for tech companies and talent.

New York’s rise as a tech hub comes as industries that have long dominated the city’s economic landscape are transformed by technology, and are themselves increasingly reliant on software engineers and other highly skilled workers.

The growth in New York is occurring largely without major economic incentives from the city and state governments. Officials are mindful of the outcry last year over at least $3 billion in public subsidies that Amazon was offered to build a corporate campus in Queens.

The retail behemoth, stung by the backlash, canceled its plans abruptly in February. It is continuing to add jobs in the city, although at a slower pace.

Still, Amazon’s announcement last month that it would lease space in Midtown for 1,500 workers renewed a debate over whether incentives should be used to woo huge tech companies to New York.

Opponents of the earlier deal, including Representative Alexandria Ocasio-Cortez, Democrat of Queens, said Amazon’s decision to expand in Manhattan showed that New York was so attractive that tax breaks were unnecessary.

Others responded that the Hudson Yards space the company was leasing paled next to the campus proposed for Long Island City, Queens, and to the 25,000 people Amazon had pledged to employ there.

Tech companies are choosing New York to tap into its deep and skilled talent pool and to attract employees who prefer the city’s diverse economy over technology-dominated hubs on the West Coast. New York is also closer to Europe, an important market.

“For a long time, if you lived in the broader tech sector, there was inertia that brought you to Silicon Valley,” said Julie Samuels, executive director of Tech: NYC, a nonprofit industry group. “So many people wanted to live here and move here, but felt the jobs weren’t here. Now the jobs are here.”

Google has grown so quickly and is so squeezed for space that it is temporarily leasing two buildings until a much larger development in Manhattan near the Holland Tunnel, St. John’s Terminal, is ready in 2022.

The big tech firms started in New York with small outposts. Google’s first New York employee, a sales worker, arrived in 2000, and worked out of a Starbucks in Manhattan. It was the company’s first office outside California.

Tech industry offices were once mostly filled with sales and marketing employees who needed to be closer to their customers and to industries like fashion, finance, media and real estate that power the city’s economy.

Over the past five years, though, the makeup of the companies’ combined New York work force has come to resemble the West Coast version: a mix of engineers and others involved in software development.

The New Tech Corridor

Four big technology companies will have a combined 20,000 workers in the city by 2022, mostly concentrated along Manhattan’s West Side. Squares on the map show where Facebook, Google and Amazon have leased space, or are planning to.

The New York Times

At Google’s New York office, highly skilled workers now outnumber their colleagues in sales and marketing. Of the nearly 800 job openings that Amazon has in the city, more than half are for developers, engineers and data scientists.

“Every line of business and every platform is represented quite healthfully,” said William Floyd, Google’s head of external affairs in New York, the company’s largest office except for its Mountain View, Calif., headquarters. “Not everyone wants to be in California.’’

Oren Michels, a tech adviser and investor who sold Mashery, a company based in San Francisco, to Intel in 2013, said that New York City had become a refuge for tech workers who did not want to be surrounded solely by those working in the same industry.

“You have younger engineers and those sorts of people who frankly want to live in New York City because it’s a more interesting and fun place to live,” he said. “San Francisco is turning into a company town and the company is tech, both professionally and personally.”

Mr. Michels said that his family had bought a home in Manhattan in 2014 with a plan to split their time between San Francisco and New York. They soon decided to live full time in New York, where Mr. Michels is on the boards of four tech firms.

The number of tech jobs in New York City has surged 80 percent in the past decade, to 142,600, from 79,400 in 2009, according to the New York State Comptroller’s office. (The business services industry, which includes accountants and lawyers and is the largest private sector, employed 762,000 people in 2018, according to the comptroller’s office.)

Since 2016, the number of job openings in the city’s tech sector has jumped 38 percent, an analysis for The Times by the jobs website Glassdoor found. In November, New York had the third-highest number of tech openings among United States cities, 26,843, behind just San Francisco and Seattle.

It is not only the biggest tech firms that are growing in New York. From 2018 through the third quarter of 2019, investors pumped more than $27 billion into start-ups in the New York City region, the second most in that time for any area outside San Francisco, according to the MoneyTree Report by PwC-CB Insights. (Nearly $100 billion was invested in start-ups in the Silicon Valley area in that period.)

Industries like finance, retail and health care provide more jobs, but the tech sector, with an average salary of $153,000, has become one of New York City’s main economic drivers.

That has raised concerns about whether the industry is intensifying income inequality and making New York unaffordable for more people.

The four big tech companies “attract thousands of out-of-state employees with advanced degrees and work experience, and drive unprecedented influxes in luxury rentals, rent hikes, and the flipping of buildings and private homes,” said Kiana Davis, a policy analyst at the Urban Justice Center.

“It should go without saying,’’ she added, “that middle-income, low-wage, poor and unemployed residents in these cities cannot access the luxury housing market nor the rising rents and have been driven out of their communities as a result.”

Jonathan Miller, president of Miller Samuel, a real estate appraisal firm, said that the residential market in Manhattan had been strong in areas where the tech firms had grown.

“I speak to brokerage groups twice a week, and the conversation is always peppered with questions about the tech sector,” Mr. Miller said. “If you have 20,000 employees coming in who are high-wage earners, that can have a pronounced impact.”

The major tech firms are expected to grow to the point that they are among the largest private tenants in New York in the coming years, rivaling longtime leaders like JPMorgan Chase.

Among companies in the technology, advertising, media and information industries, Google and Facebook are now the largest tenants, beating out legacy companies like Condé Nast, News Corp. and Warner Media, according to an analysis performed for The Times by the real estate company Cushman & Wakefield.

Facebook employs 2,900 people in New York, and recently signed the lease at Hudson Yards for 1.5 million square feet in three buildings. In addition to providing space for 6,000 workers, the deal gives the company an option to take over another several hundred thousand square feet in the development.

Facebook executives initially set their sights on a marquee building on Madison Avenue in the Flatiron district, not far from the company’s existing offices, according to a person familiar with Facebook’s plans.

But then Facebook executives toured Hudson Yards and were impressed with the amenities, including shops and restaurants, and with the short walk to major subway lines.

A deal was struck in November, but with a requirement on Facebook’s part that about 300,000 square feet in two buildings, 30 and 55 Hudson Yards, be ready very soon.

Workers were immediately brought in to begin preparing the space and to move out existing tenants.

Two blocks east, Facebook is close to signing a lease for about 700,000 square feet in the 107-year-old James A. Farley Building across from Pennsylvania Station, according to three people familiar with the deal. The property, also known as the Farley Post Office, is being renovated by the Related Companies and another developer, Vornado Realty Trust.

More than 2,500 employees could eventually work there. (The Wall Street Journal first reported on the potential lease.)

“It’s hard to predict future growth, but we believe New York is a vibrant market with a tremendous pool of talent,” a Facebook spokeswoman, Jamila Reeves, said. She declined to comment on the company’s specific plans.

Just north of the Farley building, Amazon said recently that it had signed a lease for 350,000 square feet in a building on 10th Avenue near Hudson Yards, enough space for 1,500 employees. The social media company LinkedIn, whose New York offices are not far away, in the Empire State Building, recently said it would expand to four additional floors in the landmark property.

The tech titan whose intentions in New York are probably least known is Apple.

Executives at the company, which has had an office in the Flatiron area, have toured buildings in that neighborhood and in the Hudson Yards area but a deal has not yet been signed. Apple has inquired about leasing much less space than other big tech companies, roughly 50,000 square feet.

Apple declined to comment.

For every West Coast company with a household name that has expanded in New York, there are many large but lesser-known firms with headquarters in the city.

One, Datadog, which provides cloud-based software for businesses, went public in September and is valued at $10.5 billion. The company has 480 employees in its New York offices, up from 125 three years ago.

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Prime Anchor: An Amazon Warehouse Town Dreams of a Better Life

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Credit…Andrew Spear for The New York Times

In Campbellsville, Ky., the tech giant’s influences abound. The profits, not so much.


CAMPBELLSVILLE, Ky. — In the late 1990s, the town of Campbellsville in central Kentucky suffered a powerful jolt when its Fruit of the Loom textile plant closed. Thousands of jobs making underwear went to Central America, taking the community’s pride with them.

Unemployment hit 28 percent before an unlikely savior arrived as the century was ending: a madly ambitious start-up that let people buy books, movies and music through their computers.

Amazon leased a Fruit of the Loom warehouse about a mile from the factory and converted it into a fulfillment center to speed its packages to Indianapolis and Nashville and Columbus. Its workers, many of them Fruit veterans, earned less than what the textile work had paid but the digital excitement was overwhelming.

Twenty years later, Amazon is one of the world’s most highly valued companies and one of the most influential. Jeff Bezos, Amazon’s founder, has accumulated a vast fortune. In Seattle, Amazon built a $4 billion urban campus, redefining a swath of the city.

The outcome has been different in Campbellsville, the only sizable community in Taylor County. The county population has stalled at 25,000. Median household income has barely kept pace with inflation. Nearly one in five people in the county lives in poverty, more than in 2000.

Over the last 20 years, Amazon’s stock price has soared. But household income in Taylor County has barely kept pace with inflation.

Taylor Co., Ky.

median income

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median income

Cumulative changes since 2000

Taylor County, Ky.

median income

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stock price

National

median income

Cumulative change since 2000

Cumulative change since 2000

Taylor County, Ky.

median income

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median income

Cumulative change since 2000

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Income figures are adjusted for inflation.

Sources: Census Bureau, via Federal Reserve (income data); Refinitiv (stock prices)

By Karl Russell

The divergent fates offer a window into what towns can give to tech behemoths over decades — and what exactly they get in return. Campbellsville’s warehouse was among the first of what are now an estimated 477 Amazon fulfillment centers, delivery stations and other outposts around the country. That makes Campbellsville, with 11,415 inhabitants, a case study for what may happen elsewhere as Amazon continues expanding.

Brenda Allen, Campbellsville’s mayor, said: “Amazon has had a really good business here for 20 years. They haven’t been disappointed at all. And we’re glad they’re here.”

But, she added, “I really would feel better if they would contribute to our needs.”

In central Kentucky, Amazon has reaped benefits, including a type of tax break that critics label “Paying Taxes to the Boss.” In the arrangement, 5 percent of Amazon workers’ paychecks, which would ordinarily be destined for the county and the state, go to Amazon itself. The company netted millions of dollars from this incentive over a decade.

While that tax break has run out, Campbellsville itself still gets no tax money from Amazon. The warehouse is just outside the town limits. The city school system, which is its own taxing authority, does get revenue from Amazon. Both the city and the county school systems recently raised their tax rates because of revenue shortfalls. (The city increase had to be rescinded for procedural reasons.)

No one wants Amazon to leave, though. It is Campbellsville’s largest private employer. Its online mall has given the town’s shoppers access to a paradise of goods.

Less visibly, Amazon shapes the local economy, including which businesses survive and which will not be coming to town at all. It supplies small-screen entertainment every night, influences how the schools and the library use technology and even determined the taxes everyone pays.

“We were a company town with Fruit of the Loom, and we’re becoming a company town again,” said Betty J. Gorin, a local historian.

Amazon said it was not solely responsible for Campbellsville’s vitality. It pointed out other big local employers, including a hospital and a Baptist university. “Amazon is not the only barometer,” it said.

The company said it had spent $53 million remodeling its warehouse “to benefit employees.” The facility now includes a classroom for training workshops and, it said, “on-site college classes.” Amazon declined a request for a tour.

Some cities and towns are now weighing the costs of Amazon versus the benefits. The nationwide total of all state and local subsidies for the company over 20 years is $2.8 billion, according to Good Jobs First, which tracks tax breaks for corporations.

Activists protested New York’s plan to give Amazon billions of dollars in tax breaks, causing the company to abandon its plans this year to move into Queens. (Amazon began opening new offices in Manhattan this month without any incentives.) Maryland residents rejected a proposed warehouse last summer, citing concerns about noise pollution, traffic and safety.

In Campbellsville, the relationship between Amazon and the citizens is facing some questions as it enters middle age.

“The needle has not moved in the last two decades on the quality of life in Kentucky, especially in places like Campbellsville. What does that tell you?” said Jason Bailey of the Kentucky Center for Economic Policy, a research and advocacy group.

He called the state “a fiscal mess because of tax giveaways to Amazon and other companies.” Kentucky has had 20 rounds of budget cuts since 2008, he said.

In 1948, a Kentucky underwear company set up an outpost in the basement of the old Campbellsville armory with five employees. This eventually became the largest single male-underwear plant in the world, with 4,200 workers producing 3.6 million garments a week.

The money was good, especially for women and African-Americans who had few other opportunities. Fruit, as it was eventually called, built the first public tennis courts and paid the city $250,000 in 1965 to expand the wastewater disposal plant. Factory executives spurred the creation of a country club and the public swimming pool.

The easy times ended with the North American Free Trade Agreement, which took effect in 1994. Amazon’s arrival five years later offered a second chance. Campbellsville was more than 40 miles from the nearest interstate, but it had a 570,000-square-foot modern warehouse and thousands of eager workers who knew how to hustle.

To woo Amazon, the local fiscal court passed the payroll tax measure, which opened up the state coffers. Amazon’s workers, like other employees in the county, would pay a 1 percent payroll tax and a 4 percent state income tax. But that money went directly to Amazon as a reward for bringing in jobs.

This type of tax break was first developed in Kentucky and is now widespread. Amazon’s incentives totaled $19 million over 10 years, including exemption from the state’s corporate income tax. The company said it had ultimately received “less than half” that amount, though it declined to explain the discrepancy.

The enthusiasm with which yesterday’s workers embraced tomorrow’s economy was a big story that drew national attention. Making underwear was not sexy. Selling things online was.

Arlene Dishman began working at Fruit in 1970. She said she had earned as much as $15 an hour — the equivalent of about $100 now — sewing necklines on V-neck T-shirts. “You can’t hardly turn that money down,” she said.

Her starting rate at Amazon was just $7.50 an hour, but she relished creating a digital outpost in Campbellsville. “We felt responsible for a lot of the success of Amazon,” she said. “We were just so proud.”

She became a trainer, worked with Mr. Bezos himself when he came to town, was promoted to management. These were years of turmoil at Amazon, as the dot-com bubble burst in the early 2000s. Pressure ramped up.

“I worked on the third floor,” Ms. Dishman said. “No air-conditioning. I would have people on the line pass out, constantly.”

As a manager, she said, she was too understanding, which was her undoing.

“I had worked with these people for so many years at Fruit that when a situation came up that management was not liking, I had a tendency to take the workers’ side,” she said. She left after three years.

David Joe Perkins, who worked for Fruit for 24 years and then for Amazon, said he also took pride in being part of the e-commerce start-up.

“We treated it like our company,” he said. “I have personally worked with Jeff Bezos. I actually liked the guy.”

What Mr. Perkins did not like were Amazon’s managers.

“My manager called me into the office one day and said, ‘Dave, your performance is not what it needs to be.’ I said, ‘How can I improve?’ He said, ‘You don’t fire enough people.’”

Several months later, Mr. Perkins was let go with little explanation.

Both Mr. Perkins, 64, and Ms. Dishman, 71, have Amazon Prime accounts. Ms. Dishman’s daughter works for Amazon as a data analyst. Ms. Dishman even thought about returning to the warehouse during last year’s holidays to earn a little Christmas money. She did not follow through.

Just about everyone in Campbellsville remains grateful to Amazon for coming and hiring people. Those workers take their paychecks and spend at least some of the money around town.

There are not as many workers as people think, though.

When Amazon arrived, it said it would employ 1,000 people full time within two years. That’s still the official total from the Kentucky Cabinet for Economic Development, a state agency, and in Mrs. Gorin and Jeremy Johnson’s two-volume history of the town, published this year. Team Taylor County, which solicits new industries for the community, puts the number of workers at 1,350.

Amazon said in October that the total was 655 full-time workers.

“I’m shocked,” Mrs. Gorin said.

Kelly Cheeseman, an Amazon spokeswoman, said the “head count started to shift” at the warehouse “around 2016 to 2017.” She said automation — the deepest fear of every community with an Amazon warehouse — had nothing to do with it.

“We regularly balance capacity across the network,” Ms. Cheeseman said. In November, Amazon said full-time workers had risen to 700.

Amazon said that the money it paid in wages was an investment in Campbellsville and that it had contributed “$15 million in taxes to Taylor County” over the last 20 years. It declined to break down the numbers further.

Records and interviews indicate that Amazon paid to the city school system about $350,000 in taxes this year. The company paid the county an additional $410,000 in property taxes.

Good Jobs First, the group that analyzes tax benefits for corporations, thinks that is not enough.

“What has Amazon really done for the community?” asked Greg LeRoy, the center’s executive director. “It’s not like it’s a tech lab, diffusing intellectual property or spinning off other businesses. It’s a warehouse.”

Ms. Allen, the mayor, wants more money to pay the town’s bills.

“The people in Seattle are getting rich,” she said. “They don’t care what happens to the people in Campbellsville, not really.”

In the 1970s and 1980s, life in Campbellsville revolved around Fruit. Townspeople learned not to be near downtown when the plant let out at 4 p.m. and traffic briefly became overwhelming. When Fruit shut down for the first two weeks in July every year, the town was so dead that other industries in the area scheduled their vacations for the same time. Fruit officials were active in the Chamber of Commerce, civic clubs and associations.

Amazon is not like that.

“Amazon is everywhere and nowhere,” Mrs. Gorin said. “This town runs on Amazon, but their employees are not in positions of political power.”

Amazon is linked into the community in other ways that often end up benefiting Amazon. In 2016, the company donated 25 Kindle Fire tablets to Campbellsville kindergarten and first grade classrooms. It also donated $2,500 in “content.” The town schools are increasingly buying supplies from Amazon for a total of about $50,000 in the last fiscal year, records show.

“We want to do business with those in our community, those paying local taxes,” said Chris Kidwell, finance director for Campbellsville Independent Schools. “It’s kind of a good-neighbor policy.”

The county school system, with 2,800 students, is dealing with state budget cuts. One way it has made up some of the shortfalls is by selling corporate sponsorships. Taylor Regional Hospital bought the naming rights to the health services room; Campbellsville University did the same for an education center. Amazon is not a corporate sponsor.

“We’re proud to have them in our community, and we would be proud to have them as a corporate sponsor,” said Laura Benningfield, the assistant superintendent.

Last spring, the local library was the recipient of a $10,000 gift from Amazon for science and technology education. Amazon planned to supply whatever the library wanted by ordering the material through its own site. As this article was being reported and Amazon was emphasizing what it had done for the town, the company just sent the library the cash.

“We’re on the receiving end of a blessing,” said Tammy Snyder, the town librarian. The library, like other public institutions in Kentucky, is dealing with the state’s largely unfunded pension system. Proposed changes that involve the library’s paying significantly more “will bankrupt us,” she said.

Justin Harden, 35, said he had no illusions about Amazon. He and his wife, Kendal, recently opened Harden Coffee, a popular meeting spot, on Main Street.

“If they can figure out a way to cut me out and take my business, they’ll totally do it,” he said. “They would destroy me, absolutely. But I am a 100 percent supporter of Amazon. I have five kids. We get stuff from Amazon almost every day.”

He paused, acknowledging his own contradictions. “That’s why they’re winning,” he said.

A pile of rubble on Campbellsville’s southern approach marks the ruins of the Fruit plant.

The property is owned by Danny and Sandy Pyles, commercial contractors who run an excavating company in nearby Columbia. They bought the textile factory with other investors a decade ago with the goal of building a retail complex called Campbellsville Marketplace.

The graffiti-covered shell was torn down, and a Louisville developer, Hogan Real Estate, cobbled together a deal. Kroger, the country’s largest supermarket chain, would close its two Campbellsville stores. It would then become the Marketplace anchor tenant with a 123,000-square-foot superstore.

Work was supposed to start within weeks. Then, on June 16, 2017, Amazon announced that it was buying the upscale grocery chain Whole Foods. Kroger shares slumped. Its deal in Campbellsville was put on hold, then abandoned. Hogan chased other possible anchors — Menards, Meijer, Home Depot — but none were interested. (Kroger declined to comment.)

“We used to talk about the Walmart Effect when you saw vacant storefronts in these small towns,” said Justin Phelps of Hogan. “Now it’s the Amazon Effect.”

Pyles Excavating is a good Amazon customer. The company needed a muffler recently for a track hoe. It would have cost $1,200 from a dealer. On Amazon, it was half that.

“The internet has brought the world to our fingertips,” Mr. Pyles said.

The Pyleses recently bought out the other investors in the Fruit site. Their investment is now more than $2 million.

“It really is a great piece of property, but right now it’s a reminder of the day Campbellsville literally shut down,” said Sandy Pyles, the daughter of a Fruit worker and relative of many others. “It’s a sadness.”

They would like a Whole Foods there, but know the town is too small to support it. Mr. Pyles has another idea: an Amazon Go store. These are experimental outlets with no cashiers.

That would put local competitors who still needed humans at a disadvantage while adding hardly any jobs. But it would be an investment by one of the world’s richest companies in one of the towns where it began.

“Amazon is the future,” he said. “We’d like to be part of that.”