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Viewpoints: The Search for Amazon’s Second Headquarters

Amazon’s announcement in September that it was launching a search for the location of a second corporate headquarters generated a frenzy of excitement and interest from cities and regions spanning from Mexico to Canada. More than 200 proposals were submitted from 54 states, provinces, districts and territories across North America before the Oct. 19 deadline; the shortlist of candidates is expected to be announced in December, with the finalist selected in 2018. The company intends to invest over $5 billion in construction and estimates that its second headquarters – planned to be equal to its current campus in Seattle – will generate 50,000 high-paying jobs.

We asked some of NAIOP’s Distinguished Fellows – an elite group of academic thought leaders from real estate programs at top universities – for their predictions of which city will secure the title of “HQ2” and why, as well as the potential impact on the region.

Shaun Bond, Ph.D. West Shell, Jr., Chair in Real Estate, Professor in the Department of Finance and Real Estate, Director of the Real Estate Center, University of Cincinnati The location of Amazon’s HQ2 has attracted significant speculation and unparalleled interest from communities across the U.S. Of the more than 200 cities and regions that have indicated their interest in the project, many will be automatically ruled out based on the criteria that Amazon established. Leading contenders are currently thought to include New York City, Denver, Austin, Boston, Chicago and Washington, D.C.

Other reports indicate – and this is my own view as well – that there could be a preference for an “underdog” city where Amazon looks to make a statement and build on a growing tech scene such as Detroit, Pittsburgh, Minneapolis or Baltimore (and, dare I say, Cincinnati). A choice like this would be transformational for each of these cities. They all played an important part in the economic development of the U.S. during the 20th century, but more recently have been deeply impacted by shifting economic trends. However, they possess good universities, outstanding cultural and recreational amenities, a deep pool of talent and good transportation links.

My hope from this search process, whatever the outcome, is that state and local governments will look carefully at the requirements that Amazon have laid out. There can only be one winner for HQ2 but all cities can benefit from considering how to support and develop the amenities and infrastructure that will be attractive to startup and homegrown businesses, not just Amazon. Indeed, a large part of Amazon’s decision will come down to access to talent, and the success of regions will depend on their ability to attract and retain the knowledge workers who will drive innovation and growth in the future. If regions don’t have serious plans and policies in place to support and nurture mass-transit schemes, cultural and recreational amenities, educational and research institutions, and other transport infrastructure, then they are limiting their growth prospects for the future.

Shaun Bond, Ph.D.
West Shell, Jr., Chair in Real Estate, Professor in the Department of Finance and Real Estate, Director of the Real Estate Center, University of Cincinnati

Barry Hersh Clinical Associate Professor, NYU SPS Schack Institute of Real Estate and editor of Urban RedevelopmentSelf-proclaimed “disrupter” Amazon has changed the previously secretive world of corporate site selection into a spectator sport. By going very public with its six-week search for a second headquarters employing 50,000 and a $5 billion investment, Amazon has attracted more than 200 economic development agency proposals, some featuring previously unheard of regional cooperation. Private developers were not invited, but some government proposals include privately owned properties.

One might hope that opening up the process might make it more fair, but experience with high visibility selection process, from sporting venues like the Olympics to the Bachelorette, has not been that positive. For sure, the process will leave behind many highly visible broken hearts.

Amazon’s seven broad criteria are practical and high-minded, with an invitation for creativity, suggesting separating reality from hype. The old brokers’ tale is to ask where the boss lives. Amazon’s founder and CEO Jeff Bezos has known homes in Seattle, Beverly Hills, California, and Washington D.C., where he also owns the Washington Post. He grew up in Houston and Miami, graduated from Princeton and first worked in New York. Amazon currently has facilities in at least 20 different jurisdictions in North America.

Given Amazon’s history, incentives will be required. New Jersey’s Governor Chris Christie has put forth a $7 billion proposal for Newark; he is among many city and regional leaders talking about incentives, with varying degrees of specificity, to attract HQ2. My own experience in large corporations is that they figure out where they want to be – surely, Bezos has some preference of location – and use the competition to get the best incentive package. Some publications, including Slate, which is owned by Amazon, have noted that such a massive project will have downsides, including congestion and housing price increases.

Arguably the most critical criteria is strong technical talent to provide the desired 50,000 employees. The access criterion, specifying mass transit, is a challenge for many.  Both Dallas and St. Louis have put forth innovative transportation infrastructure as part of their proposals. The mayor of Frisco, Texas, north of Dallas, offered to “build his city around Amazon,” similar to the aggressive economic marketing of a “sports-centric” city that attracted headquarters for the Dallas Cowboys,  FC Soccer and Jamba Juice. Not promoted was that the economic incentives were funded by opting out of the Dallas Transit District.

Moody economists Mark Zandi and Adam Ozimek put forth Atlanta, Austin, Toronto, Pittsburgh and Boston as favorites. Austin is the home of recent Amazon acquisition Whole Foods. Boston’s proposal focuses on one site, the former Suffolk Downs. My own thought is that part of the reason for HQ2 is different geography than Seattle. This view would favor the northeast corridor including Pittsburgh; not in an expensive and tight downtown, but rather in an amenity rich suburb with a great site. But, I think Amazon will surprise us all.

Barry Hersh
Clinical Associate Professor, NYU SPS Schack Institute of Real Estate and editor of Urban Redevelopment

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