Amazon’s 17 Tech Hubs Stand To Feast On New York’s HQ2 Leftovers
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Amazon’s 17 North American technology hubs are suddenly in a race for 25,000 jobs, just without the previous HQ2 spectacle.
A week after Amazon canceled plans for the Long Island City component to HQ2, Amazon Head of Worldwide Economic Development Holly Sullivan told Bisnow the company would be strategic in how it can locate all those employees in its 17 existing North American tech hubs.
That strategy will likely come down to a matter of talent, cost and business climate, which vary widely. The hubs include 7,000 employees in the Bay Area, 2,000 already in New York City and 1,500 in Vancouver.
There are 1,500 Amazon tech workers in Los Angeles, 1,000 in Austin, 800 in Toronto, 350 in Phoenix and an 80-employee center focused on Alexa and Amazon Translation Services in Pittsburgh.
Deciding where to place jobs previously slated for New York will force Amazon to consider how much of a Long Island City hangover it has, and whether ease of business — and a lack of scrutiny — will trump talent pipelines moving forward.
Talent Available For A Price
Along with its 45,000-employee Seattle presence, Amazon employs 2,500 corporate and tech employees at its pre-HQ2 Washington, D.C., metro offices, 2,000 in the New York City tech hub and 1,800 in Boston.
The HQ2 race indicated the company isn’t shy about sticking to large gateway markets instead of more cost-efficient Sun Belt cities, despite the HQ2 request for proposals emphasizing the cost of living as a winning factor.
“This was truly a talent and transportation-driven search,” The Boyd Co. principal and national site selection expert John Boyd said. “The proof of that is that the two winners were the D.C. and New York markets, two of the most high-cost locations in North America.”
Given Amazon’s Northern Virginia incentives allowing for as many as 38,000 jobs over 15 years, CoStar Managing Consultant and Senior Real Estate Economist Paul Leonard expects it will absorb much of the planned New York payroll, despite Amazon's company line that "nothing has changed" for National Landing.
Greater Washington was the top-ranked market in a corporate expansion study he ran on all HQ2 shortlist cities based on its talent pool, potential for population growth and ease of doing business and development.
But other pricey markets stand to benefit on a smaller scale.
Amazon announced plans during the HQ2 search for an unrelated 2,000-empoyee office at a 430K SF office in Boston’s Seaport neighborhood, and the company has the option to double that number in a future building next door to the office currently under construction.
Portland, Oregon, expects Amazon’s 400-employee presence to increase to more than 1,000 if Amazon Web Services and AWS Elemental grow to capacity at their downtown Portland office campus.
Amazon announced in April 2018 plans to grow its Vancouver office by 3,000 employees once a 416K SF office under construction completes in 2022, bringing the city’s Amazon corporate and tech job count to 5,000. The Canadian city is on the list of tech hubs expected to gain some of the planned New York jobs, as is Toronto.
Toronto’s Amazon presence is much smaller, with only 800 tech employees currently based there. But the company has plans to hire an additional 600 employees at its new Scotia Plaza office that opened in December.
Amazon declined to comment to Bisnow on the specifics of its future growth.
While the company appears committed to areas with large tech talent pools, these cities have political tendencies that are more aligned with New York than any statehouse in the Sun Belt.
New York University's Schack Institute of Real Estate Dean Sam Chandan cautions the same concerns raised by New York politicians reflect a certain set of underlying conditions in many major North American cities.
Cities with affordability challenges, resident displacement worries and fear of potential overwhelmed infrastructure — all familiar topics in northeastern U.S. markets — will likely have to make a stronger Amazon argument if they want to land jobs previously slated for a place where the argument failed.
“In markets where we see a convergence of those concerns, there’s likely to be a stronger response by elected officials,” Chandan said.
The Sun Belt Solution
Leonard's study tracked shortlist cities for their likelihood of landing more corporate expansion. Dallas, Atlanta, Boston, Phoenix and Denver — all current Amazon tech hubs — comprised the top five.
“When we look at demographics, we certainly see a wave of people moving out of high-cost coastal markets to Sun Belt markets,” he said. “We do expect that trend to continue.”
Boston has the deepest talent pool, but Atlanta, Dallas and Denver have the greatest potential population growth among Amazon tech hubs and HQ2 shortlist cities. Dallas and Denver both ranked high for ease of doing business. Austin took the top spot for ease of development while Phoenix (3) and Dallas (5) also scored highly.
Those factors are behind moves like State Farm’s eventual plans to employ 8,000 at a corporate campus under construction in Atlanta and Liberty Mutual’s plans for 5,000 employees at a Plano, Texas, corporate campus while it shrinks in Boston.
While Amazon's fastest growth is occurring on the coasts, it is big enough to grow in the Sun Belt simultaneously.
Los Angeles, currently Amazon’s largest Sun Belt tech hub, is home to 1,500 Amazon employees, spread across its Amazon Studios, Prime Video, Alexa and IMDb divisions. It is trailed by Austin (1,000 employees), Dallas (500 employees) and Atlanta (300 employees), among others.
Amazon has revised plans for a 530K SF Culver City studio under construction outside Los Angeles, nearly double the size the company initially announced in 2017. It is also taking a 75K SF office across the street from the film studio.
John Boyd thinks Dallas is well-positioned for some of the jobs slated for New York, but he also thinks Miami, although not currently an Amazon tech hub, boosted its IT appeal during the HQ2 search.
Looking ahead, Leonard thinks the tech hubs in large, diversified and relatively cheap markets stand to benefit most from Long Island City's loss.
“If you’re a company looking to relocate or expand, you need to have talent available,” Leonard said. “Maybe New York has the best talent pool, but do its costs outweigh that? If so, you move onto the next tier down.”