Which City Will Nab Amazon's HQ2? Bisnow Analyzes The Best Options
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- Access to affordable labor
- DFW Airport
- Low cost of living
- Pro-business climate
Major cities across North America are vying for the chance to house Amazon's $5B headquarters, and the competition is growing fierce.
The tech giant's multimillion-square-foot campus, dubbed Amazon HQ2, is likely to garner billions of dollars in incentives from the city of its choosing — and there are many to choose from, such as Chicago, Nashville, Philadelphia, Pittsburgh, St. Louis and Toronto. But that is just the tip of the iceberg.
"I don’t think the [50,000-employee] labor pool is going to be the driving force. It's the quality of life, the transport, the infrastructure, the 'Will our people be happy here?' the 'Do we want to be in the East Coast versus the West Coast since we’re already on the West Coast?'" Colliers International President U.S. Brokerage Marty Pupil said. "We don’t know what the ultimate driver is for Amazon … it’s too early to tell."
The bids in response to Amazon's request for proposals are coming in hot, and the perks for the chosen city will be unequivocal. Here's what Bisnow knows about the cities in the running.
SOURCE: Market Research
INCENTIVES: Highly educated workforce, job growth, burgeoning tech scene
CHALLENGES: Expensive land, height restrictions in the District
The nation's capital has all the fundamentals Amazon is looking for: it has had strong job growth in recent years; it has a highly educated workforce and a burgeoning technology scene that recently ranked third in the country in a Cushman & Wakefield tech cities report. D.C. has a large mass transit system, and while its public transportation system has struggled in recent years, improvement efforts are underway and landing a company like Amazon could be the boost leaders need to come to a long-term funding agreement.
Land in the District is expensive and restricted by height limits, but there is plenty of developable land between D.C. and Dulles International Airport on the booming Silver Line corridor, where Amazon Web Services signed a 400K SF lease earlier this year. If Amazon is looking for a more urban environment, Crystal City could be an option. The Arlington, Virginia, neighborhood next to Reagan National Airport is full of vacant office buildings that newly formed REIT JBG Smith plans to redevelop. Arlington landed a major corporate tenant in January when Nestlé chose to move its U.S. HQ to Rosslyn.
And if all else is equal, D.C. does seem to have a special place in Jeff Bezos' heart. Amazon’s CEO bought a $23M house in D.C.'s Kalorama neighborhood in January, and he acquired the Washington Post in 2013.
— Jon Banister
SOURCE(S): Greater Houston Partnership CEO Bob Harvey
INCENTIVES: Plenty of space, affordability
CHALLENGES: Public money tied up in relief effort
Amazon may be considering other cities more seriously, but as we have seen in recent weeks, never count Houston out.
“Houston is well-positioned to serve as the home of Amazon HQ2, a game-changing project we are pursuing aggressively,” Greater Houston Partnership President and CEO Bob Harvey said.
Houston’s budget will be strained by Hurricane Harvey relief efforts in the coming months, making tax incentives and development dollars a hard sell, but economic development research shows financial incentives are rarely the determining factor in a location decision. The right city will have to offer intangibles, which Houston has in spades.
Amazon will not have trouble fitting in to Houston, where it is already moving 4,000 employees to Pinto Business Park. As opposed to coastal cities where finding enough space will be a challenge, Houston has plenty to offer. Whole blocks of Houston’s central business district sit empty or underutilized, ready for development. Amazon will fit in culturally, too. Houston is diverse, eager to work with large companies and offers a stable business environment. As home to NASA and a global hub for engineering, Houston’s large well-educated labor force is just what Amazon is looking for.
— Kyle Hagerty
SOURCE(S): Market Research
INCENTIVES: Toronto is becoming the next tech mecca and would offer an East Coast location
CHALLENGES: Tight office market and expensive housing
Toronto plans to bid for the second Amazon headquarters and the city could be a prime candidate, according to Mayor John Tory. City leaders are already creating their plan of attack to make Toronto the most attractive of the suitors.
Toronto’s tech industry has been driving the city’s office growth, making the city North America’s fastest-growing tech market. Toronto also has the advantage of being more affordable than other leading tech markets, creating a better bottom-line opportunity for companies, though its cost of living for employees is still expensive.
The city has a large educated workforce, universities, a diverse population and a local government willing to work with the company, Tory said. Ontario leaders hinted they would be willing to extend incentives to the company as they have done for other businesses that have moved to the area.
While office space is tight with minimal vacancy downtown, there are areas of the city with large amounts of developable land.
— Allison Nagel
SOURCE(S): Market Research
INCENTIVES: Amazon’s existing Oregon presence
CHALLENGES: Right next door to Seattle; not enough tech employees
Amazon wants a second headquarters somewhere besides Seattle, so the race among suitors is on. Does Portland have a shot at the prize, a $5B new site employing as many as 50,000 people?
Portland faces some pretty long odds, Oregon Live reports. Larger cities in larger states with larger economies than Oregon's would naturally have an edge, simply because of how much money they can throw at Amazon in the form of tax breaks or other subsidies.
Also, Amazon's Seattle HQ is pretty close, and the company might want to look farther away, such as on the East Coast or the Southwest. Portland might also have trouble coming up with that many tech workers, though the city is already attracting them in greater numbers.
Economic development specialists said Portland has a shot despite these factors, explaining Amazon already has a substantial Oregon presence. The retail behemoth has a sortation center in Hillsboro, a complex of data centers in Morrow County and fulfillment centers coming soon in Troutdale and Salem.
— Dees Stribling
San Francisco Bay Area
SOURCES: Concord Mayor Laura Hoffmeister
INCENTIVES: High-quality tech talent
The Bay Area could easily be Amazon’s new headquarters since the company already employs 30,000 workers at various offices, fulfillment centers and research facilities in the market, according to the San Francisco Chronicle. The region also serves as headquarters for tech giants Apple, Facebook and Google. The San Francisco Bay Area has over 300,000 tech employees already and is reputedly the tech mecca of the U.S. One of the significant challenges to the region is the high cost of housing and the ongoing housing shortage.
San Francisco, which has a handful of large-scale mixed-use developments in the works that could help accommodate any new employees, and Oakland, which offers more affordable office rents, may also consider bids. San Jose, which is already planning a massive Google campus of up to 8M SF, said it will review the RFP closely. San Jose already attracts high-quality talent, has diverse real estate sites, good transit options and great weather, according to San Jose Director of Economic Development Kim Walesh.
Even the East Bay city of Concord, which has a massive 5,000-acre development planned at the former Concord Naval Base, said it will put together a bid. This development will eventually contain 6M SF of office and 12,000 units of housing, which could help sell the city to Amazon.
“Concord is a logical choice for companies of all sizes, especially global brands looking for plentiful office options, often priced at a quarter of what is offered in nearby San Francisco and half the prices in Oakland,” Concord Mayor Laura Hoffmeister said in a statement.
— Julie Littman
SOURCE: Market Research
INCENTIVES: Ample acreage, Port/Highway/Airport Access
CHALLENGES: Pessimism surrounding adequate economic incentive, lack of transit
Baltimore has two of the most suitable sites on the East Coast for HQ2 in terms of raw land availability. One is in Port Covington, the future site for Under Armour’s massive campus. The second is Tradepoint Atlantic, a 3,100-acre site in Dundalk being fitted for multiple industrial compounds. It certainly has a metro population of the size Amazon will require, even without considering its proximity to Washington, D.C., and Philadelphia. Johns Hopkins is already a prestigious generator of STEM talent in the area.
Sagamore Development, Under Armour CEO Kevin Plank’s real estate company, insists Port Covington has enough room for both UA and Amazon, and has a site as ready for development as the e-commerce giant prefers. Tradepoint has a little more work to do in preparing its site, but has even more room and similarly favorable port and highway access.
However, local business leaders are considerably less than sure that Maryland state officials can provide the tax incentives that Amazon will be looking for in its unprecedented public appeal, and neither Tradepoint nor Port Covington have the on-site public transit that the RFP stipulates. It is entirely possible that a bus line could be in place by the time groundbreaking would start in 2019, but would that be enough?
— Matt Rothstein
SOURCE(S): Geoff Kasselman, Executive Managing Director at Newmark Knight Frank
INCENTIVES: Chicago’s central location, Amazon already has a cluster of workers downtown.
CHALLENGES: Chicago’s and Illinois’ debt and pension fund crises are lingering issues.
Mayor Rahm Emanuel, Chicago’s most visible salesman, has already had several meetings with Amazon CEO Jeff Bezos about establishing the tech giant’s second headquarters in Chicago. NKF Executive Managing Director Geoff Kasselman said the main advantage Chicago has over other markets is a central location, and Amazon may want a flyover state HQ before it decides to expand to the East Coast.
“It’s easy to fly from Chicago to Seattle nonstop from either O’Hare or Midway Airport, and O’Hare also allows people to get anywhere in the world with relative ease,” Kasselman said. He also noted that Amazon already has a significant cluster of workers in the Chicago market, between its area distribution centers and at its corporate offices at 227 West Monroe. Kasselman said Amazon would greatly benefit from Chicago’s network of universities and colleges to attract young talent to the company. And there may be no better selection of large contiguous sites to choose from than those in Chicago. Kasselman said he would bet on the Tribune Freedom Center plant to have the inside track for a Chicago bid, because of its location and its ability to connect River North, River West, Lincoln Park and Fulton Market.
The city and state’s ongoing issues with pension fund liabilities and unpaid bills will be the biggest obstacle to winning Amazon’s new HQ, Kassleman said. But Amazon choosing Chicago would go a long way to fixing both the pension fund and debt crises, locally and in Illinois, and Kasselman said that other states have their own budget problems to contend with.
— Chuck Sudo
SOURCE(S): Colliers Executive Vice President David Wetherington
INCENTIVES: Pro-Business Environment
CHALLENGES: Weak Transit System
According to Colliers Executive Vice President David Wetherington, Dallas is a top contender for the new Amazon headquarters site for four reasons:
Wetherington said the incentive package is not what will win the day for Dallas because Amazon does not need the helping hand. However, a great incentive package is a gesture of good faith and Wetherington thinks it is important to show Amazon that Dallas-Fort Worth wants it here.
“We have got to do whatever we have got to do; everybody needs to get out of the way. The city needs to come strong. The incentive package will not win the day, but it sure is a great gesture if you put together the best package you ever put together in your life,” Wetherington said.
— Jeremiah Jensen
Los Angeles, California
SOURCE(S): Colliers International Executive Vice President Nico Vilgiate
INCENTIVES: Amazon Studios is based here
CHALLENGES: Lack of available land, cost of living
Los Angeles has a tremendous opportunity here to be competitive and the market is taking the bid under serious consideration. The parameters seem to suggest that Los Angeles hits almost everything that Amazon's looking for in their HQ2 RFP. It would be a tremendous windfall for the local economy that would have repercussions that would be so substantially positive throughout multiple avenues of the economy.
Los Angeles' population, its access to some of the world's largest ports, light rail and public transportation, diverse economy, multiple airports and our proximity to our airports are all factors in its favor.
"The reality is it's just tough to quantify at this point and time if there is actually a campus or a facility that exists that can currently house what I would estimate to be more than 7M SF of office space that would be required to accommodate 50,000 employees," Colliers International Executive Vice President Nico Vilgiate said. "So I think every city that's competing is not only competing with the merits and benefits that those cities and/or regions can provide, there will be a huge challenge for all just to identify where that type of scale and square footage will be placed."
That is something that Amazon will certainly take into consideration in its evaluation. Los Angeles has not one but two teams, and has some wind at its back with the Olympics, the NFL and now the professional soccer league expanding.
"We just have so many great attributes to offer. I guess my biggest concern is our lack of developable land as well as the cost of housing and our city, historically, being punitive from a business tax issue on corporations," Vilgiate said.
— Karen Jordan
CORRECTION, SEPT. 12, 9:54 A.M. PT: A previous version of this story spelled Colliers International Executive Vice President Nico Vilgiate's name wrong. The story has been updated.
SOURCES: City of Philadelphia Senior Deputy Commerce Director Duane Bumb
INCENTIVES: Unmatched metro access, deep talent pool, tax incentives, good transit
CHALLENGES: Poor credit outlook, caps on incentives
No less than Philadelphia Mayor Jim Kenney sounded the call to action after Amazon’s RFP, and Philly looks to be all-in on wooing the company. It is certainly a large enough metro area, and it is nestled between Washington, D.C., and New York, access to which Amazon prioritizes. Throw in over 100 colleges and universities in the region, and the potential talent pool rivals that of any city.
Philly has two likely areas that it will push for its proposal in the Navy Yard and University City. The former has all the development-ready land that Amazon requires, and it is in a Keystone Opportunity Zone, which provides serious tax abatements. It relies on buses for public transit, however. Meanwhile, University City’s Schuylkill Yards and uCity Square development projects, with prime access to both Philly’s biggest universities and its subway line, could potentially be combined for a development offer similar to the multisite headquarters Amazon has in Seattle.
Though Pennsylvania’s tax incentive programs are capped below levels other states may be able to offer, state and local officials will do everything in their power to bring together every available program to benefit Amazon.
“[State and city tax credits and loan programs are] based on the number of jobs created and projected investment, which Amazon would probably exceed the allowed amount for,” City of Philadelphia Senior Deputy Commerce Director Duane Bumb said. "But in this case, we’d work closely with the state to identify if there are additional financial tools that could be made available, such as capital grants, low-interest lending or something that could serve a large development program."
— Matt Rothstein
SOURCE(S): Colliers International Director of Research Aaron Jodka, Urban-Brookings Tax Policy Center research associate Megan Randall
INCENTIVES: Highly educated workforce, already somewhat of an East Coast hub for Amazon, convenient international airport, extensive public transportation
CHALLENGES: High cost of living, lack of available space
Boston has the most educated workforce in the country, a 15-minute commute to its rapidly expanding international airport, and an exploding tech scene that already counts Amazon as a growing corporate presence.
“When you look at Boston, it’s an innovation, technology and education hub,” Urban-Brookings Tax Policy Center research associate Megan Randall said. “It’s not a hard sell.”
Boston Mayor Martin Walsh has built a reputation of luring several high-profile companies into the city under his watch. While he has said there is no better East Coast city for Amazon than his, he also noted the company should not expect a bidding war. Boston and the Commonwealth of Massachusetts put a $150M incentive package to land General Electric, but the megadeal may not have even mattered, Randall said. Research suggests real economic activity is not responsive to changes in taxes, and bigger factors like infrastructure, workforce and education are beyond a state’s control. Boston has all three, which could be the city’s trump card in luring HQ2.
As for finding 8M SF, Colliers International Director of Research Aaron Jodka said this is the equivalent of every converted, rehabbed and new construction office and lab property in the Seaport dating back to 1988. This is not a deterrent. Increasing height and density at proposed developments around South Station, the Abbey Group’s Exchange South End and Fairmount corridor, or North Point in Cambridge, provide room to grow with transit access.
— Cameron Sperance
SOURCE(S): John Boyd, Principal, The Boyd Co.
INCENTIVES: Stellar credit ratings, pension programs
CHALLENGES: Traffic congestion
Atlanta is a top contender, and will likely be among Amazon’s top five considerations, New Jersey-based The Boyd Co. principal John Boyd said. Boyd’s firm is a site selection consulting agency and has helped a number of companies evaluate headquarter locations.
A big lure for corporations to Atlanta and Georgia are both government’s solid credit ratings and its balance of liabilities with pension programs.
Boyd said companies are looking more critically at factors like a city’s credit rating and property taxes when evaluating potential headquarter or major corporate presence locations. Georgia has a AAA credit rating among the three big ratings agencies and Atlanta’s credit rating had been upgraded last year to one of the highest.
“There's a common denominator among states attracting industry today: they tend to be right-to-work states and they tend to have a strong credit rating,” Boyd said. “When we talk about economic development in 2017, it’s the war between the states. That’s how competitive it is today.”
Property taxes also are a big consideration, especially as they affect employees’ cost of living. Boyd noted how when Mercedes-Benz U.S. moved its headquarters from New Jersey to Atlanta, the average executive property tax bill shrunk from $22K per year to $5K per year.
Congestion will be a disadvantage for Atlanta, Boyd said. Atlanta is notorious for its traffic, and was recently ranked among the 10 most congested cities in the world, according to a 2016 study by INRIX, with commuters spending an average of 70.8 hours per year in traffic.
Amazon has put a priority on transit in its RFP, saying potential sites must have some direct access to transit. Atlanta’s main transit system, MARTA, has emphasized transit-oriented development at its stations in recent years. But it remains to be seen if that will be enough to lure Amazon.
— Jarred Schenke
SOURCES: Market Research
INCENTIVES: Apple already here, high-tech focus
CHALLENGES: Limited incentive money, no current city manager, congestion
Amazon and Austin. Austin and Amazon. It rolls off the tongue, especially with that recent acquisition of Whole Foods. And there’s much to like in Texas, in general, and Austin, specifically: a high-tech culture, a ready university partner, a synergy of high-tech headquarters and a local team that has landed deals like Samsung and Merck. There’s also plenty of land between Austin and its neighbors Round Rock and San Marcos, ripe for development. San Marcos just landed a distribution hub for Amazon.
The downside is that Austin may be a bit too small for Amazon. The airport is still a small hub, compared to neighboring Houston and Dallas. Congestion is a downside to Austin as well, clogging roadways that provide too few routes in and out of town. And City Council — currently without a city manager — has gotten a reputation for being tone deaf to the new sharing economy, kicking Uber and Lyft to the curb in a contentious public vote.
Texas, in general, can claim no income tax, but property taxes are plenty high. And the legislature has been on the fence about the state’s incentive programs, adding little money to the Texas Enterprise Fund in the last handful of sessions.
— Kimberly Reeves
New York City, New York
SOURCES: Market Research
INCENTIVES: Highly educated workforce with a depth of tech talent, plenty of shovel-ready development sites, robust public transit system, close to two international airports, most populous city in the U.S.
CHALLENGES: New York is among the world’s most expensive places to do business, both for employers with the city’s taxes and employees because of sky-high housing costs.
New Yorkers like to say they live in the greatest city in the world, and when it comes to housing major corporations, it is hard to disagree. More Fortune 500 companies are headquartered in New York than anywhere else, it has more workers than any other city competing for Amazon’s affection, and that includes tech workers. New York Building Congress CEO Carlo Scissura, who represents the city’s construction interests, told Crain’s New York Business Amazon “should not waste time looking anywhere else.”
Amazon chief Jeff Bezos will play the field, however, and he will likely find the field less appetizing for one simple reason: costs. New York City will cost Amazon the most to build a new headquarters, with the highest construction costs in the world. New York's housing is famously expensive and its transit system, while robust, is replete with problems that will not be fixed by 2019 when Phase 1 of HQ2 is expected to open. With a wealth of major companies already in the Big Apple, it is unlikely Mayor Bill de Blasio and Gov. Andrew Cuomo, who have feuded publicly for years, would team up to offer an incentive package to compete with cities like Denver or Atlanta, for which Amazon would be a more powerful catalyst.
— Ethan Rothstein
San Diego, California
SOURCE(S): Mayor Kevin Faulconer; Gary London, London Group Realty Advisors
INCENTIVES: Access to international markets and space to build
CHALLENGES: West Coast, high cost of living
San Diego Mayor Kevin Faulconer has directed the San Diego Regional Economic Development Corp. to develop a regional response to Amazon’s RFP for HQ2. A statement from the mayor’s office cited San Diego’s geographic proximity to international markets, unparalleled quality of life and well-educated, tech-savvy talent pool. San Diego County has 11 universities and four-year colleges, including three major universities and two law schools, as well as 13 two-year colleges. Real estate consultant Gary London, of London Group Realty Advisors, said the city could accommodate an Amazon headquarters in downtown, which has 80 developable blocks available, or at the 166-acre Qualcomm site in Mission Valley.
— Patricia Kirk
SOURCE(S): The New York Times, Mayor Michael B. Hancock
INCENTIVES: Solid job market, the right skill set among the workforce
CHALLENGES: Other markets have strong tech bases
Though Amazon is mum about where its second headquarters will be, the retail giant has said it wants a metro area where job growth is strong, the workforce has the right tech skill set and is growing, the quality of life is high, workers can easily get around and out of town, there is space for development and local governments that are willing to pay to play.
Through a process of elimination, the New York Times determined that metro Denver best meets this criteria. Officials in Denver have already jumped at the opportunity to be in the running for the new Amazon headquarters.
"This is a mega prospect and we have already initiated conversations with our economic development partners at the state and regional level to thoroughly consider the best possible fit for Denver and the region,” Denver Mayor Michael B. Hancock said.
— Dees Stribling