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Amazon’s HQ2 will Create a CRE Explosion


Amazon’s HQ2 Will Create a CRE Explosion

For a company that sells goods over the Internet, Amazon sure has a formidable commercial real estate presence.

That has become more pronounced as Amazon’s growth continues to explode, with dozens of warehouses opening across the country, the purchase of Whole Foods, the launch of its own stores and the major real estate impact it has made in Seattle, where its headquarters are based.

 

All of this, as well as skyrocketing revenues, make it pretty understandable that Amazon is looking at adding a second North American headquarters. What’s unusual is how the search for Amazon HQ2 is being conducted, with the company taking pitches by individual municipalities.

 

Cities across the country have started lining up, looking to cash in on Amazon’s $5-billion investment and what it would create for their overall economies.

HQ2 supposed contenders

There are a handful of names that keep popping up in various predictions of where HQ2 will land. Here are some of the strongest prospects:

 

Chicago apparently has a lot going for it in the HQ2 run. Amazon already has plenty of office workers downtown. Chicagoland also has two airports, O’Hare International being one of the largest in the world, as well as a strong rail system, a great central location and a 600-person committee trying to lure the company, including the United Airlines CEO Oscar Munoz and former U.S. Commerce Secretary Penny Pritzker.

 

Several observers say Philadelphia has a good shot at HQ2. It’s between New York City and Washington, D.C.; has dozens of colleges around the area to offer an educated workforce; and the cost of living in lower than other cities on the East Coast. The city, which has seen a resurgence in the last decade, also has several prime plots of land ready for development, and municipal staffers are frequenting Seattle to better understand Amazon’s work culture.

 

The New York Times picked Denver for HQ2, and for good reason. The metro area already has plenty of tech talent, a major international airport, a central location in the country, a high quality of life (notwithstanding the traffic), and still has plenty of land on which to place the major complex.

 

Other cities that are reportedly strong in the running are Atlanta; Austin, Texas; Boston; Dallas; Los Angeles; Portland, Ore.; and Toronto.

Some interesting hopefuls

There are some other cities that are less likely to draw HQ2, but that doesn’t mean they’re not interesting.

 

Of all places, the surrounding Seattle area has put in a bid for Amazon’s second headquarters. Since the company is from Seattle, wouldn’t it likely have already considered other locations near its home base to expand before putting out such a public bid?

 

An economic development group in Tucson sent Amazon a 21-foot saguaro cactus to woo the e-commerce giant. However, the company would not accept the gift and instead donated it to a museum.

 

Frisco, Texas, just outside of Dallas, reportedly wants to build its city around a possible HQ2. The city is reportedly 40 percent underdeveloped, and it sounds like the mayor is basically willing to make the new Amazon headquarters its downtown.

 

And ironically, the locale that reportedly hires tech workers at a higher pace than any other city is in the Silicon Valley, New York or some other notable hub – it’s Birmingham, Ala. So maybe it has a shot?

Why cities want HQ2

Besides the $5 billion in campus investment, Amazon is looking for roughly seven million square feet of offices and will hire about 50,000 workers. If that is not enough, the construction of the facility will create tens thousands of jobs in that industry and increase revenues at surrounding businesses as a result. Amazon also says that between 2000 and 2018, $38 billion was generated for Seattle’s economy as a result of the first headquarters, in the form of other companies opening nearby, not to mention the construction of retail and housing to support the initial home base.

Why HQ2 could be a headache

In the eyes of some, the pursuit of an Amazon headquarters is like vying for the Olympics – you’d better watch what you wish for. Considering the constraints on infrastructure and traffic, Boston opted out of the games earlier this year.

 

All one has to do is look, again, at Seattle, but this time for problems.

 

Home prices there have risen higher than anywhere in the nation for 10 straight months, with a 13.4 percent year-over-year jump in June, and Amazon is pointed to as a culprit.

 

This Business Insider report also points to Seattle’s rising rents, terrible traffic congestion and neighborhood gentrification. There was also a New York Times article a few years that gained a lot of attention, contending that the working conditions at Amazon are less than stellar.

But a big win for CRE

No matter what city Amazon picks, commercial real estate development there is bound to boom across sectors. Other than the seven million square feet of Amazon offices, more is to follow in the form of other offices needed by additional companies tied to HQ2; the need for more retail, restaurants and entertainment to service workers and their families; and additional housing. It will be a heyday for commercial real estate for several years.

 

Formal bids are due by cities on Oct. 19. Soon after, we’ll see who wins this very costly popularity contest.

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ABOUT
Ian Ritter
Ian Ritter is the former Content Director for Connect Media, a Web site that covers commercial real estate nationally, with a focus on California. He is also the Online Content Manager engineering firm GRS Group and writes blogs about national industry trends. Formerly, Ian was the Retail Editor at GlobeSt.com, among other titles over nearly a decade, and was also an editor at the International Council of Shopping Centers publication "Shopping Centers Today." He holds a Master's degree in Journalism from Columbia University.

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