Amazon plans to build a second headquarters (they’re based in Seattle, Washington, currently) somewhere in the United States or Canada. A lot of people in a lot of places want Amazon to choose their place, and this week, Chicago Mayor Rahm Emanuel has a team of delegates in Seattle to check out the current headquarters campus.
Amazon says they would hire up to 50,000 people and need 8 million square feet of office space over the next 10–15 years.
What does Amazon need?
“Talented people” according to Benjamin Romano, writing in Xconomy.
Payton Chung concurs; he read the RFP and ranked Amazon’s site selection factors by “order of urgency”. For example, two things were of “paramount importance”, including the space and fiber connectivity.
These things are more important than an incentives package, which a lot of news media have focused on. Especially given the (terrible or amazing, depending on which party you are) deal the Wisconsin government is giving Foxconn to open a TV factory in the state.
Where should Amazon locate the new offices?
Gary, Indiana. The city’s mayor posted a small, text-only ad in the New York Times to say it meets the requirements while acknowledging its historical shortcomings. Thanks for pointing that out, Paul Angelone.
Fine, if not Gary, then St. Louis, Missouri. That’s what Illinois Governor Rauner is supporting, in part, as he said his administration is helping that city with their bid. The delegation in Seattle this week includes state officials, and is being paid for by donations raised by World Business Chicago, according to Heather Cherone at DNAinfo. (She also has the list of delegates, which are not scheduled to meet with any Amazon officials.)
Rauner also reinstated EDGE tax credits, which Amazon received for building a fulfillment center in Joliet, Nona Tepper reported in Crain’s.
Joe Cahill, for Crain’s, said, “Rauner and his team should devote 100 percent of their efforts to Chicago’s bid, and waste no time or resources on St. Louis.”
So, Chicago, duh, but why?
Cahill continues…
First of all, St. Louis is a long-shot bidder at best. The Gateway City has far fewer of the characteristics Amazon seeks than Chicago and other major metropolitan areas. Chicago has vastly more talent, air-travel connections, mass transit options, top-tier universities and world-class cultural amenities.
John Pletz writes in Crain’s:
Outside San Francisco, only Washington, New York, Toronto, Dallas/Fort Worth and Chicago have bigger pools of tech talent than Seattle, according to research by real estate firm CBRE. Only four metro areas produce more than 10,000 tech graduates a year: New York, Washington, L.A. and Chicago.
And why not?
Pletz continues:
Chicago has some major negatives, chiefly its soaring crime rate and the declining fiscal health of both the city and the state. The political dysfunction doesn’t help, either, especially when there’s a hotly contested governor’s race looming on the horizon.
Where in Chicago?
Sterling Bay says the former Finkl Steel site (map), as part of a redevelopment plan they call Lincoln Yards, which it paid likely over $100 million for last fall.
The Old Post Office would provide nearly 2 million square feet, with a lot of opportunities to acquire or build office space nearby, in the Union Station redevelopment, Riverline, and in the “Riverside Park” (a.k.a. Rezko lot, map) area of 62 acres owned by Related Midwest.
On Wednesday, Sept. 20, Mayor Emanuel issued a “Request for Nominations” for property owners and developers to submit their suggestions to the city on where Amazon could locate, according to Fran Spielman in the Sun-Times.
Claudia Morell, writing for The Daily Line, said, “Chicago’s Department of Planning and Development is soliciting pseudo-public input on possible locations for Amazon to open its second headquarters”, because the process is only open to those who own the property they’re suggesting. Interestingly, Morell said, “DPD only mentions proximity to O’Hare as a condition for submitting a plan, even though Midway is an international airport.”
How much should we pay them for it?
I say $0.
Ben Joravsky wrote in the Chicago Reader that he thinks there’s no way that’s going to happen.
Of course, the city can put “claw back” provisions in any deal with Amazon. That means Amazon would have to return part of whatever subsidies the city pays if it falls short of 50,000 jobs. But in its request for proposals, Amazon writes, “please also describe any applicable claw backs or recapture provisions for each incentive item.” Translation: if you want the headquarters, don’t bother with claw backs.
However, Joe Cahill wrote in Crain’s that $60 million to get Boeing to locate its headquarters here was worth it. Although it looks like in these two passages that Cahill contradicts himself.
Part 1:
The surprise victory [of getting Boeing here] silenced doubters and confirmed that Chicago has all the essential qualities of a corporate base — international air travel connections, deep talent pools, top-flight universities and diverse cultural amenities. A flock of companies have since moved their headquarters to town, including Archer Daniels Midland, Conagra, Motorola Solutions and, soon, McDonald’s. Nobody questions Chicago’s strengths as a headquarters locale anymore. [emphasis added]
Part 2:
Of course, a prize so rich comes at a price. Although Chicago recently has managed to lure some headquarters without offering tax subsidies, such as Motorola Solutions and McDonald’s, that won’t fly with Amazon. The winning bidder will have to fork over significant incentives. In Amazon’s case, the greater risk is squandering a once-in-a-generation opportunity over price. Chicago and Illinois should make an offer reflecting the extraordinary upside of landing Amazon’s second headquarters.
47th Ward Alder Ameya Pawar isn’t having it, though. (He’s also running for governor.) Rich Miller posted Pawar’s statement on CapitolFax:
If we have the money to give away billions of dollars in tax revenue to Amazon, then why don’t we have the money to invest in communities to save them from closing? And finally, we ask small businesses to pay their fair share in taxes even as they risk closure from the impacts of online retailers like Amazon, who are leading in job automation. Yet when small businesses ask for help, we tell them we live in a capitalist society.
What if there are no good cities?
Lyman Stone, an economist who just happens to work for the USDA, graded cities and metropolitan areas of the United States on factors and proxies of factors responsive to Amazon’s RFP.
For example, for a city to accept the new headquarters, they would have to have enough housing growth to accommodate the thousands of new employees (50,000 wouldn’t come all at once) in addition to existing housing demand. He maps which cities have been producing enough housing.
Philadelphia scored the highest, at 56/100, but Chicago and Washington, D.C., tied for second place. Read the article to see which public datasets he used, and his methodology.
Your turn
Do you think Amazon should locate HQ2 in Chicago? Where in the city, and why do you think it should go there? Write your comments below, or send them in to me privately.