Amazon’s recent announcement that it is looking to build a second North American headquarters dubbed “HQ2” has sent a shock through most major US Cities. With the news dropping just a few weeks after a Seattle Times article naming Seattle “America’s Biggest Company Town”, it is clear that Amazon is looking for a new and dynamic market to growth their business outside of the Pacific Northwest.
But where to set up shop? That’s the million (or billion) dollar question at hand. Amazon’s RFP alludes to several main themes - talent, space, and connectivity. Cities competing for the headquarters will be excited for the long-term economic vitality that Amazon and its thousands of well paid workers will bring, but will need to need to offer huge up-front incentive packages on taxes and property to persuade Amazon to choose them.
So - given Amazon’s needs and the competitive landscape of cities likely to vie for HQ2, who is best positioned to win the award?
To begin to winnow down the list of cities, I established some ground rules.
- HQ2 should be in America, not Canada or Mexico, to ease travel/immigration/finance concerns
- HQ2 host cities should have at least a million people in the metropolitan region
- West coast cities were eliminated as they seem more or less redundant of Amazon’s existing Seattle headquarters
- Priority was given to known white-collar talent hubs with major prestigious universities. Cities not meeting this criteria were eliminated
- Cities without extensive in-city transit options and strong regional and national transportation connectivity were eliminated
After applying those filters and eliminating cities that seem duplicitous of other, better options (for example, Indianapolis is similar to but inferior to Chicago in most criteria relevant to Amazon), I obtained the following list of “semi-finalists”. Unless Amazon goes with a wild card option, I’m pretty confident HQ2 is going to be built in one of the following cities (listed in population order):
- New York
- Washington, DC
Finalists and Rankings
Boston is a strong option for HQ2 due to its outstanding combination of talent, transit, and connectivity to the rest of the East Coast corridor. Harvard, MIT, Boston University, Boston College, Tufts, and many more excellent colleges and universities are just minutes away, and the region is a major destination for talented college graduates across the country. The T provides great public transit across the city, and Logan Airport’s proximity to the city makes getting in and out of Boston very easy.
Downsides to Boston center mostly around cost and “personalization” - it’s difficult to see Amazon carving out the same presence and influence they have in Seattle in Boston. Additionally, Boston is an expensive market and adding the volume of space HQ2 requires will be a very costly endeavor.
Much like former Seattle resident Boeing, Amazon may find that Chicago provides the right blend of business-friendliness for a headquarters. Of course, while Boeing moved their only headquarters to Chicago, Amazon will be building a separate and equal hub for their business.
Chicago is a large commercial real estate market with lots of available Grade A commercial office space, a beautiful skyline, and an open desire for an increased role in the tech industry. Furthermore, it boasts excellent public transportation and is a three hour flight (or less) to either coast. Finally, Chicago is the biggest city in the center of the US and is a huge talent draw for many excellent colleges and universities including Northwestern, the University of Michigan, the University of Chicago, and many more.
Austin is a trendy pick for HQ2 as an extremely tech-friendly city that already boasts Dell and SXSW. Many Silicon Valley companies such as Dropbox and Google have large engineering presences in Austin, and having the University of Texas nearby keeps the area dynamic and stocked with talent. A lack of state income tax and Texas’s proven commitment to attracting new businesses and technology companies will be important aspects of Austin’s proposal - it is possible that if Austin offers enough that this will become a slam-dunk deal for Amazon.
Other pros include the presence of Whole Food’s corporate headquarters and the opportunity to shape large portions of Austin in Amazon’s image.
As resident corporate capital of the world, New York needs no introduction. Amazon’s decision to consider New York or not will likely center around available office space and economic incentives - if the city is able to put together a tax or office space subsidy that drives the cost down to something more on par with the other cities on this list, then New York will have a punchers chance at snagging HQ2.
An X-factor in the New York decision may be the pricing and availability of developments with in the new Hudson Yards - an area which will be expensive but could serve as the perfect multi-use host enclave for an Amazon cluster.
Home of Carnegie Mellon and famed Google and Uber robotics laboratories, Pittsburgh is a rising city in the tech world. With cheap real estate and the ability for Amazon to help shape the city moving forward, Pittsburgh is an appealing host for HQ2. Downsides include that it is not a major transportation hub and doesn’t have a proven track record of recruiting transplants from other cities. However, if Amazon chooses to select a smaller city where it can grow and become the preeminent player in city politics, Pittsburgh is an inexpensive choice with great quality of life.
The Westernmost city of all of our finalists, Denver is a beautiful city and a quick flight to Seattle and the West Coast. Like Pittsburgh and Austin, Denver offers the potential for Amazon to help shape the city and grow together. While Denver lacks the prestigious colleges and universities other cities can boast, it has recently become a destination for talented workers and college graduates who want to prioritize outdoor living, accessibility, and a reasonable cost of living - values I think Amazon shares.
- New York
I think the key variable in Amazon’s HQ2 choice will be the weight placed upon two things:
- Tax subsidies and property benefits
- The desire to mold a city in Amazon’s image
Should Amazon desire a smaller city and a hefty benefits package to lighten their load, I can totally see them siding with our #2 seed Austin. But on their merits today, I think Chicago is the top choice for what Amazon needs in a host city.