7 Cities That Won’t Win the Second Amazon Headquarters

All seven are great places to live but it’s going to take more than scenery to lure Amazon to town

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Earlier this year, Amazon (NASDAQ:AMZN) announced the 20 finalist cities to host Amazon HQ2. A list that started with 238 proposals in October has been whittled down to less than a couple dozen contenders for Amazon’s second headquarters over the course of a few months. Now the heavy analysis and work begin for Amazon executives, including CEO Jeff Bezos, tasked with making the ultimate choice between Amazon’s top cities for HQ2.

Of the four major criteria Amazon said it has a preference for, I believe having a metropolitan area of more than one million people is essential to Amazon’s HQ2 decision — it doesn’t want to be in the middle of the countryside where employees live in identical townhouses and have to drive to get anywhere.

Having said that, I’m pretty sure you could make a strong case for almost every one of the 20 cities that made the cut. As the Amazon HQ2 decision looms, many speculate the prize will go to Northern Virginia — specifically Crystal City. But rather than discuss the reasons each city could win Amazon’s second headquarters, I’m going to come up with one or two arguments for why seven of these cities don’t stand a chance of winning Amazon’s blessing.

[Editor’s Note: This story was previously published on January 2018. It has since been updated and republished to reflect updates in the Amazon HQ2 timeline.]

Cities That Don’t Stand a Chance Winning Amazon HQ2: Toronto, Ontario

It probably seems odd that one of the trio of cities I suggested Amazon should consider for its second headquarters, and my hometown, is now on my list of cities that don’t stand a chance of winning. Unfortunately, money talks and you-know-what walks.

The only cities, in my opinion, that will be seriously considered are those providing significant financial incentives for Amazon to locate in their municipality or providing relatively inexpensive housing for employees relocating there.

“Toronto attracted Amazon’s attention without resorting to tax breaks and other financial incentives offered by some of the U.S. competitors that also made the short list,” said Toronto Mayor John Tory. “The city of Boston’s bid includes $75 million for affordable housing for Amazon employees, while the city of Newark, N.J. proposed to give the company $2 billion in tax breaks.”

Not only is Toronto not going to offer any financial incentives, but it also has the highest average rent for a one-bedroom apartment in Canada … and don’t even think about buying a house because it will cost you CAD $1,000 per square foot, or more.

Toronto would be a great place for Amazon, but it isn’t going to happen.

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Cities That Don’t Stand a Chance Winning Amazon HQ2: Newark, New Jersey

With due respect to former Newark mayor and current New Jersey Senator Cory Booker, Newark is not going to get a sniff from Amazon.

“A Newark HQ2 would mean tens of thousands of local jobs, a boost to our regional economy and small businesses, and an opportunity for Amazon to take a tremendous stake in the continued transformation of our great city,” Booker said in a statement to Wired magazineHe’s not wrong.

If this were merely a reclamation project, Newark would be a natural choice because of the financial incentives offered. Unfortunately, Amazon’s also looking for a city that can attract and retain strong technical talent. Newark’s 7.9% unemployment rate — by comparison, Seattle’s unemployment is 4.5% — is not going to enamor itself to Jeff Bezos and company.

I couldn’t say for certain, but my guess is Bezos wants to hit the ground running. Newark doesn’t offer immediate gratification to those employees relocating immediately and for that reason, I just don’t see it having a chance for serious consideration.

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Cities That Don’t Stand a Chance Winning Amazon HQ2: Denver, Colorado 

As I stated in September, the New York Times’ article that named Denver the best place for Amazon to put a second headquarters had a lot of good points. However, I found two big problems with the Mile High city.

It’s not nearly as far east as it needs to be. If you’re going to pick a city that’s in the western half of the U.S., you might as well go with Los Angeles because it’s at least in the same time zone as Seattle. Secondly, there’s a political consideration to take into account here.

“It would be pointless to put what could end up being a second Amazon company — should the government break it up or if the company was to decide on its own to split Amazon Web Services from the rest of its businesses — so geographically close to each other,” I wrote Sept. 22. “Therefore, the winning location is likely to be in the easternmost third of the U.S.”

The reality is that physical geography makes Denver a losing proposition despite being a beautiful, fun city.

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Cities That Don’t Stand a Chance Winning Amazon HQ2: Columbus, Ohio

Columbus brings a lot of intangibles to the table that Amazon will likely find attractive including a growing population, vibrant venture capital and business environment and a top-notch university where recruits will be readily available. The downside is it doesn’t have an international airport and considering many of the employees will be likely be required to spend time in both headquarters; it’s not nearly as convenient a location as Chicago.

It did offer Amazon some pretty lucrative tax breaks.

“Amazon would receive a 15-year, 100% property-tax abatement at all sites associated with its new headquarters. That would save Amazon $456,750 per $1 million of investment in property over the life of the abatement,” reported the Columbus Dispatch in October.

“The online retail giant also would receive a 15-year, 35 percent income-tax refund on withholdings from new full-time employees working at Amazon’s headquarters. That would be up to $50 million annually and up to $400 million over 15 years.”

The company will not ignore these incentives, but at the end of the day, I just don’t see a Midwest city winning the Seattle sweepstakes.

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Cities That Don’t Stand a Chance Winning Amazon HQ2: Nashville, Tennessee

Like Toronto, Nashville is staying out of the financial bribery game to sway Amazon, and like Toronto, that ultimately will work against it. Interestingly, housing prices in Nashville, which are rising due to the city’s rapid growth — according to Zillow, Nashville has a median home price of $245,000 — are still much cheaper than in places like New York City, Washington and Boston.

That could be a major attraction for current and potential Amazon employees. Unfortunately, for Nashville, Atlanta has a median home price of $218,000, is offering financial incentives, and has one of the busiest airports in the world.

I just don’t see the home of country music beating out Atlanta, the southern city that many experts feel is the odds-on favorite to win Amazon’s business.

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Cities That Don’t Stand a Chance Winning Amazon HQ2: Austin, Texas

Austin is a technology hotbed and considered one of the five cities most likely to host Amazon’s second headquarters. Like Nashville, I just don’t see its transportation infrastructure being anywhere near ready to host an additional 50,000 residents, many of whom will be flying off on a moments notice, to ports of call around the world.

“A final decision won’t come until the end of the year, and Austin will have to come up with innovative and workable solutions to its traffic and affordability issues,” said Austin-based economic development consultant William Mellor. “The good news is that, relatively speaking, Austin is already more affordable than many of the other cities on the shortlist.”

Amazon won’t ignore the affordability factor but in the end, I see Amazon having an internal top five that includes three cities on the east coast — New York City (not Newark), Boston and the D.C. trio — as well as two from the interior in Atlanta and Chicago.

Austin punches above its weight, but it’s not going to be enough to attract Jeff Bezos and company.

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Cities That Don’t Stand a Chance Winning Amazon HQ2: Raleigh, North Carolina

New York City marketing research firm GBH Insights believes the North Carolina capital is one of the top five contenders remaining in the Amazon lottery.

“We believe the top 5 likely cities for Amazon’s second headquarters/HQ2 in order will be: 1. Atlanta, 2. Raleigh, 3. Washington D.C., 4. Boston, and 5. Austin (only non-East Coast city in our Top 5),” GBH Insights’ Daniel Ives wrote in a note to clients Jan. 21. “ … These 5 cities appear to be the most viable candidates given all the competing factors.”

Interestingly, the GBH Insights also has Austin on its top five, which suggests it believes Amazon is less concerned about population and infrastructure and more interested in going to affordable cities where the tech talent already exists in large numbers. It’s an interesting theory and might have been Amazon’s choice 20 years ago when it wasn’t nearly as big a company.

However, today, I see Jeff Bezos looking to make a statement to both his employees and those who doubted his company’s success early on, that Amazon’s hit the big time. I’m not suggesting something outlandish but certainly worthy of our attention. Raleigh doesn’t fit that bill.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/10/7-cities-that-wont-win-the-second-amazon-headquarters/.

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