When Amazon announced it would be accepting proposals from cities around the country wishing to host the internet behemoth’s second headquarters, savvy real estate investors took notice as things got pretty wild pretty fast. It seemed like every major metro area in the country tweeted, Facebooked, and even turned to the printed word and print advertising to make sure Amazon founder and CEO Jeff Bezos was aware that they were interested. Videos went viral. Thousands of ad dollars were spent. Entire regions teamed up to try to compete with bigger municipalities for the alleged billions of dollars Amazon predicted its headquarters would bring to the lucky “winner” of its new headquarters.
Then, skepticism set in. Analysts started questioning whether or not landing HQ2, as Amazon’s Request for Proposals (RFP) dubbed the second headquarters, would really be the boon everyone expected. People started murmuring about poor working conditions and Bezos’ reputation for being, well, a bit hard on his warehouse workers (and just about everyone else). Some Seattle companies spoke up and said snidely that they weren’t convinced Amazon had been quite as great for that city, which hosts the current headquarters and will retain it, as Amazon had portrayed it. The entire situation started to get a little murky.
One thing that is not up for debate, however, is whether or not HQ2 will be good for real estate investors with foresight. Every savvy investor knows that buying in the “path of progress” or owning land that will soon be in demand from a buyer with limitless pockets (like Amazon or associated developers) is probably a good move. While we cannot state definitively where HQ2 will be built, the RFP gives some pretty clear delineations about where Amazon wishes to build it. Find locations that fit these requirements, and you’ve definitely narrowed down your search.
First, Evaluate the Must-Have’s
Amazon’s RFP states that the company prefers:
- Metropolitan areas with more than one million people
- A stable and business-friendly environment
- Urban or suburban locations with the potential to attract and retain strong technical talent
- Communities that think big and creatively when considering locations and real estate options.
Perhaps most important, however, are the core preferences, which are more easily defined:
- 30 miles or closer to a population center
- Approximately 45 minutes or less to an international airport
- Not more than one or two miles from a major highway or arterial road
- Access to mass transit at the site, meaning there must be direct access to rail, train, subway/metro, and/or bus routes from the Amazon site. This means either there needs to be wherewithal to build a station at HQ2 or immediately adjacent.
- Room for a development of at least 500,000 square feet by 2019
- Room for a development of up to 8 million square feet “beyond 2027”
These requirements tell us several things about what Amazon believes it cannot live without in its headquarters: specifically, access and plenty of square footage. The specific mention of transit likely indicates that this issue is a deal-breaker as well, so look for locations with international airports, established, effective transit systems or the groundwork for such (check state Department of Transportation records, maps, and studies to get an idea about this), and room to build in areas that meet these requirements. If you have transit and an airport but nowhere to go, then that city is going to have a harder time landing HQ2. Note that Amazon has permitted multiple sites for the campus that are not contiguous as long as they “foster a sense of place” and that they will consider using existing development if it is available.
Next, Take A Look at What They’re Saying but Not Saying
Let’s go back to the first list, when the company noted that it preferred “stable and business-friendly” environments. This is a common requirement for any business making a major move, as it is for real estate investors. Just as you, the real estate investor, want to do deals in states that are cognizant of your rights and needs as an investor and maybe are even willing to grant you tax abatements or other incentives to bring your business into the area, Amazon would like the same. On a much, much, much larger scale. While you will need to watch the news, and read the actual online information about individual city, state, and regional proposals for Amazon to know for sure what is being offered, you can bet that an area that is not business-friendly will not land HQ2 unless it offers up some pretty hefty exemptions to its own rules.
Here is what the RFP says on the topic:
Capital and Operating Costs – A stable and business-friendly environment and tax structure will be high-priority considerations for the Project. Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process.
Later on, the RFP goes on to say, “Local government structure and elected officials eager and willing to work with the company, among other attributes. A stable and consistent business climate is important to Amazon.”
Incentives – Identify incentive programs available for the Project at the state/province and local levels. Outline the type of incentive (i.e. land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers.
These programs will probably be a matter of public record, and you should look for areas that have successfully attracted other headquarters (the RFP suggests including these companies as references) or that appear to be willing to give Amazon the moon in order to land the coveted HQ2. These are areas that likely meet these vague requirements.
Finally, Step Away from Evaluating Values
Amazon states that it requires “the presence and support of a diverse population” as well as “a community where our employees will enjoy living.” Will these issues play a role in the decision? Absolutely, but you may be quite certain that the definitions of these characteristics are flexible and will also be highly personal. Think about your own feelings when you decide if you want to invest in a certain neighborhood. In all likelihood, some of your decision-making is based on your “gut feeling.” Amazon cannot say in its RFP, At the end of the day, we’ll pick the place we like the best, so they use non-quantifiable characteristics to allow for flexibility. That’s reasonable, but it’s not predictable, so if you are going to try to predict the future, leave that part of the equation out or at least put it both last and least in your analysis.
Remember, You Don’t Have That Long to Wait
The response deadline for RFP Phase I is October 19, 2017. It is likely that most applicants will make most, if not all, of their proposal available in order to garner the most attention for what is essentially a well-written sales pitch for their community. Whether you end up predicting the right location of HQ2 or not, you will definitely know a lot more about many more markets if you do your research now.
Carole Ellis is the editor for Think Realty Magazine. She can be reached at firstname.lastname@example.org.