WSJ Stacks up HQ2 Cities, Some Disappointments - News | Think Realty
InsightNews Doing Business

WSJ Stacks up HQ2 Cities with Some Disappointments

hq2

Last month, Amazon released its “short list” of 20 cities still in the running to host the web behemoth’s second headquarters, dubbed HQ2, which many analysts predict will revolutionize the winner’s local economy and turn an already thriving economy into a super-engine for growth. While all of the cities on the short list are certainly attractive markets in their own rights, some of them are clear front-runners in this race and others are distinct long shots. The Wall Street Journal broke down the short list in terms of strength of the existing tech labor force, current fiscal health, local cost of living, the size of the college-educated population, cultural fit with Amazon, and state tax rank.

Analysts noted that Amazon’s initial criteria “included a metro area with more than one million people, a stable and business-friendly environment, and a location where it can attract and keep talent.” They went on to call economic incentives (read: state and local governments’ offerings of funding, building capital, tax rebates, and other “goodies” to Amazon) a “wild card” that might enable a candidate city to climb toward the first tier in the rankings.

Who Stood Out

Interestingly, Dallas, Texas, stood out from all other contenders due to what the analysts described as “middle-of-the-road” ranks for everything except the large tech labor force, where it had very high scores. D.C. Proper, Montgomery County, Maryland, and Northern Virginia also placed in the “first tier” of candidates, but struggled in the categories of “state tax rank” and “cost of living,” two things that represent major benefits to both Amazon employees in the area and the corporate entity, which would benefit from business-friendly tax policies. Any city could offer Amazon temporary short- or long-term or permanent tax incentives to counterbalance this issue to some degree.

On the second tier, Atlanta, Georgia, trailed Miami, Florida, and Boston, Massachusetts, which may come as a surprise to many who believed that Georgia’s state capital would rank in the top tier thanks to low cost of living, great access to the busiest airport in the world, and a reasonably sizable population of young, tech-savvy professionals. Atlanta may have fallen to the second tier in this analysis in large part because WSJ analysts did not find it to be a particularly compelling cultural fit, which is something that Boston and the D.C.-area candidates have in spades. Dallas tied Atlanta in this aspect of the rankings but faired far better in terms of state tax rank and labor force. Miami beat all contenders on the cost-of-living front, and Boston scored as a top fit culturally, along with Los Angeles (third tier) and Austin, Texas (fourth tier).

Notable Cities

Other notable cities in lower tiers with standout rankings in some areas include Indianapolis (third, low cost-of-living), Chicago (fourth, college-educated population and tech labor force), New York, New York (fourth, with very high scores in college educated population, cultural fit, and tech labor force but nearly nonexistent scores in other categories), and Pittsburgh, Pennsylvania (fifth, low cost-of-living). Newark, New Jersey, trailed with comparatively low scores in every category. Although the source of the data, Green Street Advisors, does not formally track Canadian markets, analysts noted that Toronto says its region is second to New York alone in terms of college-educated population and tech labor force. Canada also offers an attractive healthcare system and “easy access to visas,” they said.

While this report placed no southeastern cities on the top tier of candidates and appears to label Dallas as something of a shoo-in, investors must remember that city and state attitudes toward business will play a huge role in the eventual decision, regardless of how any PR agency chooses to spin the selection. With that in mind, cities with low costs-of-living will likely have an edge because tax incentives and exemptions will not necessarily affect every single employee like increased buying power will, as will cities located in areas with demonstrated histories of making huge concessions, successfully, to lure in big businesses. Dallas certainly has that type of track record, as does Atlanta. On the third tiers, Raleigh, North Carolina, also seems likely to offer that attractive combination.

Think Realty has interviewed numerous investors and economists on the topic of HQ2, and many of them recommend watching where Amazon has already purchased land to determine which cities are good candidates for HQ2 or might benefit from an Amazon “shot in the arm” for the economy simply because of the publicity associated with candidacy and an existing Amazon presence. The majority state it may be more beneficial to track Amazon’s actual expansions rather than banking on speculation about where the company will ultimately seat HQ2.


Enjoyed this article? Sign up for your free Think Realty membership to receive access to membership only content, benefits, and stay up to date on our upcoming events.