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Friday, April 3, 2020  Spokane, Washington  Est. May 19, 1883
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Opinion >  Syndicated columns

Conor Sen: Few cities can handle an Amazon HQ

By Conor Sen Bloomberg View

Which cities will lead the economy of tomorrow? And who will decide? Often it’s an amorphous mass of companies and people over time, drifting to where land is cheap and weather is warm. Sometimes it’s one company, choosing in one moment. Like now, when Amazon decides where to locate its second corporate headquarters.

The scale of Amazon.com Inc.’s undertaking – over time, needing up to 8 million square feet of office space and 50,000 well-paid employees – is unlike anything seen in recent memory. The only thing comparable would be cities bidding for the Summer Olympics. Amazon’s Request for Proposal narrows the list significantly in terms of the number of cities realistically able to bid for such a project.

First, the labor force needs for the headquarters dramatically shrink the number of metro areas able to bid. Amazon says it’s considering metro areas of a million or more, but realistically to provide 50,000 employees a metro area is going to need to be significantly larger than that.

Consider a place like Pittsburgh. Its metro area is 2.35 million people, and its labor force is 1.2 million. But the size of its labor force hasn’t grown in 25 years. Even with the talent its well-respected universities produce, is Amazon, a company that thinks of growth in terms of decades, going to locate a headquarters in a place where it might have to hire over 4 percent of the metro area’s labor force with uncertainty over whether that labor force will ever grow?

The next factor that will reduce the list of possibilities is the need for a suitable international airport. It’s hard to say what exactly constitutes an international airport, but as with everything Amazon does, higher volumes or higher capacity will probably be seen as more favorable. The list of most-trafficked international airports is full of the usual suspects – large coastal cities and major airline hubs.

Once you’ve winnowed the list to large metropolitan areas with robust international airports, other considerations come into play. Amazon says “a highly educated labor force is critical and a strong university system is required.” Would that take cities like Dallas and Charlotte out of consideration, or would being a couple of hours from highly respected universities be good enough?

Costs are stated as an important factor as well. It’s “easy” to identify large metro areas with robust airports and deep, educated talent pools, but those tend to be tremendously expensive. Being in Seattle, Amazon surely sees how much being based in Seattle, which is cheaper than the San Francisco Bay Area, helps with recruiting. It might make sense for an expansion of 5,000 employees, but will Amazon really try to hire 50,000 employees in a metro like Vancouver, San Francisco, Toronto, Boston, New York or Washington – an area that’s already expensive?

Tax incentives play a role too. To some extent this is a question of “who wants it the most.” For all other considerations, Chicago would be an attractive destination. But the city and state are broke. Are Chicago and Illinois willing to offer billions of dollars in tax incentives, trying to compete with younger, “hungrier” Sun Belt metros? And Chicago’s another metro area with no clear prospects for labor force growth, even if its existing talent base is large and deep.

There are some softer cultural factors that are difficult to quantify as well. Will flirtations with anti-gay laws under a guise of “religious liberty” (and anti-trans “bathroom bills”) hurt the causes of the large metro areas in North Carolina, Georgia and Texas? Will Toronto’s case be helped or hurt by the political environment under President Donald Trump? (After all, he has waged a personal war against Amazon.) Will Washington’s case be strengthened by Amazon CEO Jeff Bezos’ purchase of the Washington Post? Will geographic diversity – perhaps a place in a time zone other than Pacific –- be seen as attractive?

This is the Olympics of corporate relocations. The winning city will be able to offer a large metro area, a deep and educated talent pool with a strong local university system, a robust international airport, sufficient highway and transit infrastructure, a reasonable cost of living, a welcoming culture, a business-friendly environment, likely eye-popping tax incentives and a local business and political community able to work together to make a convincing pitch.

By my tally, the options are: Toronto, Boston, Washington, Atlanta, Dallas or Denver.

Conor Sen is a Bloomberg View columnist.

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