Guest blog by Morley Driedger, Manager Innovation, Strategy, Planning & Workplace,  Enterprise Real Estate, TD Bank Group

At the 2018 CoreNet Global North American Summit in Boston I moderated a panel on Amazon’s HQ2 Search. For those unfamiliar with this topic, in 2017, Amazon publicly announced that it was looking for a second headquarters that would be a full equal to their existing headquarters in Seattle. Of the 238 cities across North America that responded with proposals, 20 were considered finalists, before New York City, and Northern Virginia (Washington) were declared winners, with Nashville also winning an operations center. In choosing the location for HQ2, Amazon stated their preference for:

  • 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

My Programs Team, which includes Sonya Verny and Andrew MacDonald, thought that the way in which Amazon approached their second headquarter search was unique given its public nature. Some commentators would go so far as to characterize the process as a “beauty contest”. Typically, site selection is conducted quite privately, and Amazon was able to flip the process on its head and have cities across North American pitch them on why their city would be the best fit for HQ2. Some cities chose to publicly announce large incentive packages, which subsequently stoked a larger public debate on whether taxpayer dollars should be given to large corporations vs. local businesses. From an economic development perspective, the opportunity to bring (at the time) 50,000 jobs and an estimated $5 billion in economic benefits to your city is extremely rare.

At the Summit, we were very fortunate to have a stacked panel to discuss this topic. Derek Snyder, Vice Chairman, Office Leasing, Cushman & Wakefield Toronto provided a thorough overview of the economic benefits and reasons why a city would want to submit a proposal for HQ2. Specifically, he outlined why Toronto submitted a proposal and how the city could integrate such a large employer. John Barros, Chief of Economic Development, City of Boston outlined the level of detail and personalization that went into the Boston proposal. Intricacies such as the dog-friendly nature of the city were emphasized, tailoring to Amazon’s pet-friendly work culture. Michelle Boggs, Executive Vice President, Business Development, San Antonio Economic Development Foundation provided a fascinating counter-response to why some cities might not be ready for a company as large as Amazon and highlighted the challenges it would put on the labor market, housing affordability, and public transportation. Seth Martindale, Senior Managing Director, Location Incentives & Portfolio Optimization at CBRE Los Angeles focused the discussion on how millennials and young leaders would be impacted. Brian Schwagerl, Clinical Assistant Professor of Real Estate Development, NYUSPS Schack Institute of Real Estate wrapped the discussion up by questioning whether providing economic incentives to one of the richest companies in the world was the best use of taxpayer dollars, foreshadowing the looming political debate that took place once New York City was announced a winner, and ultimately resulted in Amazon pulling their HQ2 plans out of the city.

The question on everyone’s minds now is if Amazon is going to announce a new winner for the second half of HQ2. Their experience in New York City brings new meaning to their preference for a “stable and business-friendly environment”. What will also be interesting to witness is whether Amazon and other large corporations conduct future site selection processes publicly. While the process likely yielded a treasure trove of data on city and state economic development plans, and possibly an even sweeter package then what could have been negotiated privately, the question will be whether it is worth the potential reputational damage. One thing that is certain is that as the economy and labor market become more complex, so will corporate real estate decisions in response to them.