Bid for Ama­zon could be Hous­ton’s cat­a­lyst for change

Craft­ing pro­posal gets lead­ers think­ing about city’s fu­ture

Houston Chronicle Sunday - - FRONT PAGE - By Katherine Blunt and Collin Ea­ton

Hous­ton’s bid for Ama­zon’s sec­ond head­quar­ters has chal­lenged lo­cal lead­ers, planners and de­vel­op­ers to present the city’s staid in­dus­trial econ­omy as a nat­u­ral fit for a tech­nol­ogy gi­ant seek­ing to in­vest bil­lions of dol­lars in a cut­ting-edge cor­po­rate cam­pus.

The pro­posed $5 bil­lion de­vel­op­ment, ex­pected to cre­ate 50,000 high-pay­ing jobs, has prompted a sweep­ing col­lab­o­ra­tion among agen­cies and or­ga­ni­za­tions hop­ing to score the cache of one the world’s largest and most dis­rup­tive com­pa­nies. Of­fi­cials see the project as a means to de­velop a nascent tech­nol­ogy sec­tor, mod­ern­ize the re­gion’s key in­dus­tries and trans­form the city’s trans­porta­tion net­work to suit a younger work­force.

Bring­ing Ama­zon to Hous­ton al­most cer­tainly will be a heavy lift. The pur­suit of the com­pany that rev­o­lu­tion­ized the re­tail in­dus­try has high­lighted both the po­ten­tial and short­com­ings of the lo­cal tech­nol­ogy sec­tor, made up of scat­tered groups of engi­neers in the en­ergy, med­i­cal and space in­dus­tries, which ac­count for many of the city’s ma­jor in-

no­va­tions, but have yet to break out of their si­los to cre­ate the kind of cul­ture and buzz that an­i­mate tech cen­ters such as Sil­i­con Val­ley, Austin or Ama­zon’s home­town of Seat­tle.

But eco­nomic de­vel­op­ment of­fi­cials say that re­gard­less of out­come, the bid may well be­come the cat­a­lyst for the kind of in­no­va­tion ecosys­tem that pushes the re­gion and its econ­omy into new di­rec­tions to un­der­pin its longterm pros­per­ity.

“Ama­zon is a foil for think­ing about where you’re try­ing to take a city,” said Bob Har­vey, pres­i­dent and CEO of the Greater Hous­ton Part­ner­ship, which is lead­ing a team of de­vel­op­ers, aca­demics, Texas Med­i­cal Cen­ter ex­ec­u­tives and real es­tate bro­kers jug­gling a high-stakes bid­ding war and Hur­ri­cane Har­vey re­cov­ery ef­forts.

Ama­zon an­nounced last month its plan to build a sec­ond head­quar­ters in a ma­jor metro area with more than 1 mil­lion res­i­dents, a pipe­line of tech­ni­cal tal­ent and strong tran­sit and air­line con­nec­tiv­ity, among other fac­tors. It out­lined a de­tailed re­quest that en­cour­aged cities to craft cre­ative pro­pos­als to ac­com­mo­date a sprawl­ing 8-mil­lion-square-foot de­vel­op­ment ex­pected to gen­er­ate bil­lions of dol­lars for the lo­cal econ­omy.

The open-ended so­lic­i­ta­tion also spurred a fran­tic race among vir­tu­ally ev­ery ma­jor and mid­size city across the coun­try, driv­ing po­lit­i­cal, busi­ness and civic lead­ers to hone pitches, line up in­cen­tives and try to di­vine the an­swer to the all-con­sum­ing ques­tion, ‘What does Jeff Bezos want.” Of­fi­cials in Tus­con, Ariz., hope it starts with a cac­tus — par­tic­u­larly the 21-foot va­ri­ety they shipped to the Ama­zon CEO.

‘Still evolv­ing’

Hous­ton likely has a tough sell ahead of it. The lo­cal startup scene has grown in re­cent years, but has so far failed to at­tract the sort of ven­ture cap­i­tal ac­tiv­ity con­cen­trated in Austin and other tech­fo­cused cities. Skep­tics point to the city’s con­sis­tent fail­ure to de­velop projects that would sub­stan­tially ex­pand its tech­no­log­i­cal base and at­tract ma­jor firms such as Mi­crosoft, Google or Dell, all of which have op­er­a­tions in Austin.

Most re­cently, the Univer­sity of Texas sys­tem’s am­bi­tious plan to trans­form roughly 300 acres of land near the Med­i­cal Cen­ter into a cut­ting-edge data sci­ence cen­ter failed in the face of in­tense op­po­si­tion from Univer­sity of Hous­ton lead­ers and state law­mak­ers. Pro­po­nents of the deal blamed po­lit­i­cal spar­ring for scut­tling a deal that could el­e­vated the city’s chance of de­vel­op­ing a more ro­bust tech­nol­ogy sec­tor.

“That type of non­sense has to stop,” said Hous­ton de­vel­oper David Wolff, chair­man and pres­i­dent of Wolff Com­pa­nies. “You have to have the in­sti­tu­tions work­ing to­gether.”

But lo­cal lead­ers ar­gue that the city’s grow­ing num­ber of soft­ware engi­neers and com­puter pro­gram­mers could com­ple­ment Ama­zon’s am­bi­tions as it ex­pands its data sci­ence ca­pa­bil­i­ties out­side of re­tail and en­ter­tain­ment. In ad­di­tion, city of­fi­cials in re­cent years have made a push to el­e­vate lo­cal star­tups and draw ven­ture cap­i­tal in­vestors. Sta­tion Hous­ton, a down­town startup in­cu­ba­tor and co-work­ing space, has at­tracted more than 260 mem­ber com­pa­nies since it opened this spring.

The city’s most prom­i­nent uni­ver­si­ties have bol­stered their tech­nol­ogy pro­grams in re­cent years to in­clude data sci­ence and an­a­lyt­ics. UH of­fers a master’s de­gree in data an­a­lyt­ics, and Rice Univer­sity has part­nered with IBM to de­velop ro­bot­ics.

“We are still evolv­ing, and we can grow and de­sign a city with the help of an Ama­zon to help cus­tom­ize our city to their par­tic­u­lar needs, which many other cities can­not do,” Mayor Sylvester Turner said in an in­ter­view. “We are just now be­gin­ning to fo­cus on star­tups, tech­nol­ogy, in­no­va­tion in a very in­te­grated sense.”

Even so, Hous­ton came in at No. 39 on a re­cent list of U.S. cities ranked by ven­ture cap­i­tal deals, dol­lars and ac­tive star­tups, ac­cord­ing to Rice’s McNair Cen­ter. That’s well be­hind Dallas, which ranked No. 30.

Seek­ing in­cen­tives

Ama­zon, how­ever, could change the city’s tra­jec­tory. Ed Egan, di­rec­tor of the McNair Cen­ter, an­tic­i­pates that Hous­ton would climb into the na­tion’s top 25 most in­no­va­tive cities if it landed the com­pany’s sec­ond head­quar­ters. Ama­zon is the type of pil­lar com­pany that can at­tract top tech­ni­cal com­pany and cross­fer­til­ize other in­no­va­tion sec­tors, in­clud­ing en­ergy and medicine.

“Hous­ton is a sec­ondtier city, with­out a doubt,” Egan said. “What we need is one seed, one good neigh­bor to play with. We could re­ally build an ecosys­tem around Ama­zon.”

A re­cent Brook­ings In­sti­tu­tion anal­y­sis iden­ti­fied 20 metro ar­eas that fit the com­pany’s ba­sic cri­te­ria, a list that in­cluded Hous­ton, Austin and Dallas. These Texas cities, as well as San An­to­nio, have be­gun craft­ing their own bids for the cam­pus, gath­er­ing data on the real es­tate, roads, util­i­ties, ac­ces­si­bil­ity and work­force avail­abil­ity of var­i­ous spots through­out their metro ar­eas.

“We’re try­ing to stitch to­gether a story that’s go­ing to show (Ama­zon) how we’ve po­si­tioned our­selves,” said Erica Hur­tak, a spokes­woman for the San An­to­nio Eco­nomic De­vel­op­ment Foun­da­tion.

The process re­quires con­tenders to sign a lengthy nondis­clo­sure agree­ment, and Hous­ton of­fi­cials de­clined to out­line spe­cific de­tails of the city’s pro­posal. In an in­ter­view, Hous­ton Chief De­vel­op­ment Of­fi­cer Andy Icken said there’s plenty of avail­able land for Ama­zon’s cam­pus be­tween down­town and the Texas Med­i­cal Cen­ter, an area dense with some of the city’s most in­no­va­tive com­pa­nies.

Ama­zon noted in its re­quest for pro­pos­als that its de­ci­sion will hinge in part on eco­nomic in­cen­tives, which Hous­ton rou­tinely of­fers in the form of prop­erty or sales tax breaks to firms ex­pand­ing or re­lo­cat­ing in the area. The state of Texas, mean­while, has one of the largest and most gen­er­ous in­cen­tive pro­grams in the na­tion.

State eco­nomic of­fi­cials said they ex­pect to work with cities to put to­gether in­cen­tive pack­ages for Ama­zon.

“That plays to Ama­zon, and I think we’ll have a pro­posal that deals with that real­ity,” Icken said. “If you look at the re­sources here in this city, we think we have a very com­pet­i­tive sit­u­a­tion.”

Brett Coomer / Hous­ton Chron­i­cle

At Hous­ton’s first-of-it­skind Ama­zon ware­house com­plex, ro­bots are key to ramp­ing up de­liv­ery speed. Story on page B1.

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