Lessons learned in failed courtship
Some residents glad tech giant’s HQ2 will not be on Front Range
After 14 months, a 20-city shortlist and a pile of speculation and intrigue as high as the Rocky Mountains, Amazon’s HQ2 search ended thus: The most courted company in the world confirmed Tuesday its now-split second headquarters project will rise outside Washington, D.C., and in New York City. Denver, tabbed an early leader in the HQ2 race, was beaten out by East Coast big-timers.
Some Front Range residents, among them many renters and commuters, may have breathed a big sigh of relief after Amazon’s reveal. The company’s original proposal called for a $5 billion investment bringing 50,000 high-paying jobs and 8 million square feet of development to the winning city.
Others are left to assess the techhub beauty pageant that was and ponder what comes next for a metro area still in the midst of a major business attraction hot streak.
Sam Bailey, vice president of economic development for the Metro Denver Economic Development Corp., oversaw the state’s HQ2 bid. He spoke to Amazon on Tuesday morning, and
while the news wasn’t good, future discussions are planned.
“We congratulated Amazon on their selection, and we are happy to have worked with them throughout the process,” Bailey said. “We have a follow-up call scheduled with them at a later date to go over some feedback about the metro Denver region and Colorado.”
Most Colorado residents never got a good look at the state’s HQ2 proposal. Prepared by the private Metro Denver Economic Development Corp., the 23-page document was shared publicly once 11 pages were blurred out. Those pages included the 30 sites Colorado landowners put forth for consideration (eight of which were broken out for more detailed highlighting) and the amount of financial incentives the state could offer.
Now, with the process closed, Bailey said the EDC still will not be releasing the full proposal. Officials signed a three-year nondisclosure agreement with Amazon, he said, and the document contains “proprietary and sensitive information” that could put contributing landowners and others at a competitive disadvantage.
“We don’t want to jeopardize any follow on investment opportunities with the company that may exist at this time,” Bailey said, adding that participating in the HQ2 process “provided us a tremendous opportunity to market our region in a way that we couldn’t have done otherwise.”
Incentives were a bone of contention for HQ2 opponents who questioned why Colorado would subsidize a company whose founder is the richest man in the world. In talks with Amazon, Eric Hiraga, director of the Denver Office of Economic Development, said specific incentive amounts never came up.
“I think we want to go beyond the traditional writing a check for the company’s bottom lines,” Hiraga said. “Let’s use these monies to have something that will benefit the company, the neighborhood and the residents. That can be anything from parks to transportation infrastructure. It could be education, a whole variety of things, even affordable housing.”
Given that Maryland put $8.5 billion on the table and New Jersey threw down $7 billion, Colorado wasn’t going to win on incentives alone. And in the end, Amazon didn’t make extracting a payoff from states and cities a top priority, said Michael Ferren, research fellow at the Mercatus Center at George Mason University.
Virginia’s winning bid came with $819 million in incentives, a fraction of what Amazon could have picked up by plopping down a new base just across the Potomac River.
“Subsidies didn’t matter for Amazon. Virginia and New York could have gotten away without offering any direct subsidies,” he said.
What mattered most was finding technology workers. Amazon wanted locations where it could attract not just the top 20 percent or 10 percent of the crop, but the top 1 percent. And it wanted locations large enough that it wouldn’t disrupt the local economy and housing markets, a problem in its home base of Seattle.
“At the end of the day, this came down to workforce and where they could get labor,” said Tim Cook, CEO of KSM Location Advisors in Indianapolis.
KSM had put Boston at the top of its list of cities likely to win, followed by the D.C. area and New York. But Boston officials conceded that they didn’t have the depth of the tech talent Amazon needed to draw on, Cook said.
And if Boston couldn’t pull it off, Denver wasn’t about to cover the gap, he added. Splitting the hub in two offered the company a better chance of attracting top talent without scraping the bottom of the barrel.
Geography also worked against Denver, something Gov. John Hickenlooper alluded to in comments last year. Of the 20 cities on the list, Denver, not to mention Los Angeles, was too close to Seattle. But once Amazon decided to split HQ2, why did the company put both new hubs on the Eastern seaboard, rather than plopping one in the middle of the country? Maybe it wouldn’t have been Denver, but what about Chicago or Dallas or any place not near an ocean?
“Amazon chose not one but two elite coastal cities for its new headquarters. There’s no other way to slice it: Amazon repudiated the heartland with this decision,” lamented Aaron M. Renn, a senior fellow at the Manhattan Institute, in a blog post on Urbanophile.
But there were other intangibles that Denver and other losing cities simply lacked, said Neal Saunders, managing director of GlobalData Retail, in a note.
New York is a global hub for finance, fashion and other categories where Amazon wants to expand. And as Amazon continues to expand overseas, New York’s abundance of nonstop international flights gave it an advantage.
Crystal City is near Washington, D.C., where the company needs to develop its political clout as it develops power in a variety of industries, including more regulated ones such as health care.
“While other locations may be disappointed not to have secured Amazon’s favor, it does not mean they will miss out entirely,” Saunders said.
Over the past two years, Amazon has greatly expanded its footprint in metro Denver, opening up a sorting center in Aurora, fulfillment centers in Aurora and Thornton, a PrimeNow center in Denver and a new delivery center in Centennial.
There are web services engineers working in Broomfield and a digital advertising group in Boulder. And at the Park Meadows mall in Lone Tree, the company recently opened its second Amazon4-starstore, which highlights some of its most highly rated products.
Amazon, which for years avoided hiring in the state during a standoff over sales tax collections, could soon have more than 3,000 workers, not counting seasonal hires. And metro Denver’s successful application put it on the list of preferred locations, even if it didn’t make the final cut.
“We used the application as an opportunity to come together across sectors and evaluate what’s best about our state. We came together on areas where we have a shared commitment to grow. We are proud that many businesses have chosen to plant their roots here, and their roots are every bit as important as Amazon’s,” Hickenlooper said in a statement Tuesday.
Metro Denver has had a string of recruiting successes, chief among them apparel holding company VF Corp., which will bring 800 high-paying corporate jobs and a Fortune 250 headquarters to downtown Denver (earning up to $27 million in incentives in the process).
Amazon may be going to New York and D.C. for its expansion, but several San Francisco tech firms have zeroed in on Denver and Boulder for theirs.
Representing northwest Denver’s District 1 on the City Council, Rafael Espinoza said many of his constituents opposed Amazon’s HQ2. His district is home to neighborhoods such as Berkeley and Highland that have seen tremendous growth, redevelopment and associated pains over the last decade.
But the councilman admitted he has mixed emotions. He feels Amazon would have been an ideal partner for the forthcoming redevelopment of the 62acre River Mile property between the Pepsi Center and downtown.
“The future is delivery more so than bricks and mortar, and Amazon is well positioned for that future,” he said. “I’d rather have those jobs here than export that money to some other municipality.”