What we learned from the Amazon RFP?

July 20, 2018

For those following the storyline, a couple of months after Amazon began its HQ2 location visits, the top 20 considerations have now been whittled to 10 cities across North America, including Toronto. As the closed door deliberations continue, we at the PEDC have paused to review just how a big search from a mega company might shed light on today’s site selection process.

According to their website, Amazon’s destination criteria include:

  1. Metropolitan areas with more than 1 million people;
  2. A stable, business-friendly environment;
  3. Urban or suburban locations with the potential to attract and retain strong technical talent; and
  4. Communities that think big and creatively when considering locations and real estate options

According to the Commercial Real Estate Insights Report by the CCIM Institute and Culverhouse College of Commerce, Amazon’s site selection criteria came down to one driving factor, namely Workforce availability. While traditional factors such as incentives and available real estate are still important, Amazon is chasing the population that most uses its services as these locations also produce a skilled workforce. Amazon, like other expanding companies, discovered that the majority of their business customers are located within the epicenter of the supply chain, aka the “Golden Triangle”, which is east of the Rocky Mountains.

When it comes to workforce, if a company can increase its labor productivity, then occupancy costs can be mitigated. Without a skilled workforce all relocation and expansion efforts fail. With 1.4 million business customers located East of the Rocky Mountains, it is most likely that one of these cities will be chosen for HQ2 including, CA, NYS, TX, IL, FL, MA, NJ, PA, and WA. The initial cut from 53 location opportunities to 20 was made when it was discovered that those 20 locations have or are in proximity to primary education institutions capable of providing the thousands of new skilled workers Amazon will need to hire annually.

Technology, E-commerce, and logistic companies similar to Amazon are disrupting retail and the financial business models. No longer do we look to retail shopping center development to add employment and put revenue in municipal coffers from sales taxes. Amazon’s HQ2 development has publicly highlighted the site selection process, giving EDCs a chance to review the process from the other side and consider what their presentation might be missing. Along with Amazon’s destination criteria their idea of a perfect location stemmed from the following 4 guiding principles:

  1. Customer obsession rather than competitor focus;
  2. Passion for invention;
  3. Commitment to operational excellence; and
  4. Long-term thinking

According to the CCIM Institute and Culverhouse College of Commerce, Amazon’s HQ2 search process is pioneering a more transparent process for corporate expansions that will be emulated by other expanding and transformative companies”. With a move away from traditional retail development to technological, e-commerce and logistics focused companies EDCs across the country will be pressed to update their marketing efforts on behalf of their towns, cities, and counties especially to satisfy companies that will bring in revenue, resources, and jobs like Amazon.

Amazon predicts that the development of HQ2 will invest over $5 billion in construction, and will bring over 50,000 jobs to its new home. For every 1 Amazon job there will be 8 non-Amazon jobs created (restaurants, hotels, transports, etc.).

Interested in the site selection process and how the Putnam EDC markets a unique destination such as Putnam County? Contact us at 845.808.1021, so that we can discuss how Putnam works for you!