Amazon HQ2: A Contrarian Perspective

The Interwebs are abuzz with Amazon’s recent announcement that it is looking for a location for “HQ2,” a massive new headquarters that will be as big as, or bigger than, its current Seattle presence. The opportunity to get 50,000 high-paying jobs and $5 billion in investment has spurned a predictable frenzy among cities and regions. Pundits have started to handicap various cities in USA and Canada on their prospects.

Conventional Thinking: Amazon Needs “Office Space” in a Hip City Center

For all the Sturm und Drang, the thinking has been disappointingly conventional. Most experts have gravitated to a predictable set of large non-West Coast cities—Denver, Dallas, Philadelphia, Atlanta, Minneapolis-St. Paul, metro Washington, Toronto, Boston. With this incrementalist thinking, Amazon should simply buy a couple of hundred acres near Silver Line Extension in Loudoun County, Virginia, and be done with it.

With current thinking, HQ2 is a $5 billion expense to build an office.

I believe that everyone—possibly including the people who wrote the Amazon RFP (Request for Proposals)—has missed the once-in-a-lifetime opportunity here. They have also misunderstood talent attraction, as well as the interplay of mass transit and mixed-use development.

I want to present my core beliefs, and propose a bold and (dare I say) sui generis path for Amazon.

Core Beliefs

1. Tech graduates of elite colleges are willing and able to move to work for Amazon: Amazon does not need a location on Soldiers Field Road to hire Harvard graduates. What it needs is a place that these graduates crave—a walkable, mixed-use community where people are not dependent on cars. Additionally, when these young people marry, they will want good schools, safe, quiet neighborhoods, and generally new construction. These two contrasting requirements rule out most suburbs, and most city centers.
2. Right-to-work is a better metric of a state’s business-friendliness than gimmicky “incentives”: Financial incentives—essentially, temporary tax reductions—are a thoroughly bad way to evaluate a long-term decision at Amazon’s scale. Note the current travails of Alexion Pharmaceuticals—despite tens of millions in incentives from Connecticut, it is moving its headquarters to Boston. A much better way to predict a state government’s business friendliness is whether it is a “right to work” state. In such a state, the government has made the tough decision to not be beholden to unions, especially public sector unions. This leaves Amazon with 28 states (and Guam, but that territory is an impractical candidate on many fronts). Most of these states are in the South and the Midwest. Also, they are geographically distant from Seattle.
3. The future of mass transit is buses, not trains: Local/metro trains move people between residential areas and central business districts. This model is structurally flawed. It does not create walkable, mixed-use communities, and it keeps people car-dependent. Note that the most train-rich metros in the world—London, Paris, New York, Tokyo—are chock-full of cars. Trains have two other limitations: they cost an exorbitant amount of money before they deliver any value; and they simply can’t go from where everyone lives to everywhere they want to go, at all times. Trains don’t “scale down.” That is what buses do: they use existing roadways; can vary in capacity from a 22-seat van to a 100-seat mega-bus; and don’t require a high capital investment.
4. A walkable, mixed-use development beats mass transit every day of the week: In an ideal community, even bus use should be secondary to walking. This means, first, that the community needs walkable streets—sidewalks on both sides, street lights, curbside trees, buried utility lines. Second, it needs destinations within a “walking distance.” Research has shown this distance to be 0.8 to 1.0 mile. Many people will walk this much to go for coffee/dinner/gym/work. Most places except city centers fail this test. However, a new purpose-build place can easily satisfy it.
5. In fifteen years, with enough land and demand, we can build as many houses and amenities as we want: Current HQ2 analysis has fixated on the need to house 50,000 employees. The knee-jerk reaction has been to look for a place that can do this immediately. However, as the RFP makes clear, this is the potential size of HQ2, over fifteen years. Once we think about the timeframe, a completely new set of options emerges. We are a country rich in land. We also have a set of developers that are experienced in creating city-scale developments such as The Woodlands, TX, The Villages, FL, and Nocatee, FL. Unfortunately, these developments are devoid of imagination—they are shiny versions of the car-dependent city. HQ2 presents an opportunity to address this myopia.

Recommendation: Change HQ2 to a Once-in-a-Generation Opportunity to Redefine Urban Living

1. Get 50,000+ acres near a regional airport in a right-to-work state: The RFP’s reference to 100 acres is off—by a factor of 500. Amazon should think about a township that is the size of a mid-sized town (a little bigger than Richmond, VA). A motivated business-friendly state government can make it happen.
2. With an appropriate developer, create a township for the 21st century: The Irvine Company, Howard Hughes Corporation, and Baldwin & Sons are a few of the several companies that have extensive experience building at-scale communities. They will be ecstatic to work with Amazon.
3. Make HQ2 the anchor tenant; sell developed property for $100 billion; change human civilization: The rate-limiting factors for master-planned community growth are land and demand. With a large tract of land, and Amazon as the anchor tenant, it is easy to achieve skyrocketing growth for a walkable, mixed-use community. Amazon can decide to own nearby units for company employees—much like Facebook is contemplating in Menlo Park, CA. With this initial “seed customer,” it is easy to see other large employers, retail complexes, hotels, as well as universities flocking to this community. Why should Columbia University’s ambitions be hamstrung by its 36-acre campus in Manhattan? And, over time, why shouldn’t Amazon move “HQ1” to this place?

The market value of a well-planned community can easily reach $2 million/acre, or $100 billion for a 50,000-acre community.

Amazon can not only keep a meaningful part of this revenue, it will also show the world a way to live that is not car-dependent. Lastly, there is profound ethnographic and social learning in building, selling, and maintaining a community of this type and scale. This learning can drive the development of new Amazon products.

With imagination, HQ2 can be a $100 billion opportunity that will inspire all 21st century living.

I welcome your thoughts and comments.