
In September, Amazon announced a request for proposal (RFP) for a city to host its upcoming second headquarters. By the time the request closed on Oct. 19, the company had received 238 proposals from cities and regions across North America, each one interested in attracting the ecommerce giant to its town.
According to the RFP, this second headquarters (known now as HQ2) will hire as many as 50,000 new employees, with an average annual salary of $100,000. The project’s estimated worth is over $5 billion in capital expenditures. On Amazon’s current time line, the firm expects to complete 500,000 square feet of the second headquarters in 2019 and build up to 8 million square feet of new space by 2027.
Determining the ideal location for a new Amazon headquarters is a difficult task using numbers alone. Several variables could affect Amazon’s decision, from a tailor-made tax incentive package to a personal preference on the part of the decision makers. However, for Reis’ recent “Amazon HQ: Location Data and Scoring Analysis” white paper, economists Barbara Byrne Denham and Victor Calanog chose to eschew anecdotal information entirely and rank North America’s largest metropolitan areas by their adherence to Amazon’s quantifiable criteria.
Amazon has stated a preference for metropolitan areas with more than 1 million people. The headquarters would ideally be in either an urban or suburban location with sufficient real estate options, with the potential to attract “strong technical talent.” Decision drivers include a business-friendly environment, an educated labor force close to a population center, logistics for personnel travel to work, nearby airport access to major cities, and a “cultural community fit” that includes a diverse population, excellent higher-education opportunities, and an appealing community and quality of life.
Denham and Calanog pulled data from commercial real estate statistics, the Bureau of Labor Statistics, Census “way to work” data, state tax rates, and other sources to give each of Amazon’s preferences a quantitative value. They then ranked each metro by its performance versus the U.S. average in each category. The rate of public transportation as a means to work was used to quantify public transportation access, while the average apartment rent was used to quantify the cost of living, and museum and cultural employment rates were used to quantify local amenities and quality of life. Every variable was measured as a premium or discount to the average, then aggregated but unweighted.
New York City takes the top spot in Reis’ analysis, with a score of 4.8. San Francisco comes in second, at 3.8, followed by Washington, D.C., at 3.4. While all of these locations have vast cultural and educational amenities, Reis notes that they also have high costs of living and doing business. For example, while New York's museum and cultural employment ranks 145% above average and public transportation use 593% above average, its office rent rates are 121% higher than average and its apartment rent rates, 163% above average.
The top 10 also includes Seattle, home of Amazon’s first headquarters, followed by San Jose, Calif.; suburban Virginia; New Orleans; Boston; Rochester, N.Y.; and Chicago. The bottom-ranking metros are mostly suburban markets with little public transportation and high costs of doing business.
This article originally appeared in BUILDER magazine.