Suffolk Downs Bid to Host Amazon’s Second Corporate Headquarters

Bids to host Amazon's second headquarters saw many states and metro areas put forward proposals and Boston regions are no exception. Having received proposals from 238 cities and metro areas, Boston's Suffolk Downs joined Worcester and New Hampshire by unveiling its bid for the investment. The project will see Amazon spend up to $ 5 billion in initial investment and provide up to 50,000 high-paying jobs. Boston is pretty clear on the location they propose for the project- Suffolk Downs. Other sites, included in Boston's bid are South Station, Allston, and Widett Circle. Armed with a 218-page proposal along with two glossy videos, it depicts a picture of a highly innovative city ready to house the online retail giant.

Amazon's Proposal Criteria

In Amazon's request for proposals to various cities and states, it has laid out a criterion for the new location for its headquarters. To begin with, it is looking for a metro area that has more than one million people, and a stable business environment, among other decision drivers and preferences. Here is a detailed insight with the unit analysis of metropolitan areas that ranked first.

Business Environment

A stable business environment is critical to selecting an ideal location for Amazon's second corporate headquarters. As such, the state should exhibit an efficient tax policy and healthy fiscal conditions. To evaluate these factors, Amazon will be looking at the state's tax environment ranking and its credit rating from the Tax Foundation. Additionally, the state's willingness to provide financial incentives makes another crucial aspect for Amazon when assessing its business environment.

A good business environment is also evident in the dynamism of the state's economy. It is shown using a five to ten-year growth rate for general employment and availability of tech-savvy jobs. Based on business environment criterion, Austin, Texas, Dallas, and Nashville are the top three metro areas with the highest credit ratings.

Ability to Attract and Retain Skilled Employees

The ideal location should improve the overall quality of life for employees. Amenities like restaurants, dining areas, art galleries, and other entertainment places are factored in. The crime rate of a state also affects the quality of life it provides to citizens. The quality of schools in a metro area measured in terms of students' dropout rate relative to the level of poverty, and the diversity of a population are all measures that help determine a state's quality of life. Seattle, San Francisco, and New York rank among the best metro areas with high quality of life, though the cost of living is exceptionally high.

The Cost

While Amazon has set aside an initial capital of $5 billion, the overall cost of the project is critical to selecting an ideal state or metro area. Real estate costs are crucial to the construction of new buildings and land acquisition as they significantly affect the general cost of living for employees. Most measures are biased upward based on metro areas that have large houses, as well as regions with expensive properties sold recently.

A new measure from CoreLogic estimates the price per square foot of a single-family unit in a metropolitan state. Data on energy prices, unit labor costs, and taxes is also used to determine the cost of running a business in the city. Coupled with the average salary of an employee in an occupation that matches those required by Amazon, Memphis TN, Buffalo, NY, and Oklahoma City qualify to be the top three metro areas. The cost of a single-family unit in Buffalo is $91 a square foot compared to $362 in Los Angeles, which ranks first in providing the relevant workforce.

Availability of an Educated Workforce

Amazon is looking to hire up to 50,000 skilled employees. Various indicators are used to determine a state's supply of skilled labor. To begin with, the number of 2016 bachelor's degree graduates shows the flow of qualified employees. Additional parameters like the number of graduates who have pursued relevant degrees (math, engineering, or computer studies) and those from top colleges come in handy.

The company is looking for metro areas that have a high supply of people with relevant skills relative to the demand for such proficiencies. Thus, states with more students graduating than they need present a desirable balance of demand and supply from Amazon's perspective. Such areas include Washington DC, Los Angeles, and New York City as they all have lots of major universities, including those that provide studies in the relevant degrees.

Ease of Access to Transport

Amazon also lists access to international airports and other mass transit channels as crucial to choosing an ideal location for the project. Seattle, San Francisco, and Minneapolis rank as the top three metro areas with adequate transit access. These three metro areas provide access to major transport, but San Francisco features the largest number of walkers, bikers, and public transit.

Suffolk's Proposal

Boston's bid; now dubbed “Boston Yes” comprises thirty letters of support from local business leaders, universities, and elected officials, among them Gov. Charlie Baker. The city qualifies as a top contender for the setting up of Amazon's second headquarters, and according to Bloomberg, it is a favorite among the company's senior executives. Suffolk Downs has 161 acres of land and sits along Blue Line that includes a new mixed-use of Suffolk Downs neighborhood, which will house five hotels, Amazon office space, and street-front retail.

The proposal does not include financial incentives which Mr. Walsh, Boston's Mayor, stated Amazon had not explicitly asked for. Additionally, a recent poll showed that, while a majority of the residents embraced the proposal, they were split about offering giveaways to the company. Suffolk Downs is located a short distance away from Logan Airport and is ready for development compared to other locales along the Greater Boston. Suffolk Downs' bid promises to deliver the first phase (500,000 square feet of retail space) of Amazon's proposal by the end of 2019 and construct the 8 million square feet by the year 2027.

Why Suffolk Downs?

Proximity to Mass Transit Channels

Suffolk Downs is connected to two Blue Line stations, making it perfect for Amazon's proposal criteria. It is located ten minutes away from Boston's downtown and five minutes away from the airport. A previous developer-Thomas O'Brien- had also selected Suffolk Downs for a Transportation Orientated Development (TOD) project. One of the reasons that made the area a choice location was its connection to the two MTBA stations. It was a unique feature he had not found in any other place throughout the project's life.

Housing

Boston already has a high demand for housing, and the prices are increasing by the day. The selling price for a single-family unit in the state is more than $ 400,000 (an increase of $ 30,000 from June 2016) with even higher rates around Boston. As such, Boston's housing plan fits Amazon's headquarter plans.

A large number of Colleges and Universities

Amazon is looking to set its headquarters in a location that provides a large pool of talent. The Greater Boston touts up to 55 universities and colleges with Suffolk Downs hosting its very own Suffolk University. This feature offers Amazon with the much needed tech-savvy workforce while creating an opportunity to build long-lasting relationships with the institutions.

According to a CBRE Research conducted in 2016 to study the talent pool of top ten markets in the U.S., Boston ranked third with a population of 24.8% millennials who have enrolled in graduate, undergraduate, and doctorate courses.

Home to other Conglomerates

Boston also touts hosting big companies like General Electric. Having been based in Fairfield, Connecticut for a greater part of its life, the company chose to move to downtown Boston. G.E's CEO, Jeffrey Immelt stated that Boston's diverse technological-fluent workforce and the abundance of colleges were among the reasons it decided to make the move. What's more, unlike the greater Boston, which is relatively expensive, downtown Boston regions like Suffolk Downs provides somewhat affordable living conditions.

The deal saw the city offer up to $ 145 million in business incentives ($ 25 million as a relief for property tax and $ 120 million in grants) to secure the deal. Though the construction of General Electric headquarters ends in 2019, the company plans to employ 800 people, among them 600 designers, product managers, and developers and 200 corporate staff members.

Mixed-Use Development

Apart from the attractive development opportunities, Suffolk downs already provides 10,000 residential units for Amazon employees through HYM's mixed-use expansion/development plan. According to the proposal, the development can accommodate up to twenty percent of the company's employees.

Suffolk Downs provides lots of room for growth for Amazon's second corporate headquarters, among other developments it may decide to embark on. These benefits outweigh any financial incentives it may offer Amazon. Of course, there is always a downside to getting such developments. Suffolk Downs is likely to experience congestion at the airport and on the route way. Additionally, the project will also take a toll on the existing infrastructure. Logan Airport, for example, being the only airport close to Amazon's HQ2, is already very busy and does not have much space for expansion.

Bids from Other Cities in Boston

While Boston maintains Suffolk Downs as the most suitable location for Amazon's HQ2, various cities located in the state have also placed bids.

New Hampshire

Its proposal draws upon Boston's benefits- a low tax environment, the advantages of a major metropolitan state, high-quality life, hence its slogan “ALL THE BENEFITS OF BOSTON WITHOUT ALL THE HEADACHES.” Its ideal location for the new Amazon's headquarters is situated in a developing urban village in Londonderry. The proposal does not highlight the issues that affect Boston, e.g., commute time and affordability and it has not promised any financial incentives given that the state does not charge income and sales tax.

Leominster

While it has a population of 40,000 people only, Leominster also placed its bid for Amazon's HQ2, a city once considered to host Massachusetts's first casino. Its proposal offers Amazon over 400 acres and tax breaks worth $ 405 million over a period of thirteen years. The city expects to receive tax revenue of $1.8 billion.

Lawrence

Haverhill, Lawrence, and North Andover presented a joint proposal to the company. Haverhill's mayor, Fiorentini, advocated the move, citing the cities' potential in meeting most of Amazon's RPFs. It offers a piece of land located along the former AT&T manufacturing complex, stating that the region provides a diverse population of both white-collar and blue-collar employees.

Worcester

Ranked as New England's second largest city, and the nation's emerging startup hubs, Worcester presents the cheapest alternative among other towns in Boston. The only downside is that Worcester does not have an airport as big as Logan, but it hosts nine universities and colleges. Worcester offers attractive financial incentives of up to $ 500 million in tax savings (real estate), investment tax credit from the state, development tax credits, and 100% tax exemption on personal property tax over a twenty-year period.

The Odds of Boston's Suffolk Downs Winning the Bid

Several Amazon executives were convinced that Boston provided an excellent location for their headquarters, but the company denied there were any frontrunners. Since the company is in its initial stages of determining an ideal location, all the states and cities have an equal playing field. According to the requirements listed on Amazon's RPF, some towns stand a better chance than others with Boston, Denver, and Washington D.C. taking the first three positions. Moody's Analytics listed ten metro areas for the headquarters- Philadelphia, Austin, and Atlanta with Boston taking the ninth place. Amazon maintains it will make the final announcement and selection of the location of their new headquarters in 2018.

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