What Amazon’s possible HQ2 could mean for Minneapolis Real Estate Market

Who out there would like Amazon.com’s headquarters in our beloved Minneapolis?

Or, we should say, Amazon’s SECOND headquarters. According to the Seattle Times,  on Thursday, Jeff Bezos and company announced plans to spend $5 billion on a second headquarters somewhere in North America. Bezos says will be a “full equal” to their current campus in Seattle. And wherever Amazon decides to build out HQ No. 2, they’re going to bring thousands of jobs with them…as many as 50,000 employees! These jobs are not minimum wage jobs, many, if not most, are $100k plus.

Similar projects attracted other cities to woo large companies like Alcoa, General Motors, Intel, and, Boeing requiring a ton of incentives costing these cities millions. Weighed against expected direct employment, Amazon’s HQ2 project scale dwarfs those earlier projects. “Fifty thousand people…is a big carrot,” said David Sirmon who teaches business strategy at the University of Washington Foster School of Business.

And, with those high paying jobs comes development, lots of development. When there is commercial development there is always residential development to go with it. In my real estate world, development equals upward mobility. Upward mobility equals moving and selling, which equals more jobs and more housing! “We are creating a neighborhood…a district,” said John Schoettler, Amazon’s vice president of global real estate, referring to their downtown Seattle campus. In Minnesota speak, that means development!

Additionally, whichever city lands Amazon’s second headquarters can expect street-level retail space to go to local restaurants, in line with what’s played out in Seattle. What would that look like for Minneapolis? Oh my! Our Twin Cities would be a great place for a new Amazon “district.” Our entertainment, shopping, and restaurant quality of life would increase exponentially.

However, as a possible consequence, would we transition into a buyer’s market? The housing market tends to cycle between shortage and surplus. Therefore factors that impact supply and demand influence housing market changes. Factors that have a widespread effect include interest rates, economic conditions, and consumer confidence levels. For example, low interest rates, good economic conditions and high levels of consumer confidence can increase the number of potential buyers. Since housing supply tends to lag behind demand, the result is movement toward a sellers’ market. Reverse those factors and buyer demand will most likely slow. When the market reaches the point where there is an excess of properties, a swing toward a buyer’s’ market generally occurs.

Amazon, in general, continues to expand like crazy, with a workforce quickly closing in on 500,000. And with the recent acquisition of Whole Foods, they’re working hard on the future of grocery shopping as well. Amazon is looking for a city with a “highly educated workforce,” and a “stable business-friendly environment,” which is business-speak for “make sure there are a lot of tax breaks.” Does any city come to mind here? Hmmm.

Amazon needs 8 million square feet of office space. For some perspective, Amazon would need the equivalent of nearly six IDS Centers or about 15 of the new Wells Fargo towers that were built next to U.S. Bank Stadium. Possible sites in the Twin Cities would include:

  • The area just west of Target Field
  • Prospect Park neighborhood
  • Arden Hills Rice Creek Commons site
  • St. Paul Ford plant property
  • Maple Grove Arbor Lakes area

But the move immediately sparked the first action in a bidding war among states and cities eager for a stake in Amazon’s empire. Mayors around the country were quick to tout their cities as a potential destination for Amazon’s expansion. Naturally, Minnesota politicians are jockeying for the headlines. Top city leaders have weighed in, kind of. Publicly, they are muddy on how they would approach this request for proposal.

As of the date of this article, Gov. Dayton has assembled a task force lead by the Department of Employment and Economic Development. St. Paul Mayor Chris Coleman thinks we can put a competitive proposal together, but was unclear whether we should put  together an aggressive incentive package. Minneapolis Mayor Betsy Hodges has said nothing (really, Mayor Hodges?). Mayoral candidate and City Council member Jacob Frey is luke-warm at best. He seems to think that because we are so awesome Amazon should come here just because we “have a highly skilled workforce and a growing economy.” That’s all you can say, Mr. Frey?

Another candidate, Tom Hoch, was more cautious in saying, “we should be open to reasonable public incentives.” Ok, that will get us nowhere while competing with Austin, Texas or Pittsburgh, Pennsylvania.

The bottom line for the Twin Cities is that it’s not a slam dunk to have enough capable workers, enough real estate and enough incentives to be attractive to Amazon. Especially if we do not have a unified and comprehensive approach from a like-minded political team.  Greater MSP is likely to coordinate a bid that includes the state, region and a local community.

GREATER MSP was created to tackle this exact proposition. Their mission is to accelerate job growth and capital investment in the 16-county region. They want to be a single, coordinated response from a unified metro area. Greater MSP CEO Michael Langley indicates that, “this why Greater MSP was created, to make sure we had a regional organization to respond to opportunities like this.” Ok, guys, let’s get to work and make this happen. The opportunities are enormous.

Will Amazon choose Minneapolis-St. Paul? I’m not seeing much hustle to get this done. If we had motivated and unified civic leaders we might be able to put together a competitive offer. But, from what I can tell, this isn’t in the cards.

Amazon plans to announce a decision next year, and start work on the first phase of a new campus by 2019.


Reporting content from Matt Day of Seattle Times and Nick Halter of Minneapolis-St. Paul Business Journal

Read More >> Minnesota leaders will bid for Amazon’s second HQ, but what will they offer?

Read More >> Amazon plans to build second, ‘equal’ headquarters outside Seattle

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