Amazon HQ2 – Coming to a City Near You, But is It Worth It?

Amazon HQ2 – Coming to a City Near You, But is This is a Good Thing?

Here in Denver, there has been a lot of hype about the RFP that Amazon released to find the best city for their second headquarters or Amazon HQ2. In fact, The New York Times has already picked Denver as the best choice for the new Amazon HQ2.

This only fueled the flames for some intense conversation around the city.

There are a lot of people that want it because of the 50,000 jobs it would bring to the area and amazing economic growth.

Then there are people that are saying, “No” to the new headquarters because it would make housing prices just go that much higher. They say that Amazon has already been a burden on Seattle and its housing market, infrastructure, and so on.

As always, I’m on the fence with what the new Amazon second headquarters could do for Denver and its job market, economy, housing market, and so on.

So let’s take a dive into the facts to find out what a mega-prospect like Amazon HQ2 could do for a city.

Backstory

Back in September, Amazon announced that it will be taking bids from cities to host its new second headquarters. Amazon laid out a set of guidelines that the city has to meet in an 8-page request for proposal (RFP). Below are some of the major guidelines they laid out.

  1. Either existing building sites with opportunity for expansion or a greenfield site of 100 acres
  2. Area where job growth is strong
  3. Labor pool (skilled tech labor) is large and growing
  4. Quality of life is high
  5. Workers can easily get around and out of town
  6. There is space and a willingness to pay to play

Really, Denver meets all of these qualifications. There is plenty of land for development, the tech industry is booming here, quality life is one of the highest in the country, we have a fairly good mass transit system, and we have so much space to play in the mountains.

The only thing that gets me is Denver far enough from Seattle? If I were Amazon, I would be wanting something on the East coast to make travel to Europe easier and cheap.

Then again, Denver International Airport (DIA), is one of the busiest airports in the world with direct flights to Europe and Asia. With Denver being centrally located in the country, it would allow for Amazon’s employees at the second headquarters to get to either continent easily.

Jobs

Amazon says they will create 50,000 new jobs for the headquarters. This has really been scaring people in the Denver metro area because the area is growing fast enough.

People need to calm down and breathe a little bit here.

Amazon is not going to just dump 50,000 new people into the city within one month. The new headquarters will be developed in many phases.

The first three phases planned take the new headquarters up to 3,000,000 square feet. From there it will grow out the campus organically in many more phases to around 8 million square feet by 2027.

Using a ratio of 160 square feet per employee (8,000,000/50,000) that means the first three phases could hire 18,750 people. Each phase would on average hire 6,250 people.

We saw double that moving into Denver last year, and that is only Denver, not the metro area.

Hopefully, Denver can plan transportation system upgrades along with these phases. Though this might be too much forward thinking to ask for from a government agency.

Economic Growth

Amazon claims that it will invest $5 billion into the new second headquarters. This is an astonishing number!

Amazon claims, “its investments in Seattle between 2010 through 2016 resulted in an additional $38 billion to the city’s economy – every dollar invested by Amazon in Seattle generated an additional $1.40 for the city’s economy overall.”

There is no doubt that the Amazon HQ2 would bring a significant economic boost to the city with new high tech jobs, construction jobs, more real estate investment/development, and so on.

But at what cost does this development come with? We will take a look at the answer later on when we look at Amazon’s and Seattle’s relationship.

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Housing Market

Denver’s housing market is gaining value at a ridiculous pace. It is finally starting to slow down so young couples have a chance to purchase a home. A lot of people are worried that if Amazon brings their second headquarters here, it would just spark that value growth again.

I do not blame them. If we take a look at the median house listing prices on Zillow for Seattle proper they were $351,000 back in October 2011. Six years later, they are now $699,000 or a 99% increase!

In Denver proper, we are not far off from Seattle’s growth. Since October 2011 we have already seen an 83% growth in median house listing prices as well. The question is if Amazon comes to town, could we see our median listing prices basically double again? I do not want to live in a city where the median house listing is over $600,000.

Since I already own a home, I am for more growth. In the past year, our house has already gained nearly $40,000 in value!

The issue is, would I ever be able to move somewhere else in the city with prices so high? Even though our house value could double, I might never get to see that money because we could not afford to move somewhere else; unless we move out of state which I do not want to do.

Infrastructure

Like most cities, Denver has congestion issues on the roads. This has only become worse with the extreme growth the metro area has seen.

It is common sense if you have more people, the more wear and tear there will be on the roads.

Luckily Denver has been very aggressive at implementing a light rail system over the past decade or so. Plus, the area just made news by being one of the finalists for Ellon Musk’s Hyperloop project.

Though all of this effort might be a little too late.

According to Inrix Inc., Denver ranks 21st out of 240 in the U.S. for the amount of time drivers spend stuck in traffic. Which is right in line with Denver metro area’s population as the 19th most populated in the nation.

Even with this being said, because of Denver’s continued growth, it does need to invest more in its transportation system whether it be wider roads, light rail, or train to keep up.

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Seattle

Denver needs to remember not to be blinded by the dollar signs that the Amazon HQ2 will bring to the area.

We need to listen to Seattle’s warning as there are many side effects that will come along with the new headquarters.

According to one Seattle blogger, he warns us of horrible traffic and higher living costs. Others claim of constant construction, which we already have in Denver, so it will probably just get worse?

Rent is already high in Denver. Based on what has happened in Seattle, if Amazon came to Denver this trend would not slow down. It probably would just get worse.

These are all things Denver, or any other city, need to start tackling even before they get the good news that the mega-prospect is coming to town. When a company like Amazon comes to town, the city needs to ramp up its speed of work to keep up with the speed at which Amazon moves.

Conclusion

I believe that having the Amazon HQ2 in Denver would be an amazing boost to Denver’s already booming economy. It will ensure continued growth for years to come.

I also believe that Amazon will do amazing things to help the Denver community because of the resources the company has. It really could become a leader in investing back into the Denver area and its charitable organizations.

On the flipside, Denver needs to come up with a stronger plan to speed up its infrastructure development so it can absorb the increase in traffic that is sure to come.

Also, Denver can hopefully continue to help those younger couples trying to buy their first homes. Currently, there are grants to help out but they are fairly selective. Maybe making these grants cover a larger group to help more people that will struggle to find affordable homes.

Overall, what it comes down to, are we, as Denverites, willing to deal with these negative side effects to host such a large company?

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