September 19, 2018
In the age of instant gratification, Amazon delivers. However, when it comes to site selection, many throughout the country are on pins and needles waiting for Amazon’s HQ2 decision. Visits to the final 20 cities were completed in May, and as the months have slowly ticked by, speculation on the winning location has raged on. So many variables and circumstances have been stacked against each other, it is still anyone’s guess as to what the conclusion of this long selection process will be.
Transwestern’s most recent national office market report emphasized the strength of the sector, underscored by rising rents and brisk leasing activity. Overall, 34 of the 49 Transwestern reporting markets registered positive absorption in the second quarter. These are markets that are in demand, and, in many cases, are primed to offer the types of amenities and quality of life Amazon undoubtedly wants to deliver to its employees.
When looking at Transwestern’s top 10 markets for 12-month absorption, you’ll see that five Amazon finalists are on the list – Boston, Chicago, Dallas, Los Angeles and Northern Virginia. And except for Northern Virginia, four of these markets rank in the top 10 for new office space under construction. This speaks to the business confidence and economic stability of these cities, which would be attractive to any company.
Another effect of a strong market is rent growth, an important concern for any corporate occupier planning for future space needs. In some cases, office rents in markets Amazon has targeted have increased significantly more than the national average over the past 12 months: Atlanta; Austin, Texas; Raleigh, N.C.; and Columbus, Ohio. On the flip side, Boston, Columbus, Dallas, Indianapolis, Philadelphia, Pittsburgh, and Raleigh posted asking rents below the national average at the end of the second quarter.
Of course, many of Amazon’s finalist cities are offering economic incentive packages that would help offset operating costs. New Jersey promised one of the largest packages, offering Amazon an estimated $7 billion in tax breaks over the next decade. Add to the equation other important factors such as labor qualifications, cost of living, existing infrastructure and commuting times, safety and educational resources, just to name a few.
What does all this tell us? Truthfully, only that the decision-making matrix on this megaproject is complex, and despite all the wild guesses and supported hypotheses, no one will be confident in their presumptions until the final decision is announced later this year.
– By Matt Dolly, Research Director, New Jersey