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CoStar Market Insights: San Francisco/East Bay Ranks Top for Meeting Amazon’s HQ2 Search Requirements

Oakland Coliseum Complex Presents Unique Opportunity for Tech Firm
September 26, 2017
Katerina Cheok is a market analyst with CoStar Market Analytics covering the Northern California region.
Katerina Cheok is a market analyst with CoStar Market Analytics covering the Northern California region.
The San Francisco-Oakland-East Bay metro area came out on top in a ranking of more than 50 major U.S. metros that fit Amazon’s requirements and preferences for locating a second national headquarters.

Using Amazon’s Request for Proposal (RFP) and CoStar’s unparalleled database of commercial real estate information, the CoStar Market Analytics team developed a ranking of potential Amazon HQ2 destinations among metros with more than 1 million people.

The rankings weigh: the percent of a metro’s population holding a bachelor’s degree or higher, the total number of computer and mathematics jobs in the metro, the rate of tech-related job growth from 2013-‘15, the total amount of proposed office space tracked by CoStar, the average price/square foot of office properties in the metro based on CoStar sales data, and the affordability of the metro based on CoStar apartment rental data.

A major problem that Amazon would quickly encounter in the Bay area, however, would be finding a space that meets all of their requirements.

Amazon is seeking space for up to 8 million square feet of office that is close to the airports as well as public transit. These basic requirements eliminate areas like downtown San Francisco (due to lack of space) or more suburban areas like Pleasanton (due to a lack of significant mass transit).

There are still a few possible locations though that could fit Amazon’s requirements. The City of Concord has already entered a bid using the old Concord Naval base as a possible location. Even before Amazon’s announcement, the city had hoped to redevelop the project into around 6 million square feet of commercial space on the 120-acre campus with another 12,000 housing units as well.

It would not be hard to adjust these proposals to fit Amazon’s needs, especially since the plans have yet to have been fully approved. Concord is also much more affordable than much of the Bay Area in terms of both office and apartment rents.

The mayor of Oakland is apparently also considering putting a bid in, but the spaces he would have available would likely not be quite as clean as they seem to be in Concord.

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An interesting possibility could be the Oakland Coliseum Complex. All three of the professional teams currently using the facility have plans to leave within the next few years leaving the 130-acre property with no set future.

This would be a unique opportunity for a large piece of land that has Bay Area Rapid Transit access and is close to Oakland International Airport. The City of Oakland would also be happy to bring in a big name tenant, like Amazon, after Uber decided not to move its headquarters to Uptown Station like it had originally intended.

The largest problem with this space would be that there is little chance that Amazon’s timeline could be met. The Golden State Warriors are hoping to start their 2019 season in their new Mission Bay stadium, but the Raiders would move to Las Vegas in 2020 at the earliest and the Oakland A’s would likely not be moving till 2022.

If San Francisco was hoping to capture Amazon’s attention, it would be a much harder task. Amazon already leases around 400,000 square feet of space in various buildings around the city, so there could always be the possibility of a more Salesforce approach of multiple buildings as opposed to one large campus.

Amazon could also look further down the Peninsula for space. While greenspace would be more readily available, the lack of a lot of mass transit would pose more of a problem.

Overall though, even though the San Francisco-Oakland-Hayward MSA meets many of Amazon HQ2’s RFP requirements, there are a couple that would likely be hard to meet. Operating costs in the Bay Area are some of the highest in the nation, and there is not a lot that can be done to change that, even for a company like Amazon.

The time to operations would also be hard in the Bay Area as even outside of the Oakland Coliseum timing issues, the permitting, entitlement and construction process is often a long and drawn out process that might not be able to meet Amazon’s ideal 2022 timeline.

Also, though most cities would not turn someone like Amazon away, Bay Area cities are not known for giving a lot of incentives to companies either. With the high concentration of tech already present, many citizens, and the city councils in return are not likely to approve tax incentives for big corporations, especially at the same levels that other parts of the country, like Texas, for example, are more than willing to give.

The high cost of living in the Bay Area could also fall into a negative when it comes to the community/quality of life requirement Amazon has listed.

CoStar Market Insights is a new feature providing a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 206 metro areas, with a granular understanding of the projects, players and economic trends that move these markets. Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

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