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Denver Makes Shortlist for Amazon HQ2

E-Commerce Giant Expects to Decide Later This Year on Campus Location
January 18, 2018
Three months after officials submitted a bid for consideration as the location of Amazon’s vaunted "HQ2," Denver has been placed on the shortlist, released today by the tech giant after it winnowed down offers from 238 to 20.

Economic development and elected officials expressed excitement over the city’s advancement to the next phase of the selection process for a corporate campus that Amazon says could bring up to $5 billion in investment and as many as 50,000 new jobs to the area of its choice.

Gov. John Hickenlooper tweeted his enthusiasm Thursday morning:

"It’s great to be on Amazon’s list of finalists as they consider the location of their second headquarters. Colorado is one of the most business-friendly states in America and we believe the Denver region would be a great choice for Amazon’s second location," the tweet reads.

Cities and metro areas across North America submitted bids for the campus, some offering up fat incentive packages - potentially up to $7 billion in Newark, NJ’s case - with the hope of luring the company that changed the face of Seattle, the location of Amazon’s original headquarters.

Amazon considered the bids based on criteria outlined in a request for proposals it released in mid-2017, according to a media release.

"Getting from 238 to 20 was very tough, but all the proposals showed tremendous enthusiasm and creativity," said Holly Sullivan with Amazon public policy. "Through this process, we learned about many new communities across North America that we will consider as locations for future infrastructure investment and job creation."

The details of metro Denver’s bid were kept secret, but economic development leaders in November said that the offer did not lean heavily on incentives, but rather relied on the area’s quality of life, talented workforce, world-class airport and business-friendly tax climate to woo Amazon founder Jeff Bezos.

Whatever Amazon leaders found in Denver’s proposal, it was enough to shepherd the Mile High City onto the second round of selection, which will include requests for additional information and an evaluation of "the feasibility of a future partnership that can accommodate the company’s hiring plans as well as benefit its employees and the local community," according to Amazon’s statement.

"We are delighted the metro Denver region is among the 20 locations that Amazon is now considering for its second North American headquarters. It means they recognize what we’ve long known: Colorado is a great place to live and work," said J. J. Ament, CEO of the Metro Denver Economic Development Corp., which spearheaded the effort for metro Denver’s proposal. "And we think Colorado stands out because of our smart, healthy workforce; the innovative investments we’ve made in infrastructure like FasTracks; our global connectivity at Denver International Airport; and our incredible quality of life. We’re looking forward to working with Amazon to understand what they need to be successful - and how Colorado can be part of that success."

The tech giant, which employs some 540,000 people worldwide, expects to make its decision later this year.
Meanwhile, a debate about whether or not Amazon and its 50,000 employees would be good for Denver is taking place around the city.

Business and many government leaders worked to throw their full support behind the Amazon proposal, claiming that the campus would bring with it an infusion of capital, economic activity, employment opportunities and notoriety for Denver and Colorado, providing momentum to carry the area through the next economic downturn, whenever it comes.

But others have been vocal in opposition to bringing HQ2 to Colorado, saying that the state’s infrastructure can’t handle the influx of people and that cost of living is already rising fast enough.

If metro Denver were to be chosen for Amazon’s new campus, there would be challenges, especially relating to infrastructure and transportation, said Patty Silverstein of Development Research Partners, a Jefferson County-based economist who consults with Metro Denver Economic Development Corp. and the Denver Metro Chamber of Commerce.

But Silverstein sees those challenges as an opportunity for the state to address issues that already exist and on which there has been little to no movement in recent years in the Colorado legislature.

Transportation funding, for example, has been the subject of debate in legislative sessions for several years and was again introduced as a priority on the first day of this year’s session.

Housing costs in metro Denver have skyrocketed since 2014, with the median price of a home increasing by 37 percent since then. Denver’s local government in 2016 passed a measure to create a $150 million fund for affordable housing, but the effort will fall short of addressing the affordable housing problem in the city.

Getting the Amazon campus could be the catalyst the state needs to move the needle on these issues, Silverstein said.

Amazon's arrival "has the power to transform the local housing market," according to Javier Vivas, director of economic research for realtor.com.

"The impact is likely to be more material for smaller markets, and those equipped to handle the growth. From a housing perspective, Pittsburgh, Indianapolis, and Raleigh, NC, all offer relative affordability and less inventory constraints, and would benefit from a new wave of jobs. New York, Los Angeles, Denver and Boston are markets that have already seen a fair share of growth and inventory challenges, and affordability would be further constrained," Vivas said.

More concerning to Silverstein is the rock-bottom unemployment rate in Colorado, which hit 2.7 percent in the fourth quarter of 2017. But, she said, that problem is not specific to Colorado. The unemployment rate is low across the country and in the other 19 areas on the shortlist.

"There’s nowhere in the country that has the labor force for this," Silverstein said. "How do we pull people off the sidelines? We need all hands on deck."

Beyond residential, the real estate implications of an Amazon campus in metro Denver would be vast, as the company has already shifted the fundamentals of one asset class: Industrial. A recent report from CBRE indicated that Amazon’s huge moves in industrial space have caused prices for industrial land to shoot up.

Amazon grew its warehouse footprint by more than 30 percent nationwide in 2017, according to a company release issued late last year. In metro Denver, the company has completed two new industrial buildings totaling 1.5 million square feet and is busy on a third - a three-story, 2.4 million-square-foot behemoth being developed by Trammell Crow Co.

A new campus would take the company’s commercial holdings to a whole new level for the Denver market.

At Amazon’s original campus in Seattle, 40,000 employees are housed in 33 buildings totaling 8.1 million square feet. A similarly sized campus in Denver would make up about 4.5 percent of the total office inventory in metro Denver, which currently stands at about 168.8 million square feet, according to CoStar data.

It also stands to reason that Amazon would need more industrial space and the influx of employees would likely drive demand for new development in every segment, including multifamily, retail, health care and hospitality.

Molly Armbrister, Denver Market Reporter  CoStar Group   

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