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Why Amazon's HQ2 Will End Up In This City





Amazon might decide on winning city in unconventional way

There’s been a flurry of recent stories about Amazon's HQ2 announcement. From someone analyzing Jeff Bezos' flight records to considering a recent large development proposal in Atlanta. There's much anticipation and speculation in the remaining 20 cities and there are a ton of blogs, news and betting sites speculating on which city will land the coveted second headquarters. We know Amazon is looking for a city/metro area with a population of at least 1 million, good public transit, an international airport, a business-friendly environment and enough space to hold 50,000 workers.

The remaining cities match up pretty well on the major ‘must haves’ but vary widely in population, coolness factor and affordability. I believe Amazon's choice will come down to the city which ranks the best in (in this order): cost of living, the number of tech jobs per 1,000 jobs, and public transit.

Why in this order? It makes sense to consider the cost of living first as this will knock out the pricey east and west coast cities. Amazon is touting 50,000 jobs to the winner. Not all of the jobs will be paying $100,000+? They’ll need to hire admins, office support teams and other positions that are not as high paying…and those workers need to be in a more affordable city.

It makes sense that cities that make the cost of living cut will be judged on tech job saturation in the overall job market. Where’s there’s a good bit of tech jobs, there’s an array of things that come with this: schools turning out new talent, programs, and hackathons/networking opportunities.

Finally, public transit is the last filter the remaining cities will be judged on. Although recent data show that public transit usage has declined in the age of ridesharing, public transit continues to be a 'must have' amenity in many cities. In many large cities, transit stations are attracting mixed-use development, entertainment districts and heightened demand for housing, all coming with subsequent jumps in property values.

Now for my opinion and numbers

Here’s how Amazon will narrow down the selection to the final city for its HQ2 (based on what they might find most important):

I will not consider northern Virginia and Montgomery County in the stats because they are a part of the greater Washington, DC region, along with the actual District of Columbia in the running, there are three areas of this metro area in the competition.

1.   Cost of Living will be the first metric- cities with a Cost of Living Index score (COLI) above 150, will fall out of the competition. Reason: Every one of the 20 cities has a COLI of more than 100 (the US average), with the lowest being Indianapolis (124) and the highest, New York City (224). The 18-city average is 161.1, meaning the cost of living in these cities is 61% higher than the US average. Amazon may consider a ‘new COLI average’ of 150. This knocks out Washington, DC, Toronto, Boston, Denver, Newark, Philadelphia, New York City, Chicago, Los Angeles, and Miami.

2.   The next batch of cities to fall out of Amazon’s favor will be the ones that are less saturated with tech jobs. In other words, the cities with less than 40 tech jobs for every 1,000 overall jobs. Why 40? The average number of tech jobs per 1,000 overall jobs in the remaining 8 cities is 41.9. But wait, Columbus would have made it if the average would have been used as the cut-off instead of 40. Yes, it would have, but it’s eliminated in the next round anyway: the public transit ranking.

3.   The remaining cities: Austin, Raleigh, Columbus, Dallas and Atlanta public transit agencies square up, powered by the number of total passengers (subway, light rail, and bus). This is where Atlanta wins by being the number 1 most traveled public transit agency out of the remaining cities. With Atlanta sprawling more than any of the remaining cities (with the possible exception of Dallas), having a public transit system that transports the numbers that Atlanta's MARTA system does, says a lot when the level of sprawl is thrown into the equation.


COL stats: https://www.expatistan.com/cost-of-living/index/north-america
Public transit stats: http://www.apta.com/resources/statistics/Pages/transitstats.aspx
Employment data: https://www.bls.gov/oes/current/oessrcma.htm






Copyright 2018 © Ari Meier

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