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Friday, 08 September 2017 10:58

West Michigan economic developers will pursue secondary Amazon headquarters

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West Michigan economic developers plan to jump into an already crowded pool of contenders for Amazon.com Inc.’s proposed $5 billion second headquarters.

In doing so, they’ll find themselves swimming among some much larger cities, including Chicago, Toronto, Boston and Detroit. 

While economic development executives here acknowledge the West Michigan region has some tall barriers to overcome, they said the right plan from public and private partners could attract the attention of the Seattle-based e-commerce and grocery giant.

Amazon (NASDAQ: AMZN) dropped its RFP online publicly on Thursday morning — a rarity in the economic development world, sources said. As a result, many cities announced their intention to pursue the project, which could result in 50,000 new jobs with salaries averaging $100,000 per year or more. The “Amazon HQ2” as Amazon CEO Jeff Bezos has called it, could also require the construction and development of up to 8 million square feet of new office space, plus considerable economic spin-off opportunities.

“I would say we have just as much of a shot as anybody else does,” said Tim Mroz, vice president at Grand Rapids-based economic development agency The Right Place Inc. “We have a growing region, we have a walkable region, which is very important as outlined in the project. We have a successful, very commutable urban community.”

Other quality-of-life amenities such as plans to restore rapids to the Grand River through downtown Grand Rapids also stand out as selling points, according to area executives.

It is unclear what advantage the new 225,000-square foot data center in Grand Rapids operated by tech firm Switch would offer to the project. The data center operator, which lists Amazon Web Services among its clients, claims the new facility is “the largest, most advanced data center campus in the Eastern U.S.”

Other cities throwing their hat in the ring include Chicago, Baltimore, New York City, Boston, Toronto and Dallas, according to a Thursday afternoon report from CNBC.

More locally, stakeholders in Detroit and other surrounding suburbs announced their interest in landing the Amazon headquarters, according to Crain’s Detroit Business.

Whether the Grand Rapids area can stand out from those larger municipalities remains to be seen. Proposals are due October 19 and a final selection won’t be announced until sometime next year, according to the RFP.

But right from the start, the West Michigan area will have immediate challenges, based on requirements laid out in the RFP. Those include a relatively small — albeit growing — international airport that currently offers no direct flights to the West Coast, as well as a smaller available workforce than other metro areas that have already expressed interest in pursuing the proposed project.

The Grand Rapids-Wyoming metropolitan statistical area (MSA) currently has a civilian labor force of about 573,000, according to data from the Federal Reserve Bank of St. Louis. The overall metro area has a population of about 1.5 million, putting the region just over Amazon’s minimum threshold for consideration of one million residents in metropolitan area.

“You can't catch a fish unless you've got bait in the water,” said Kris Larson, president and CEO of Downtown Grand Rapids Inc. (DGRI). “This is one where it's not a fish, it's a whale. It might be a long shot, but I think it's one that we want to go for. If nothing else it gives us great experience working together as a community.”

Attracting a large corporate office user to downtown Grand Rapids has been a key goal of DGRI as laid out in its community-driven GR Forward master planning process, as MiBiz has previously reported.

Urban planning experts note that Amazon’s growth in Seattle — a metropolitan area of about 3.8 million people — has led to considerable strains on the region’s housing market, meaning that smaller areas with already tight housing markets might be hard pressed to make a compelling case for the second headquarters.  

“(W)hile Amazon says that it’s open to metro areas of over a million people, realistically, if you want to be as big as Amazon is in Seattle (today), you probably need to be in a market as big as Seattle or bigger,” Aaron Renn, a senior fellow at the Manhattan Institute for Policy Research, wrote on Thursday afternoon.

Landing a large corporate headquarters such as Amazon will almost certainly require various tax incentives, sources said, adding that incentives would likely need to be offered at both the municipal and state levels and could make for an opportunity to utilize the so-called “good jobs” incentive recently signed by Gov. Rick Snyder.

“Large transformational projects like this often require multiple sets of incentives to really make the business case to come to Michigan and West Michigan,” The Right Place’s Mroz said.

The Michigan Economic Development Corp. (MEDC) would also likely play a role in any attraction efforts aimed at bringing Amazon to Michigan, but just what that might look like is largely unclear.

“Amazon is definitely an exciting prospect, and as always, we’re looking for opportunities to attract business investment and create jobs,” Kathy Achtenberg, an MEDC spokesperson, said in an email. “We are certainly studying the possibilities.”

 

Changing course

The manner in which the Amazon RFP was simply dropped online rather than sent out privately to a handful of select candidates makes for a vastly different process than many other large-scale economic development projects, according to some local executives.

The Right Place, for its part, said on Thursday morning that it had only just begun to study the RFP, when MiBiz initially sought comment.

Executives there said that based on an initial read of the RFP, the Grand Rapids area would not be in the running for the proposed project.

“We’re a region of 1.5 million people with a terrific economic climate and robust cities, but we don’t a site big enough and we don’t have enough people,” Birgit Klohs, president and CEO The Right Place, told MiBiz on Thursday morning. “I would love to compete, but I have to be realistic.”

Later in the day, after fully reviewing the RFP and discussing it with potential partners and municipal leaders, it became evident that the Grand Rapids area could meet the requirements of the phased project Amazon was proposing.

Numerous “shovel ready” sites in and around downtown Grand Rapids — including surface parking lots — could meet the first phase requirements of the proposed, decade-long build out and other sites would be identified as the development grows, sources said.

The company states in the RFP that it seeks either existing buildings of at least 500,000 square feet and meeting specific requirements, shovel-ready greenfield sites of at least 100 acres and holding appropriate infrastructure or certain infill development sites.

“We've already been advancing conversations with many (potential partners) to see if we can cobble together a solution that fits their walkability criteria,” Larson with DGRI said.

Sites don’t have to be contiguous, “but should be in proximity to each other to foster a sense of place and be pedestrian-friendly,” according to the Amazon RFP.

Access to mass transit, highways and walkable areas are all noted as key considerations by the company in its RFP.

Amazon’s existing headquarters north of downtown Seattle currently consists of 33 buildings totalling 8.1 million square feet of office space, housing approximately 40,000 employees and offering numerous on-site restaurants, cafes and public space.

The Seattle Times called Seattle “America’s biggest company town” last month.

“We expect HQ2 to be a full equal to our Seattle headquarters,” Jeff Bezos, Amazon founder and CEO, said in a statement. “Amazon HQ2 will bring billions of dollars in up-front and ongoing investments, and tens of thousands of high-paying jobs. We’re excited to find a second home.”

 

Coming together

It’s not so much the real estate issues that give economic developers a moment of pause as it is workforce issues and getting all the necessary partners to the table.

With an unemployment rate of about four percent, according to the United States Department of Labor Bureau of Labor and Statistics (BLS), West Michigan would be hard pressed to find the quantity of skilled and educated labor the company seeks.

Klohs with The Right Place noted that labor shortages are likely to be prevalent anywhere the company decides to land.

Amazon noted the presence of universities as a key consideration in its RFP and sources locally believe that West Michigan’s higher ed institutions and those statewide could be appealing to the company.

Ultimately, the joining of multiple municipal, state and private partners that would be needed to  execute a project of this size is what will make West Michigan stand out from other, larger competitors, The Right Place’s Mroz said.  

“In order for any community in the country to pull this project off, no matter who gets it...the private sector, the public sector and the state entity are going to have to work together to make this thing happen,” Mroz said. “A project of this size and scope can not be handled in a vacuum with solely private or solely public resources. I think that's one of the unique things we have going for us here in Grand Rapids.”

 

Read 9129 times Last modified on Friday, 08 September 2017 12:22
Nick Manes

Staff writer

nmanes@mibiz.com

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