Month: January 2018

Charlottesville’s HQ2

January 18, 2018

Recently the economic development world has been abuzz with conversation about Amazon’s quest for a second headquarters location, which they have aptly titled “HQ2”. Taking a page from tech titan Google, who launched a frenzy in 2010 when it dangled the possibility of community-wide household gigabit connections with its Google Fiber competition, Amazon decided to issue its own very public Request for Proposal (RFP) and seek to have cities and states compete for the opportunity to host the new office facility.  Typically Fortune 500 firms in search of expansion locations engage the services of a site selection consultant who then research and vet the localities that meet key requirements and begin a process of elimination until ultimately a final location is selected. But in the era of crowdsourcing, and well, Amazon being Amazon, they chose a decidedly different type of search. So in September, the retail giant, with over half a million employees, released an 8 page RFP and gave communities a deadline of late October to respond.

To be sure, the project to locate Amazon’s second headquarters is big, very big, with plans to create 50,000 new high-paying jobs and invest more than $5 billion dollars in the first five to ten years alone. To get a sense of the impact, read any story written in the last decade about the resurgence and now explosive growth of downtown Seattle (Amazon’s current headquarters) and the Amazon factor is evident. With 40,000 employees spread across 8.1 million square feet of space in the heart of downtown Seattle – that is a big footprint. According to an analysis by the Seattle Times, Amazon occupies 19% of all prime office space in the city – the most for any employer in any major US city.

While these type of come-one-come-all competitions tend to generate wacky attention grabbing stunts (such as Stonecrest, Georgia offering to rename itself Amazon, GA or Calgary, Alberta posting persuasive graffiti on Seattle streets), Amazon executives insist they are taking a data driven approach to site selection. Amazon is looking for a metro area with more than 1 million people, quality transit options, and incentives from local governments. Those incentives could come in the form of tax credits and exemptions, relocation and workforce grants, utility incentives, and fee reductions Amazon says.

Shortly after the Amazon announcement, I received several inquiries asking, will Charlottesville be submitting a response? The answer without hesitation was an unequivocal – no. Given the scope of the HQ2 project Amazon presumed (correctly) that areas with a population of less than 1 million people would simply not have the infrastructure and workforce to sustainably support the project. Even with recent growth in the area, the entire Charlottesville MSA population is only 218,705. Further, our unemployment rate is currently 3.1% which equates to about 3,600 people across the region. Factoring in the underemployed, typically suggested to be another 5-7%, creates a slightly larger pool of potential hires but nothing approaching the scale and need of a large company like Amazon.

In case you were wondering, the limitation to metropolitan areas with more than 1 million people leaves only 52 US metros remaining in the competition. And incidentally, in Virginia there are believed to be three submissions from the Washington-Arlington-Alexandria, Richmond and Virginia Beach metros all of which exceed a million in population.

While Charlottesville and many others are not viable contenders for Amazon’s HQ2 project, what can they learn from the process to improve their own prospects for economic growth?

In my estimation, it should cause us to reflect a bit and consider our comparative assets and community values (in the context of corporate citizens) and seek to match those assets and values with enterprises that share them and are of a size and scale that also fit with Charlottesville. To be sure, this is not easy, nor is it ever perfect. In part, this realization, leads to our strategy in the OED to place a greater focus on nurturing and growing existing businesses rather than attracting new enterprises.

Nonetheless, there are times and opportunities when encouraging outside investment makes sense and benefits a community.

With that in mind, what can Charlottesville learn from the Amazon RFP, knowing that other companies may take a similar approach in the future? First, while taking care to leave all options on the table, Amazon sends several strong signals that an urban/downtown setting is desired. This of course is influenced by their success in Seattle and the growing interest that technical talent typically has in living and working in this environment.  Also, Amazon states plainly a core preference for mass transit at the site. Not nearby or coming soon, but physically in place. This is a far cry from the days when corporate headquarters locations simply sought proximity to a major interstate as a prime location factor.  Among other clues, Amazon also notes cultural community fit, quality of life and community uniqueness as decision drivers. It seems clear then that Amazon values a city that focuses on place making and actively seeks to develop and maintain vibrant urban environments.

This is good news for Charlottesville as we have many of the attributes of a vibrant urban place, albeit on a smaller, and perhaps more manageable scale.  The Downtown Mall was an early effort at place making that is now paying dividends in many ways; as a gathering place for the community, but also as a magnet for growing businesses.  It is not unusual to hear inquires that specify a preference for available space within walking distance to the mall. Examples of companies choosing a downtown location include SNL (now S&P Global), CFA Institute, WillowTree, GovSmart, Apex Clean Energy, Indoor Biotechnologies and HemoShear just to name a few.

While the Amazon project isn’t realistic for Charlottesville, the process and criteria used by one of the leading companies in the US to select a headquarters location is informative. One could in fact argue that the aforementioned Charlottesville enterprises used similar influences in their decision making.

The work of economic development is constant, and certainly much more than a response to an RFP, so it is important that as a community we continue to make the investments and create the policies that contribute to our collective quality of life and result in an attractive business environment. Doing so will position us well for the moment our version of an HQ2 comes along.

-Chris Engel, Director

OED Updates:

  • The first retail vacancy study of 2018 will be conducted this month. This biannual study of retail vacancy rates throughout the City has been conducted by the Office of Economic Development since 2008. The completed report will be released in February.
  • The GO Skilled Trades Academy will start on Friday, January 26th and run through Friday, March 9th. Five City residents have been selected for the program. Five local employers will be offering job site tours and partnering to possibly hire the participants upon successful completion of the program.
  • The Charlottesville Construction Contractor Meet-Up will be held on Friday, January 26th from 8:30am to 10:30am at CitySpace. This is an opportunity for staff to connect with vendors in the skilled trades who could potentially bid on City construction jobs. For more information, contact Hollie Lee at 434-970-3117.
  • Recruitment is now open for GO Driver, which will begin on Monday, February 12th. For the first time, Albemarle County is partnering with the City to fund two non-City residents in the program. Upon successful completion of the program, non-City residents will become bus drivers for Albemarle County Public Schools. For more information, contact the Downtown Job Center at 434-970-3933.