Amazon HQ2: Analytics Predicts the Pick

Mitch Wagner
1/29/2018

As Amazon searches for a city in which to locate its second headquarters, data analytics provider Looker claims that crunching 2015 numbers from the US Census Bureau makes the answer obvious.

Amazon.com Inc. (Nasdaq: AMZN) said last year it plans to open a second headquarters, equal to its existing base in Seattle, and this month it narrowed the candidate list down to 20 locations, including New York, Chicago, Denver, Austin and a couple of locations in the Washington, D.C. suburbs. (See Amazon Taps 20 Locations as Finalists for Second Headquarters.)

In a blog posted Friday, Looker did some simple calculations and made its prediction for where HQ2 will land. The five primary factors, says Looker, are: population density, or whether a city has enough room to handle a large number of new workers; housing vacancy, for whether new and relocated hires will be able to find places to live; diversity, whether the gender and racial distribution will attract outside talent; and educational achievement, whether Amazon will be able to "leverage the existing educated population fo the location."

An Amazon facility in Madrid. Photo by Alvaro Ibanez from Madrid, Spain (Amazon Espana por dentro) [CC BY 2.0], via Wikimedia Commons

An Amazon facility in Madrid. Photo by Álvaro Ibáñez from Madrid, Spain (Amazon España por dentro) [CC BY 2.0], via Wikimedia Commons


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Amazon expects that HQ2 will employ 50,000 people, and Looker assumes that will be a mix of an area's existing population and people relocating for jobs. Looker assigns a five-point rating to each location on each criterion, and the winning location scored 24 out of a possible 25 points, with two runners-up each scoring 22 points.

Denver scores best on population density, with the lowest number of people per square mile -- plenty of room for new people. Not surprisingly, both New York, NY, and Washington, DC, are already pretty well jammed up, Looker says.

Source: Looker.
Source: Looker.

Chicago and Miami score high on available housing. On diversity, New York, NY, and Washington, DC, top the list, while Pittsburgh scores lowest.

Which location was Looker's top pick? Find out here: "The Data Has Spoken. Amazon's HQ2 Should Be In..."

For another perspective, my friend and former colleague Wayne Rash predicts that Amazon will pick one of the several locations on the list in or near Washington, D.C. He cites several reasons, one being proximity to the US's center of power; another being proximity to the nexus of the US fiber network -- nearly all the world's Internet traffic passes through Northern Virginia.

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Susan Fourtané
Susan Fourtané
2/2/2018 | 11:02:39 PM
Re: Diversity and fiber
It seems like quite many of the cities on the list need infrastructure, transportation, or healthcare improvements, which make me wonder why they are on the list in the first place. If you could choose three candidate cities for AHQ2, what would they be?
Michelle
Michelle
2/2/2018 | 1:29:27 PM
Re: To the data
I assume they already know where they'd like to be. Do you think the public nature of the search will help them get the best deal wherever they go? I kinda hope this helps some of these places get other companies interested in building in new places. 
Joe Stanganelli
Joe Stanganelli
2/1/2018 | 11:34:10 AM
Re: To the data
@Michelle: Realistically, few if any of these factors actually matter, to my mind.

For instance: Access to talent? Amazon is going to be relocating tens of thousands of employees. Between that and their ongoing recruitment efforts nationwide and worldwide, I don't think access to talent is going to be that much of a problem. Besides, if Amazon really cared about access to talent, San Francisco would be in the running.

Infrastructure is important, but nothing has changed substantially between than and now.

I am hard-pressed to think otherwise that Amazon already has a much, much shorter short-list than is out in the public -- and is simply using this pageant show (that's all it is) to get the best deal it can.

 
Michelle
Michelle
1/31/2018 | 10:54:36 PM
To the data
This is an interesting result. I wonder if it'll be right. I tend to think it's wrong because I want AHQ2 to come to Texas...
maryam@impact
[email protected]
1/31/2018 | 3:20:32 PM
Re: Diversity and fiber
Ariella yes and Vegas is struggling with a lot of infrastructure issue like healthcare access which could be a huge issue if you drop 50,000 more people into the pool.
maryam@impact
[email protected]
1/31/2018 | 3:01:21 PM
Re: Diversity and fiber
I have to agree with Joe I couldn't imagine LA being happy about 50,000 people on their freeways because their commuter system has no real comprehensive public transportation. Some of the locations are just not a good fit the cost of living in LA is also very high forcing many into even longer commutes. While NY has the transportation the costs of operating in the city are astronomical.
Joe Stanganelli
Joe Stanganelli
1/31/2018 | 1:15:31 PM
Re: Diversity and fiber
@Ariella: As a matter of BC/DR? Sure.

But this often comes back to bite them in the butt when an area not known for a particular natural disaster experiences that natural disaster. Lower Manhattan data centers during Hurricane Sandy comes to mind.
Ariella
Ariella
1/31/2018 | 9:12:47 AM
Re: Diversity and fiber
@Joe I know that Vegas was the focus of attention from Zappos founder Tony Hsieh a couple of years back. But he appears to have come to realize that not everything worked out exactly according to plan: https://www.cnbc.com/2016/08/09/zappos-ceo-tony-hsieh-what-i-regret-about-pouring-350-million-into-las-vegas.html
Susan Fourtané
Susan Fourtané
1/31/2018 | 8:22:53 AM
Re: Diversity and fiber
I see! Thanks, Joe. It’s going to be interesting to see what city is going to win HQ2.
Joe Stanganelli
Joe Stanganelli
1/31/2018 | 7:52:30 AM
Re: Diversity and fiber
@Susan: Frankly, I'm not even sure how or why LA is on Amazon's list at all. Its combination of poor public transportation and absolutely atrocious traffic should automatically disqualify it (to say nothing of the smog and other quality of life issues). If Amazon wants to have an HQ2 in California, it arguably makes much more sense for them to be in the Bay Area/SF.

But San Francisco is out; the Bay Area doesn't need them because they have a bazillion other tech companies, so no incentives are to be had there.

That said, as Amazon clearly wishes to avoid HQ2 being in Silicon Valley, there are still yet better options in California than Los Angeles.

Even Las Vegas -- about a 9-hour or so drive away in neighboring Nevada -- has earned a reputation as a nascent tech hub. Las Vegas also enjoys a relatively low cost of living and relatively low population density for a city of its size. The public transit still leaves a lot to be desired, but it doesn't have nearly the traffic problems. But Las Vegas didn't make Amazon's HQ2 list either (probably because Las Vegas isn't willing to shell out the incentives; it doesn't have to, because it's got all that casino money).

I suspect LA is primarily on the list because attracting Amazon would be such a huge win for the city that they're likely willing to offer major incentives to Amazon -- which, I further suspect, Amazon will use as a negotiating tool in bargaining with much more appropriate municipalities.
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