CRE Midwest

Any lessons learned from Amazon's HQ2 debacle in New York?

What did we learn from Amazon's HQ2 search?,ph01

During the dawn of Amazon’s announcement that the world’s most beloved business was in search of a second headquarters (HQ2), economic development watchers predicted a bold, new day in site selection.

Renowned renovator of so many fundamentals of our everyday lives – from how we purchase goods to how they’re delivered and so much more – Amazon was now reinventing site selection. If a company plans to build a second headquarters and wants competing cities to give it their best shot, why not roll out the process with the subtlety of a high school marching band?

It was brilliant, really. Post your RFP online for all the world to see. Make it clear that the one variable competing cities and states truly have autonomy over – incentives, incentives, incentives – will play an important role in the company’s decision, despite the fact most of the decision’s pivot points will remain firmly under the control of Amazon.

So it began. Communities and states of all shapes and sizes went after the golden prize with ferocious audacity. Veterans of economic development beauty pageants (including us) lost objectivity on what was happening. We recall “boldly” predicting that as many of 75 cities might compete for HQ2, only to look like foolish amateurs when the final tally reached 238.

Amazon achieved its most thrilling moment in its HQ2 search when it announced the names of the 20 cities that had made final the cut. The national media, already in fawning mode over the company’s expedition for a new headquarters, went into overdrive. The finalist cities touted their achievements, and many of them announced they were winners regardless of Amazon’s final choice. By and large the hunt for HQ2 had already been branded an unqualified success for Amazon.

But this is where the process began to turn. Incentives watchdogs criticized cities and states that refused to reveal details of their bid packages. Those communities that did share their proposals were assaulted with equal ferocity for what some of those proposals contained: billions of dollars in incentives and exclusive peeks at infrastructure and strategic plans of communities and regions. Even cities that didn’t make the cut were demeaned for previously pandering to the company by sending gifts and publishing mushy valentines to sympathetic local media partners.

As the process drug out, details were scarce about the status of the search. Gossip and rumors began to fill the void. The press analyzed the flight schedule of Jeff Bezos’ private jet and combed social media for clues about where the company might be headed.

When the company finally announced its decision, this, too, came under attack. The fact that Amazon billed the projects as a lone second headquarters throughout before dividing HQ2 into two separate locations caught some by surprise – even though speculation had been mounting for months whether one city would be able to fill so many jobs. Subsequently, when the winning areas ended up being the two cities where Amazon already had the largest concentration of existing employees outside of its first Seattle headquarters, cynics pounced on the decision as being a fait accompli.

But Amazon’s HQ2 experience reached its nadir when it announced New York City as one of the two winning areas. Unlike the other victor, Northern Virginia, which has greeted Amazon with open arms, the company’s Big Apple experience had been troubled from the start. From local union pushback to interest groups carping over whether the incentives offered were truly necessary to win the deal, the project’s downward spiral has been death by a thousand paper cuts.

Perhaps Amazon and its site selection team could have deployed more triage tools in advance to finesse a successful outcome. But this particular project at this particular point on the space time continuum of state, local, and federal politics faced headwinds that would have proved daunting under any circumstances.

Nonetheless, the unceremonious implosion of Amazon’s New York experience shouldn’t detract from the overall positives that have come from HQ2, and the two primary lessons that all of us – governments, economic development officials, and constituents – can apply in the years to come:

• Public private partnerships work best when there is true collaboration and not economic development ransom, whether perceived or real, dressed up as good-hearted competition.

• State and local governments that more assertively preserve their autonomy when competing for deals will be better positioned to understand the rules of the game before they decide to enter.

There’s no doubt that all of the players in HQ2 might do a thing or two differently if they had to do it over again. If nothing else, jurisdictions competing for economic development prizes should remember this basic tenet to every deal: When there are more competitors than prizes, not everyone goes home a winner. And the next big deal is just one RFP away.

Tim Cook is chief executive officer and Katie Culp president of Indianapolis’ KSM Location Advisors.