Office N Illinois

Chicago missing out on HQ2 could be a mixed blessing

| Kathleen O'Hare | Associate Director, The Real Estate Center at DePaul University

Chicago missing out on HQ2 could be a mixed blessing,ph1
Related Midwest’s “The 78,” a nascent neighborhood on 62 acres that was among the locations pitched to Amzaon for HQ2 in Chicago.

With speculation leaning toward three cities other than Chicago as finalists for a potentially split Amazon HQ2, it apparently is time for Chicago’s city and civic officials, along with a handful of real estate developers and development sites, to forge ahead with Plan B.

Over the course of the courting process, the sentiment among business leaders and the real estate community has been mixed in terms of whether winning the battle for HQ2 would be a good thing or not. Earlier this year, in its Mid-Year Sentiment Report, The Real Estate Center at DePaul University asked survey participants which scenario—winning the battle for Amazon’s HQ2 or productive, ongoing organic growth in places like 1871 and Fulton Market—would be more impactful for the City of Chicago.

The findings of the report were mixed. More than 56 percent said Amazon HQ2 would be most impactful, though many expressed concerns or a wait-and-see attitude based on gaining a better understanding of the incentive package that could be awarded to Amazon. Those interviewed for the report were equally mixed, offering strong opinions for either outcome. Many said it was an impossible question to answer with all of the variables and unknowns.

In the report, Matthew Wurtzebach, vice president, commercial finance group, Draper & Kramer, said, “It’s hard to know what the Amazon incentive package will mean; hard to gauge the impact, because we don’t know what has been offered.” He added that there are inherent risks in putting all your eggs into one basket.

Brian Rogan, vice president, Associated Bank, said he wasn’t sure which option is better, adding, “How can new jobs be seen in a negative light?”

Jim Shilling, the George L. Ruff endowed chair, DePaul University, notied that an Amazon victory is not void of concerns. “Sometimes you have to worry about what you wish for,” he added, comparing the issues that San Francisco and Seattle have experienced—huge infrastructure spending and major congestion—as they have grown as major tech hubs.

At the same time, demonstrating the back and forth evident in responding to the question, he said, “Winning Amazon HQ2 would be a big plus for all sectors. In this market, tech companies are driving growth. Amazon would help do that.”

Other commercial real estate professionals lamented “the shock of that type of win” in Chicago or really anywhere in the country. “I wonder if we could absorb the shock, and the price war that could result,” said Don Pafford, senior vice president, U.S. Bank, who described himself as someone who prefers slow and steady, expressing concerns over how the city could handle an HQ2 win.

Pafford added, “I think to do what we’ve been doing, with a lot of tech like Google, WPP and along with many others, moving to Fulton Market and the West loop, is better in the long term.” The experts talked about Amazon’s ability to essentially create a whole new neighborhood overnight, spur new development and impact positive job growth.

Stephanie (Matko) Chrisman put things in perspective saying, “Chicago has done very well with organic growth for at least the last 10 years, as companies have grown, expanded and relocated downtown. I think if we don’t get HQ2, we’ll still be okay.”

For Michael Episcope, a co-founder of Origin Investments, the question of Amazon versus organic growth was not an either/or situation, it’s an and. “If Amazon comes to Chicago we’ll see growth we haven’t seen in 40 years,” he said.

He also noted that over the long run, Chicago needs to sustain the growth of Fortune 100 companies to the city. At the same time, true organic growth is needed, not growth in the city that is simply the relocation of companies from the suburbs.