Third Biggest Story of 2018: Will Chicago Win Amazon HQ2?

Decision day is fast approaching as to where Amazon will build its second headquarters.

If you recall, 238 cities sent in proposals.

The decision is expected in early 2018 as Amazon’s Seattle headquarters is bursting at the seams. It appears they are looking to start construction at the new location ASAP.

Amazon will spend $5 billion to build out its headquarters and expects to ultimately hire as many as 50,000 people.

It wanted an urban area in a city with over 1 million people. Amazon also wanted an international airport.

While many cities are drooling at the prospect of landing HQ2, there are also cons to “winning” this beauty contest, especially in real estate.

From CNNMoney:

New research from Apartment List, a site that catalogs apartment rentals across the country, forecasts an annual rent increase of up to 2% per year in the city that houses HQ2. That’s on top of organic price increases that already occur from year to year.

“Rents are already rising rapidly nationwide,” Apartment List said in a report that analyzed data from the U.S. Census and Bureau of Labor Statistics. Half of renters are considered “cost burdened,” spending 30 percent or more of their income on rent, according to the firm.

Apartment List said Raleigh, Pittsburgh and San Jose would experience the highest rent increases if HQ2 comes to town. The impact would be smaller in cities like Washington D.C., Los Angeles and Dallas.

The largest increase in housing costs would be in Raleigh, which wouldn’t be able to build enough homes to sustain the influx of workers, according to the report. Meanwhile, housing costs would stay lower in places like Dallas, which has lax building restrictions and a cheaper labor pool.

In 2017, Seattle easily took the crown as the city with the most construction cranes with 58.

Housing prices also jumped the most of any of the top 20 major cities last year.

The Seattle median home price:

  • To start 2017: $635,000
  • End of 2017: $741,000

Of course, median price is also dicey as it depends on the mix. But inventory is low in Seattle as thousands more are moving in than there is housing for.

Stories of bidding wars abound.

Will Chicago win Amazon HQ2?

Can Chicago’s housing market handle winning?

 

 

29 Responses to “Third Biggest Story of 2018: Will Chicago Win Amazon HQ2?”

  1. Longer term, Chicago’s real estate market could totally absorb this demand, there’s plenty of well-located areas around that can still gentrify and room for more density. Short term will be hard on nearly any RE market. But I doubt we get it though, too many negatives with the economic and political climate around here.

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  2. Can we “handle” it? There is really a ton of vacant land or real estate that can be redeveloped here and I’m already concerned that we are going to be running into a supply glut with all the construction that has/ is taking place.

    And from a housing cost standpoint…by definition housing costs don’t go up unless people (on average) are doing really well.

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  3. I think Chicago has a great chance of getting Amazon. Despite our political and fiscal malfeasance, Chicago is a front runner in terms of everything Amazon claims they want in a new HQ location.

    Public Transit – Check
    Size – Check
    Low cost of living – check
    Ability to absorb 50k people – check
    International airport – check
    Top Tier Universities – Check Twice
    Relatively convenient to Seattle – 4 hour flight
    World Class City with a lot of Millenials – check

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  4. Toronto offer the same (what Russ said) along with currency and political diversification. Also offers better immigration climate.

    Negative is no Football team!

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  5. I selfishly hope we get HQ2, I mean we really do have everything in place to accommodate them, but mostly so I can sell my house to some sucker and GTFOOH

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  6. Dont think Chicago will win, but if they do it can absorb the influx of new employees. The 50,000 employees is at full build out – 15 years in the future (Maybe). Swagging based on the phasing/SF looks like there would be around 8k new employees in phase I and I doubt that all that hiring would be on day 1.

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  7. My guess for HQ2 is Washington, DC. Specifically the Navy Yard neighborhood. It checks all the boxes that Russ listed. And the weather is better. The only part where Chicago beats it is the flight time to Seattle. But access to DC was specifically mentioned in the HQ2 proposal. Bezos already owns a home near DC.

    Chicago could handle HQ2. Chicago offers HQ2 many good sites for an office campus. But the Navy Yard offers HQ2 an entire neighborhood to shape into a walkable extension of the HQ2 campus.

    The rents will surly skyrocket in the Navy Yard neighborhood if HQ2 is located there.

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  8. Chicago has huge swaths of impoverished areas that could be improved and are close to public transportation. I don’t think we would have a problem housing 50k new middle class people.

    I don’t think we’ll win the HQ though just because Chicago has so much crime and the state and city are in such financial disarray.

    Who knows though? My friend works for Mars and she is being transferred to Newark. Newark is paying $1,000 per employee to bring more middle class people into that hell hole. Apparently, her life and safety are worth $1,000 to Mars.

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  9. Let’s say you knew not only what city but what neighborhood/area they were going to choose, what could you do with that knowledge?

    I suspect someone already knows and we just have to look for the right signs.

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  10. “And the weather is better.”

    As a former Washingtonian, I’d say it’s debatable that the weather is better. It used to average about 110 each day the first couple of weeks in July and there were torrential downpours just in time for the evening rush hour. On the flip side, one inch of snow shuts the city down (or at least used to). Cost of housing is also significantly higher than Chicago.

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  11. Let’s say you knew not only what city but what neighborhood/area they were going to choose, what could you do with that knowledge?

    Start looking into Daley/Vanecko/Madigan friends and family land purchases

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  12. One inch of snow would shut down any city that is unprepared for snow. It might get blistering hot in DC in the summer, but the other three seasons are nicer than Chicago.

    The Navy Yard neighborhood is not a high cost of housing area. The housing prices are lower because it’s not an easy commute from there to most federal buildings. That makes it good for Amazon who is not looking for a commuter neighborhood.

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  13. 99% chance that HQ2 will be Atlanta. Who knows what share of the other 1% chance goes to DC, NC, PA, Toronto, or whatever, but I don’t think any measurable portion of it goes to Chicago.

    I doubt it will impact residential pricing, but one thing that’s going to push commercial pricing (light industrial in particular) through the roof in the greater Chicago area is the legalization of the green industry (and not solar and wind).

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  14. They’ll pick Chicago, and redevelop the Tribune printing plant at Chicago & Halsted.

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  15. Part of me thinks they will pick a smaller tier 2 type city like Atlanta. I think Amazon may see themselves as some kind of catalyst to help propel another city to the next level.

    Atlanta is a fine city (my home town) but it is nothing like Chicago by any stretch. It lacks the depth of cultural amenities and isn’t as urban. It really isn’t a walkable city and public transportation is a joke. No one in Atlanta rides MARTA unless you are broke and have no choice.

    Cost of living is a little cheaper, but not by much in desirable in town areas. Otherwise, you are in suburban mcmansion hell.

    Atlanta does have room to grow though. IMHO, the only thing Atlanta has that I’d consider parity to Chicago is Hartsfield Airport and I guess nicer weather.

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  16. “It lacks the depth of cultural amenities and isn’t as urban. It really isn’t a walkable city and public transportation is a joke.”

    They specifically want something urban which makes me think it won’t be Atlanta. 30% of their Seattle employees walk to work and they have said they love the urban environment as it helps creativity.

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  17. “They’ll pick Chicago, and redevelop the Tribune printing plant at Chicago & Halsted.”

    There are certainly plenty of options to build the headquarters in the Chicago city limits.

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  18. “99% chance that HQ2 will be Atlanta.”

    Why do you think that?

    Apparently, in the first go-around it was down to Toronto and Boston but Amazon wasn’t pleased with either one, for some reason, and decided to “open it up” in a bidding war. Both of those cities fit their urban model with public transportation and both have good international airports.

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  19. “Let’s say you knew not only what city but what neighborhood/area they were going to choose, what could you do with that knowledge?”

    But don’t we already KNOW that these neighborhoods/area will be developed anyway? Amazon or not?

    They are already going to redevelop the old post office. They just got a $500 million loan for that. It IS happening. Shouldn’t you be buying up condos nearby, regardless of if it’s Amazon or someone else going in there?

    Same with the old Finkle site. They have already released the drawings for that big project.

    Same with the 60 acres south of Roosevelt Road on the River. Why isn’t everyone buying in the blocks area near that block of land? Related has announced tentative plans for it as well.

    Amazon, obviously, will come in with $5 billion and begin building immediately. They won’t want to wait around 5 to 10 years for the location.

    The only difference between Amazon going in and someone else going in is that you may not be dead by the time your investment in the area paid off.

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  20. Sabrina, they are going to develop all these sites but it’s not clear who is going to occupy them. I wouldn’t bet on all this space being filled.

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  21. the $5B is over the lifetime of the HQ. Initial build costs are $300-500MM

    There’s no guarantee the ultimate buildout happens

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  22. “I don’t think we would have a problem housing 50k new middle class people.”

    There are enough empty lots in East Garfield or Bronzeville that you could move in 50,000 people and the rest of the city wouldn’t even notice, wouldn’t even strain existing transportation services. Chicago was built for 5 million people, topped out at 3.5 and currently only has 2.7. That’s one advantage in addition to O’Hare, central location and culture. But my gut says DC or or somewhere in the I95 corridor gets it.

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  23. “Sabrina, they are going to develop all these sites but it’s not clear who is going to occupy them. I wouldn’t bet on all this space being filled.”

    True. But as long as the economy stays hot, they will develop and build on these lots as we see with Riverline finally being developed.

    That’s why I said you may have to wait 20 years for appreciation near some of these areas if Amazon doesn’t come to Chicago. Because they WILL get developed but it may take a while.

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  24. I still believe Chicago will win the HQ, and it will go either on the Related site or the Trib site at Chicago and Halsted. The Finkl steel site is too small and lacks the FAR and building height prospects of the prior two sites which are more core urban. Bezos is obviously going with a blue state urban locale. And yes, Chicago has the ability/open space to absorb/build for the new influx of people.

    “(Toronto) Also offers better immigration climate.”

    Huh? The only reason that Diversity is accepted in the workplace is because the employers are in fear of being shaken-down by the hucksters. In the old days, they used to fear Jesse Jackson showing up and complaining about blacks. Now there is a professional anti-white industry of SJW jihadis that literally extort companies, so they simply take the easy route and pay the “protection racket” that these SJW mobsters impose.

    Everyone knows deep down that James Damore is right.

    If diversity was so critical then China wouldn’t be an economic powerhouse, after all how could it be when its so homogeneous?

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  25. “If diversity was so critical then China wouldn’t be an economic powerhouse, after all how could it be when its so homogeneous?”

    China is NOT an economic powerhouse. It only has big numbers because it is…well…big.

    We don’t drive their cars, watch their tvs, movies, phones or anything. In fact, I cannot think of one native Chinese product that I use.

    Japan used to be the same until they stopped copying and starting creating. But even Japan still isn’t great at it.

    Whites are already a minority in America’s largest state. There’s no going back for whites. Diversity is our strength. And, by the way, the young in the urban areas don’t even notice race, thank god. They have too many friends and lovers of different colors. In fact, the intermarriage rates among the young are extremely high. Eventually, there will be no way to say what “race” you are on some government form.

    Older people simply don’t understand. Millennials don’t even know who Jesse Jackson is! Ask a 25 year old in the loop. They have no clue.

    You give your age away all the time HH. Only older people have a memory of a guy named Jesse Jackson.

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  26. Whites are already a minority in America’s largest state

    Incorrect

    https://en.m.wikipedia.org/wiki/Demographics_of_Alaska

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  27. “You give your age away all the time HH. Only older people have a memory of a guy named Jesse Jackson.”

    Yeah, I’m 70 because I know who Mick Jagger is. Got it. You’re the one pushing 70.

    I think it’s quite wonderful of you to notice that even Japan and China are non-creative counties that copied white achievements! That’s a big step for any anti-white person to acknowledge as a fact and as truth. It is true.

    Miscegenation is a concern, but it’s not a prevalent as you think. I know many Jewish people who have a major concern about it, and actively try and teach their kids against it. It’s frowned up in their religion too. I guess it would be good if they all just married out and they disappeared. Diversity is not a strength, there is not one shred of proof of that. Every single element of our diversity is at the other’s throat these days. The Democrat party is basically a circular firing squad right now, you have Jews attacking BDS, and POC complaining that Feminism is run by white women, you have gays who cant figure out whether they should support Islam, etc. etc. It’s ridiculous.

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  28. This Amazon hullabaloo is reminiscent of when everyone was so confident Chicago was going to get the Summer Olympics.

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  29. “Whites are already a minority in America’s largest state”

    Largest state by population. You knew what I was saying.

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