6 reasons Amazon won’t pick Arizona for new HQ site

Economic Development | 8 Sep, 2017 |

The hunt for where Amazon will build its second North American Headquarters is on, but some industry leaders doubt Arizona’s chances to secure the project.

Amazon’s “HQ2” would resemble its existing headquarters located north of Downtown Seattle that totals 8 million square feet, employs 40,000 workers and has generated an economic impact of $38 billion between 2010-2016 for the city.

Ideal locations for HQ2 include urban or suburban areas with at least one million people that are well connected to transit and near a university with a large talent pool to hire employees, which signifies Greater Phoenix as a contender.

Amazon opened the HQ2’s Request For Proposal on Thursday, catching the attention of many local and state government officials across the nation.

The e-commerce giants says HQ2 could total 8 million square feet, employ 50,000 high wage workers and is expected to cost $5 billion to build and operate.

But does Arizona realistically have a shot at securing Amazon’s HQ2?

No, according to some of Arizona’s top thought leaders, but that’s OK with them.

6 REASONS WHY AMAZON WILL PASS ON ARIZON

Not enough incentives. Economist Jim Rounds, president of Rounds Consulting Group, thinks Arizona will rank in the top five potential locations for HQ2, but Arizona’s policymakers will smartly offer limited incentives to protect taxpayers. He says, “There will be states that offer well above a reasonable value in incentives,” which creates the risk of going from good public policy to bad.

Arizona won’t pay to create jobs. For example, the recent Foxconn deal in Wisconsin for a new 20-million square-foot LCD manufacturing plant includes a $10 million investment from Foxconn, but requires Wisconsin to provide $3 billion in subsidies over a 15-year period, which equates to Wisconsin paying approximately $230,000 for each of the 13,000 jobs proposed by Foxconn. If Amazon does request more incentives from Arizona, Rounds thinks Arizona’s policymakers and economic developers should “go back to building our economy the old fashioned way: one small business at a time.”

Expanding geographic footprint. Amazon already has a dominant presence in the western region of the country with its existing HQ in Seattle. “Amazon will want to be in a time zone farther east since they are currently in Seattle,” says Grady Gammage Jr., co-founder and partner at Gammage and Burnham. This will enable the global e-commerce giant to more conveniently operate in coordination with its clients and customers in different time zones.

4 Amazon facilities already in Arizona. Arizona is home to four Amazon facilities located in Chandler, Goodyear, Phoenix and Tempe. Greater Phoenix is an ideal location for the company’s fulfillment centers because of its proximity to California ports and direct shipping routes to other Southwest states and Mexico.

Location. Location. Location. Amazon wants HQ2 to be equal to its Seattle HQ and Gammage doesn’t think Phoenix can offer quite the same appeal. Despite Arizona’s growing demographics and amenity offerings, its business-friendliness, competitive tax structure, low cost of doing business and great weather, Gammage says, decision makers in Seattle will not think Phoenix is “cool” for its knowledge-based workers as opposed to the warehouses Amazon currently operates in the Valley.

Poor K-12 education system. According to the U.S. News and World Report, Arizona ranked 48th in the country for its K-12 education system, which is what Gammage points to as a major factor often considered by site selectors and corporate decision makers.

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