Chicago is among 20 suitors still in contention for Amazon’s second headquarters, as the city vies to win one of the most heavily contested — and most publicly conducted — corporate office deals in decades.
Local boosters had just a few hours to revel in Amazon’s Thursday announcement about its HQ2 short list, however, before the two biggest obstacles to the area’s bid — government dysfunction and taxes— bubbled up.
Amazon tweeted the list of 20 contenders. Chicago was joined on the list by other big cities long believed to be in contention, including Washington, D.C., Boston, Atlanta, Denver, Dallas, New York, Toronto and Philadelphia, as well as some surprises — such as Indianapolis and Columbus, Ohio.
One notable omission was Detroit, which many real estate experts had pointed to as an HQ2 dark horse to watch.
Seattle-based Amazon in September announced plans to invest $5 billion creating a second but “full equal” headquarters that would create up to 50,000 high-paying jobs in buildings potentially totaling more than 8 million square feet. Amazon said it plans to start with about 500,000 square feet and expand the campus over a decade and a half.
Amazon received proposals from 238 cities and regions in the United States, Canada and Mexico.
“Getting from 238 to 20 was very tough — all the proposals showed tremendous enthusiasm and creativity,” Holly Sullivan, an Amazon public policy executive, said in a news release. “Through this process we learned about many communities across North America that we will consider as locations for future infrastructure investment and job creation.”
Illinois, Chicago and Cook County teamed up to offer more than $2 billion in incentives to Amazon, and offered 10 proposed sites.
Sites in Chicago are Lincoln Yards, a development along the Chicago River near Lincoln Park and Bucktown; the Downtown Gateway District, which includes space in Willis Tower and redevelopment of the old main post office and Union Station; City Center Campus, a proposed redevelopment of the state-owned Thompson Center in the Loop; the River District, a 37-acre development along the river and Halsted Street; the Burnham Lakefront, a Bronzeville development that includes the Michael Reese Hospital site; the 78, a development planned on 62 acres along the river between the South Loop and Chinatown; Fulton Market district properties controlled by multiple owners; and the Illinois Medical District redevelopment.
Two suburban locations proposed are the soon-to-be-vacated, 145-acre McDonald's campus in Oak Brook, which the company will leave for Fulton Market; and more than 260 acres available for development on the longtime Motorola Solutions campus in Schaumburg, where Zurich North America recently built a new headquarters.
At separate appearances, Gov. Bruce Rauner and Mayor Rahm Emanuel reacted to the news.
Rauner referenced taxes and the perception of “a corrupt system” in the state. Speaking at an event in Country Club Hills to highlight property taxes in the south suburbs, Rauner said “The CEO of Amazon, Jeff Bezos, knows how bad taxes are, and … the state of Washington, where they’re coming from, does not have an income tax.”
“So what I think, we’ll have a better case to make to Amazon if we show that we’re disciplined about our own taxes, that we work to keep our taxes low and help bring our taxes down,” Rauner later added. “If we make progress on this, this will send a great message to Amazon that Illinois is not always just raising taxes with a corrupt system, that when they grow here and they bring their employees here and grow our economy. So I hope we can make these changes. It’ll help us bring Amazon here.”
Rauner made similar comments about the state’s shortcomings in August, when Illinois was reported to be one of 11 states vying for a combined Toyota and Mazda automobile plant that would have brought 4,000 jobs to the state. The Japanese carmakers recently said the plant will be built in Alabama.
Chicago Mayor Rahm Emanuel, told of the governor’s Amazon comments while speaking at a separate event Thursday, suggested “it would be helpful if the state was pulling with us.”
“The governor has some challenges, he has a campaign, he has a budget coming up,” Emanuel said. “But we have incredible strengths, and as I said, four years in a row the city of Chicago has been number one in both corporate relocations and direct foreign investment. And the only thing I would say to the governor is, we’ve done that in the face of pretty bad dysfunction in Springfield. Imagine if Springfield got its stuff together, how good it would be.”
What’s next in Amazon’s selection process is unclear. The company could pare the 20 contenders down to a shorter list before selecting one, or its next announcement might unveil the winner.
On its website, Amazon said, “In the coming months, Amazon will work with each of the candidate locations to dive deeper into their proposals, request additional information as necessary, and evaluate the feasibility of a future partnership that can accommodate our hiring plans as well as benefit our employees and the local community. We expect to make a decision in 2018.”
Despite the unusually public nature of its HQ2 search, Amazon has tightly controlled specific details about the process. Several Chicago developers involved in the HQ2 proposal found out the city was on the list of 20 the same way the rest of the world did, in the tweet and press release.
It’s unclear how many developers Amazon officials have talked with directly, and how many sites it has visited.
Amazon said key factors it will consider include access to a major airport, public transportation, top universities and well-educated workers. The company is looking to expand outside Seattle because the company has outgrown the city, creating a shortage of potential employees, affordable housing and office space.
Some of the 20 locations still in contention — Austin, Texas; Indianapolis; Columbus; Raleigh, N.C.; Nashville, Tenn.; and Pittsburgh — could eventually face some of the same issues, because they’re relatively small or already have been growing rapidly.
In addition to Washington, D.C.’s proposal, two nearby suburban areas — Northern Virginia and Montgomery County, Md. — also made Amazon’s short list. Others on the list are Los Angeles, Miami and Newark, N.J.
HQ2 will annually pump billions of dollars directly into the chosen area’s economy, while also generating jobs at other companies that want to do business with Amazon.
Although a surge of well-educated workers would create more spending power in Chicago, increase property values and boost tax revenue, there’s no guarantee HQ2 will be a financial home run for the owners of the real estate Amazon chooses to buy or lease.
The company is known as a tough negotiator, commercial real estate experts said. While the landlord could turn a relatively modest profit, the deal could trigger a wave of follow-up deals that would cause values of nearby properties to soar.
Many of the proposed developments are already in the works, with or without Amazon.
Chicago developer Sterling Bay already has unveiled several details for its more than 70-acre Lincoln Yards project, including plans for a 20,000-seat stadium with a retractable roof. A United Soccer League team is expected to begin playing there in 2020, and Sterling Bay said it plans to bring other sporting events, concerts and entertainment to the venue.
Related Midwest is working to bring a proposed University of Illinois-led innovation center, called Discovery Partners Institute, to its 62-acre development in the South Loop.
Nearby, owners of the long-vacant post office recently announced a $500 million construction loan to continue converting the wide building into 2.8 million square feet of offices, amenities, retail and a ground-floor food hall.
In Oak Brook, McDonald’s recently put its McDonald’s Plaza property up for sale and said the main, 74-acre portion of its campus would soon hit the market.
Amazon unveiled its list of HQ2 contenders a day after another tech giant, Apple, said it planned to create a new office campus — a deal that also could attract eager suitors throughout North America. Apple’s announcement did not make clear whether it plans a site search or whether it already knows where the new campus will go. Apple said the location would be announced later this year.
Emanuel, who had Apple CEO Tim Cook on his podcast in October when Cook was in town for Apple’s flagship store opening on Michigan Avenue, immediately vowed to pursue the Apple deal.