What can Amazon’s search for a new HQ teach us about how to grow a city economy?

Amazon HQ, Seattle. Image: Getty.

Amazon’s announcement a few weeks ago that it will open a second US headquarters, and its invitation for cities to bid to become its new HQ, have sparked a lot of debate across the Atlantic. But the criteria set out by Amazon on what it expects from its new host city also offers interesting insights for places in the UK, and for the government’s industrial strategy.

It’s not often that a company explicitly states what it is looking for when it’s searching for a new location. But in announcing plans for its new HQ, Amazon did exactly that – setting out clear guidelines as to how bids from competing cities will be judged. In no order, it stipulates that the following conditions must be met by the successful city:

  • Appropriate office space – either already built, or land to build on;
  • Business friendly environment and tax structure – for business friendly, read low taxes and grants;
  • Appropriate labour force – a good supply of workers, measured in terms of the size (population centre of over 1m), as well as skill level (highly educated and a ‘strong university system’);
  • Strong transport links within the area – including a link to an international airport;
  • Strong digital infrastructure – fibre broadband and good mobile coverage from a number of providers;
  • Cultural and quality of life offer – a diverse population with good recreational and educational amenities to help attract and retain staff;

The document also sets out that Amazon only wants one bid per Metropolitan Statistical Area – which could be likened to a LEP or city region here – and that places bidding must have a population of at least 1m.

Of course, this is only one company (albeit a very big one – Amazon estimates the new HQ will create 50,000 jobs with an average wage of $100,000). Nonetheless, the list broadly chimes with the factors higher-skilled companies have named in conversations with Centre for Cities in recent years.

While Amazon doesn’t rank its criteria in terms of importance, it’s likely that the availability of a skilled workforce will be chief among them. As we show in our new briefing about why skills should be a key concern in the industrial strategy, British cities that can offer access to high-skilled workers and knowledge have been most successful at attracting high-paying, businesses and jobs.

Given the fundamental importance of skilled workers to a high-knowledge operation, there’s no reason to assume that Amazon would be any different. As such, improving skills-levels in UK cities has to be a top priority for local leaders and in the government’s industrial strategy.

But while skills are of the utmost importance, both the Amazon document and our recent What Investors Want report also illustrate that businesses and investors assess a wide range of characteristics when assessing the attractiveness of a particular city. Ultimately, firms are driven by their likely return or profit, and will be drawn to cities which offer them the best combination of skills, infrastructure, and a pro-investment city leadership with a strong record of delivery.

As such, improving transport, skills and housing should be top of the list for local leaders seeking to make their places more attractive to businesses. Crucially though, we found that this isn’t enough – city leaders also need to actively promote the advantages they offer, as well as focus on building stronger relationships with the private sector, and demonstrate a willingness to ensure big private sector projects get over the line.

What’s a little more surprising about Amazon’s criteria is that includes grants and subsidies as a key consideration. If we were talking about an Amazon warehouse, this demand would be expected. Such a facility would need access to lots of cheap land and workers, something which can be found in a large number of places, and so a sweetener would clearly help sway the decision. For example, this has been used by both the Scottish and Welsh Governments to attract Amazon warehouses to Swansea and Dunfermline.


But with the company’s new HQ, we’re talking about a higher-skilled operation. The clustering of high-skilled businesses in central London and Manhattan, two of the most expensive places to do business in the world, shows that high-skilled businesses are prepared to pay a premium for access to talent.

And it’s hard to see Amazon sacrificing this for the sake of some subsidies – indeed, it is unlikely the company’s decision to locate its UK HQ in Shoreditch resulted from similar interventions. The reality is that Amazon can only meet its need for a large skilled labour force, good transport links and a strong amenity underlines by locating in a major city.

This undermines a line of argument often put to us here at the Centre for Cities, which suggests that modern communications technologies allow big firms to locate anywhere. It also echoes a point made by Professor Michael Storper in his City Horizons lecture last September: that in the modern economy, firms like Amazon need cities as much as cities need firms like Amazon.

More broadly, it underlines the importance of cities to the economies of developed countries. In the UK, for example, economic activity isn’t evenly or randomly distributed across the country – it is clustered in cities.

For the industrial strategy to be successful in in raising prosperity and growth across the country, it therefore needs to focus on helping successful cities continue to thrive – and support struggling cities to overcome the challenges they face in boosting their economies.

Paul Swinney is senior economist at the Centre for Cities, on whose blog this article was first published.

Want more of this stuff? Follow CityMetric on Twitter or Facebook.

 
 
 
 

CityMetric is now City Monitor! Come see us at our new home

City Monitor is now live in beta at citymonitor.ai.

CityMetric is now City Monitor, a name that reflects both a ramping up of our ambitions as well as our membership in a network of like-minded publications from New Statesman Media Group. Our new site is now live in beta, so please visit us there going forward. Here’s what CityMetric readers should know about this exciting transition.  

Regular CityMetric readers may have already noticed a few changes around here since the spring. CityMetric’s beloved founding editor, Jonn Elledge, has moved on to some new adventures, and a new team has formed to take the site into the future. It’s led by yours truly – I’m Sommer Mathis, the editor-in-chief of City Monitor. Hello!

My background includes having served as the founding editor of CityLab, editor-in-chief of Atlas Obscura, and editor-in-chief of DCist, a local news publication in the District of Columbia. I’ve been reporting on and writing about cities in one way or another for the past 15 years. To me, there is no more important story in the world right now than how cities are changing and adapting to an increasingly challenging global landscape. The majority of the world’s population lives in cities, and if we’re ever going to be able to tackle the most pressing issues currently facing our planet – the climate emergency, rising inequality, the Covid-19 pandemic ­­­– cities are going to have to lead the way.

That’s why City Monitor is now a global publication dedicated to the future of cities everywhere – not just in the UK (nor for that matter just in the US, where I live). Our mission is to help our readers, many of whom are in leadership positions around the globe, navigate how cities are changing and discover what’s next in the world of urban policy. We’ll do that through original reporting, expert opinion and most crucially, a data-driven approach that emphasises evidence and rigorous analysis. We want to arm local decision-makers and those they work in concert with – whether that’s elected officials, bureaucratic leaders, policy advocates, neighbourhood activists, academics and researchers, entrepreneurs, or plain-old engaged citizens – with real insights and potential answers to tough problems. Subjects we cover include transportation, infrastructure, housing, urban design, public safety, the environment, the economy, and much more.

The City Monitor team is made up of some of the most experienced urban policy journalists in the world. Our managing editor is Adam Sneed, also a CityLab alum where he served as a senior associate editor. Before that he was a technology reporter at Politico. Allison Arieff is City Monitor’s senior editor. She was previously editorial director of the urban planning and policy think tank SPUR, as well as a contributing columnist for The New York Times. Staff writer Jake Blumgart most recently covered development, housing and politics for WHYY, the local public radio station in Philadelphia. And our data reporter is Alexandra Kanik, whose previous roles include data reporting for Louisville Public Media in Kentucky and PublicSource in Pittsburgh, Pennsylvania.

Our team will continue to grow in the coming weeks, and we’ll also be collaborating closely with our editorial colleagues across New Statesman Media Group. In fact, we’re launching a whole network of new publications, covering topics such as the clean energy transition, foreign direct investment, technology, banks and more. Many of these sectors will frequently overlap with our cities coverage, and a key part of our plan is make the most of the expertise that all of these newsrooms combined will bring to bear on our journalism.

Please visit citymonitor.ai going forward, where you can also sign up for our free email newsletter.


As for CityMetric, some of its archives have already been moved over to the new website, and the rest will follow not long after. If you’re looking for a favourite piece from CityMetric’s past, for a time you’ll still be able to find it here, but before long the whole archive will move over to City Monitor.

On behalf of the City Monitor team, I’m thrilled to invite you to come along for the ride at our new digs. You can follow City Monitor on LinkedIn and on Twitter. If you’re interested in learning more about the potential for a commercial partnership with City Monitor, please get in touch with our director of partnerships, Joe Maughan.

I want to thank and congratulate Jonn Elledge on a brilliant run. Everything we do from here on out will be building on the legacy of his work, and the community that he built here at CityMetric. Cheers, Jonn!

To our readers, on behalf of the City Monitor team, thank you from all of us for being such loyal CityMetric fans. We couldn’t have done any of this without you.

Sommer Mathis is editor-in-chief of City Monitor.