Friday, October 6, 2017

The Downside of a FAST Growing company - Where would Amazon go?

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The genesis of this post came from two sources. First, a very well written article in the New York Times entitled: Amazon Plans Second Headquarters, Opening a Bidding War Among Cities. Secondly, from my Orange County Register editor who posed the question, "where would Amazon locate if they chose Orange County?"

Clearly, Amazon's footprint in the Seattle area is massive - around 80,000 folks draw a paycheck and consumed is about 20% of the available prime office space in the city - roughly equivalent to 8,000,000 square feet of space! Imagine the chaos created if Amazon were to vacate even half of that occupied space - incredible.

For the HQ2, Amazon's plan would include 50,000 new hires and a facility to house them. Close to an international airport, skilled labor, affordable housing, access to mass transit, fiber optic capabilities, and a business friendly environment are all on Amazon's checklist - with all the appurtenant goodies states like Texas seem willing to dole out - tax breaks, free land, employee relocation expenses, no state income taxes, cameo with the governor, etc. 

Although many of the checklist items can be found in the OC - labor, airport, fiber - California has shunned economic incentives with the abolition of redevelopment districts and enterprise zones. Gone are the halcyon days of California cities writing a check for the promise of future sales tax and incremental property tax revenue increases - the proverbial "I scratch your back" scenario. 

So, where would Amazon go in the highly unlikely event the OC was in the running? Well, it depends. On what, you ask? On the type of facility they are seeking. It appears the new headquarters would house a number of engineers and skilled labor - therefore a facility much like Broadcom abandoned when they were recently acquired. 50,000 employees at 100 square feet each would require around 5,000,000 square feet of office or flex industrial space - like those that litter the Irvine Spectrum. A quick search yielded approximately zero existing - occupied or vacant - buildings that could garner that amount of footage in the county. Therefore, someone would have to build the building for Amazon to occupy. If we stacked the building with two stories, this new construction would require close to 100 buildable acres - roughly the size of the old Boeing campus in Anaheim, an eighth of the Great Park or around half the size of Angel Stadium - parking and field. Probably ain't happening. 

Lets go a different route. Amazon has constructed 77 warehouse buildings around the nation since 2005. A number of others were either planned or under construction and Amazon became the occupant. Generally, the buildings are 750,000-1,000,000 square feet apiece. To put that figure in context, we are describing 25 football fields - under one roof - plus, the appurtenant parking and circulation around the building - or another 10-25 football fields. The only vacant building in Orange County that could house an operation such as that would be the former JC Penneys building in Buena Park. But, there is an issue - the ceilings are too low for Amazon's proprietary procurement system. Ooops!

Have fun in Dallas, Amazon. Go Cowboys!

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