'The mother of all bidding wars'
Metro areas across Canada are preparing bids to lure Amazon north of the border, regardless of the political firestorm that would ensue
Amazon.com Inc.'s call for pitches from cities hoping to become home to the online retailer's new headquarters has touched off a frenzy at city halls across the United States and Canada.
Cities are crafting presentations that boast of their attributes in hopes of being picked as the place where Amazon will hire as many as 50,000 people and spend $5-billion (U.S.) as it develops its second corporate head office.
"This is shaping up to be the mother of all bidding wars," said Scott Galloway, a professor at New York University's business school and author of The Four: The Hidden DNA of Amazon, Apple, Facebook and Google. "Every mayor wants to be the one that detonates a prosperity bomb in the town square."
Bids are being assembled by Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montreal, Halifax, and even Sault Ste. Marie, Ont. Windsor, Ont., is teaming up with Detroit in what could be the only cross-border pitch fielded by Jeff Bezos and his Amazon executives. The Canadian cities are up against dozens of U.S. places and are gambling they can convince Amazon to risk a political firestorm in President Donald Trump's United States by locating outside the country.
"All Canadian cities boast at least one significant research university and a strong high-tech environment and all can accommodate the jobs growth anticipated from Amazon, particularly since this growth will be metered out over time," said a report from commercial real estate company Colliers, skipping over Halifax.
With just less than half-a-million people in the regional municipality of Halifax, the port city knows it will appear a pint-sized contender for the bid. But Halifax officials say the city is serious about putting together a bid that will contend. "We know we're a long-shot. No question," Mayor Mike Savage said. "But we'd be a no-shot if we didn't put in a bid. We have some very serious people around the table that have been meeting every day."
Ed Clark, a former bank executive who is leading the push for the three Ontario cities, said Canada's cheaper currency, lower wages and low-cost health-care offer Amazon significant savings.
Toronto not be resorting to antics such as mailing a cactus to Mr. Bezos – as business leaders in Tucson, Ariz., tried to – in order to woo the company, said Mark Cohon, chairman of Toronto Global, the agency leading the Toronto region's bid.
"We are going to focus on the business and the strong story that Toronto has and we're not going to get caught up in the gimmicks that we've seen from some smaller locations around North America," Mr. Cohon said.
Members of some bidding teams, including in Toronto and Ottawa, recently toured Amazon's Seattle campus, which comprises 33 buildings and 8.1-million square feet with 40,000 employees, to see where the $450-billion company feels at home.
Blair Patacairk, managing director of investment and trade for Invest Ottawa, said Canada's capital would be a natural choice because of its likeness to Seattle.
"Our secret sauce is we're Seattle No. 2, if you look at the quality of life and the culture," Mr. Patacairk said. "Yeah, we're not as huge as the GTA or Montreal. We're not that. But we're very similar in other ways to those guys that are sitting down there in Seattle."
Looking to replace lost oil patch jobs, Calgary and Edmonton are touting their lack of traffic congestion in cities that have room to grow. Vancouver, already home to an Amazon office, has a high quality of life on its side. But it may too close to Seattle for Amazon, which likely wants to place its new HQ in a different region and time zone. Montreal's political turmoil and clogged roads are not in its favour, though the city has good universities.
Alan Middleton, a marketing professor at York University's Schulich School of Business, said a good pitch will emphasize development space and tax relief, in addition to highlighting an area's educated work force and quality of life.
He said the Greater Toronto Area has almost everything Amazon would be looking for – except for a well-functioning transportation network – but he doubts Mr. Bezos would risk being known as the man who took 50,000 jobs to another country. "Even though he is an antagonist of the President, I can't see him moving out of the United States," Prof. Middleton said.
Amazon announced the contest on Sept. 7 and set a submission deadline of Oct. 19. Bidders are to submit their proposals through the company's website and the company says it will name its selected site some time in 2018. But there are no other details on how the process will unfold. Amazon declined to comment for this story.
In its eight-page request for proposals, Amazon lists why cities should be eager to host the company (jobs, money, jobs), as well as what it's looking for in a winning city. At the top of the list is a place with a million people that can attract and retain tech employees and a "business-friendly environment and tax structure," where community leaders "think big and creatively" about real estate. Nice-to-have attributes include a downtown campus with a layout that looks similar to Amazon's Seattle headquarters and is development-ready.
Good schools and universities, a major airport nearby and a good transit system are important. So are "incentives," which Amazon refers to at least 20 times in its request for proposals.
"Amazon welcomes the opportunity to engage with you in the creation of an incentive package, real estate opportunities, and cost structure to encourage the company's location of the project in your state/province," the document says. Such language is the stuff of requests for proposals (RFPs) used by promoters of megaprojects, auto plants and major sporting events. In the fight to land jobs and investment, incentives are the weapons.
"They'll be looking for handouts," Prof. Middleton said in a phone interview.
Prof. Galloway described Amazon's document as "obnoxious, but no more obnoxious than what the Olympics sends out, or the World Cup." He said governments' eagerness to court the company will make them offer tax breaks and giveaways they'll later regret.
"My advice is: do the math and make sure this is good for the city after the elected officials have [left office] and taken their victory laps," he said in a phone interview. "Enough giveaways and enough tax breaks will make this a bad deal. People are so intoxicated with the idea of being the second home to Amazon that they could make irrational decisions. Just as they do for the Olympics every four years."
Of all the Canadians cities vying for Amazon's affections, Toronto is the only serious contender, he said. "Having said that, I don't think Canada has any chance."
That's because Amazon and other massive tech companies are facing criticism in the United States for avoiding taxes and killing jobs. Setting up a new headquarters in another country will not help Amazon's bid to be seen as a good corporate citizen.
Prof. Galloway figures Amazon has already picked New York City. "They're just running a competitive bidding process so they can take the best terms to the mayor of New York and ask him to match it," he said.
Prof. Middleton, however, said he has been told Cleveland is the likely winner. "They're pitching like crazy and offering lots of money and have space and a reviving tech sector," he said.
Eric Atkins, with files from Jessica Leeder, Andrew Willis, Alexandra Posadzki and Shane Dingman
Calgary is the fourth-largest city in Canada, with 1.5 million people, but the civic boosters behind its proposal are convinced it could be the No. 1contender among Amazon's northern options.
"Amazon has been a target of ours for a couple of years, we've been having several conversations with them," says Mary Moran, president and chief executive of the Calgary Economic Development, the organization shepherding the city's bid.
Calgary's best pitch to Amazon may be that its energy-focused economy fell off a cliff three years ago after a decade of torrid growth. The result of that downturn is twofold: available real estate and a skilled labour market with some slack.
"It's really obvious that they are not looking for a large city, they are looking for a less-congested, easy-to-get-around, lower-cost-of-doing-business city, otherwise why bother moving?" Ms. Moran says.
According to a recent report from Barclay Street Real Estate, the city has about a 25-per-cent vacancy rate for offices, representing about six-million square feet of space.
The city also has about 6-per-cent unemployment and a lot of "headquarter" talent (legal, human resources, logistics, etc). One downside about the talent pool is that, while Statistics Canada data from 2016 suggest the city has about 32,200 engineers, only about 2,900 are software engineers.
Calgary may also have the most excited local population, if the busy and voluble #amazonyyc hashtag on Twitter is any indication.
Edmonton Mayor Don Iveson had the most colourful response to the Amazon RFP we've come across, calling the chance to land $5-billion (U.S.) in economic development a "tasty morsel."
Adam Sweet, chief of staff at the Edmonton Economic Development Corporation – which is running Edmonton's proposal – is keeping closemouthed on the case the city will be making to Amazon, declining even to name what he thinks are its key cultural differentiators. "We're making an economic case," is as specific as he will get, but he says the city is determined to win. "When Edmontonians put their mind to something, we say what we do and we do what we say."
Publicly available data suggest why Edmonton might be a good fit. Amazon is seeking a location with high growth, and Edmonton's population boom has made it the second-fastest growing city in Canada and the youngest of the big cities, with a median age of 35.7.
Space should also be no problem: A Colliers International report on Edmonton's office market noted the city has had 10 consecutive quarters of "negative absorption," or increasing vacancy.
What Mr. Sweet will say is that the self-proclaimed City of Champions lured an outpost of Google's artificial-intelligence company, DeepMind Technologies, into town and that it has a world-renowned machine-learning research centre at the University of Alberta.
Edmonton might be the coldest city in the competition. According to Statistics Canada, its coldest month features average lows of -19 C.
Halifax officials know they are dreaming big with their vision to attract Amazon to the East Coast. Atlantic Canada's biggest city is still smallish at fewer than half-a-million people. But bid enthusiasts insist the city can punch above its weight given the opportunity.
While Amazon will doubtless attract a new stream of job-seekers, Halifax has been stoking its digital economy. Tech-industry jobs ballooned more than 50 per cent from 2010-15; the city was recently named Canada's fifth-largest tech hub. Halifax ranks as one of the lowest-cost cities in Canada for tech firms based on typical wage and rent obligations, according to a 2016 report by CBRE Ltd.
There are more than half-a-dozen postsecondary schools in the Halifax region, which adds up to both work-force potential for Amazon and avenues for unique collaborations. "We are disproportionately strong in terms of our educational facilities and the ability to support this sort of huge, white-collar initiative," said Ron Hanlon, president of the Halifax Partnership, an economic-development agency.
Transit, though, will be a challenge. Buses are the backbone of a bare-bones metro transit service, although the city hinted that expanded commuter-ferry service will factor into its bid. It is also in talks with airlines about bumping up direct flights to major destinations in the United States, said Ron Hanlon, president of the Halifax Partnership, an economic development agency.
Officials are mum on where they will propose to build Amazon's gargantuan campus. But expect what locals call the "ocean advantage" to play a part.
Ocean access creates options for eco-friendly building designs as well as quality-of-life incentives for staff. "We like to talk about our boardroom-to-kayak-to-beach opportunity," Mr. Hanlon said. Those are beaches that, thanks to Halifax's buyer-friendly housing market – the average home price is about $300,000 – Amazon employees will be able to live on.
Montreal officials say they're putting together a great bid. They're just too busy to talk about it, says a spokesperson for Montreal International, the agency in charge of the city's proposal, and they don't want to divulge the confidential strategy.
But Quebec, "has everything it takes to attract such a major investment: a stable business environment, a strong academic network that fosters co-operation and highly skilled, creative talent whose genius is the envy of all," Quebec Economy, Science and Innovation Minister Dominique Anglade said in a news release earlier this month that highlighted the city's status as a technology hub and its openness to foreign investment.
With its charming cobblestone streets, historic architecture and vibrant arts scene, Montreal may be the most scenic of the Canadian cities bidding for the Amazon headquarters. And it's certainly hip. The city has a thriving craft-brewery scene and its denizens have street-style befitting the pages of a fashion magazine.
Montreal also checks a number of Amazon's boxes. The population for its census metropolitan area exceeds four million, well above the one-million threshold stipulated in the RFP. The province's economy is turning a corner after decades of sluggish growth, yet home prices remain significantly lower than in Toronto and Vancouver, making home ownership a realistic aspiration for its residents.
But Montreal has a number of drawbacks as well, including crumbling infrastructure and Quebec's history of political turmoil and corruption. Those could prove to be major setbacks to the city's efforts to attract the tech giant.
With a population of around 1.3 million, the Ottawa-Gatineau region barely exceeds the minimum size stipulated in Amazon's RFP. And its airport doesn't offer direct flights to Seattle – a major drawback. But Blair Patacairk, managing director of investment and trade at Invest Ottawa, says Canada's capital has plenty going for it, including a highly educated work force, a burgeoning tech industry and a high overall quality of life.
While Ottawa is best known for its high concentration of civil servants, its tech industry is growing rapidly and is the region's second-largest employer, after the federal government, Mr. Patacairk says. Sixty-one per cent of Ottawa's labour force have postsecondary degrees, making it the country's most educated work force, he adds.
Housing is more affordable than it is in Toronto, Vancouver or many of the U.S. cities vying for the Amazon campus and the region's smaller relative size means less time spent in gridlock.
Although it doesn't have the "cool cred" afforded to its larger Ontario counterpart, Mr. Patacairk notes that Ottawa does offer a plethora of entertainment options, from concerts to sporting events. Its proximity to hiking trails and ski hills will appeal to the outdoorsy and, in the winter, its residents can skate along the Rideau Canal, the world's largest skating rink.
"We have the advantage of being right beside our friends in Quebec, many of whom are French-speaking," Mr. Patacairk notes. "People come here and embrace that. They go on both sides of the river. So the National Capital Region has a lot to offer in that respect."
Greater Toronto Area
The Greater Toronto Area's bid checks a lot of the boxes on Amazon's wish list. Its population – 5.9 million for the census metropolitan area, according to the latest census data – well exceeds the minimum of one million. Pearson International Airport is easily accessed via the UP Express and the region has a concentration of high-quality universities churning out graduates, including in tech.
But another, more intangible aspect of the Toronto region also bears mentioning – its multiculturalism and growing global prominence as an epicentre of cool. Toronto finished fourth in the Economist's 2017 rating of the world's most livable cities. Its West Queen West neighbourhood was named the second-coolest neighbourhood in the world by Vogue magazine, which dubbed its main thoroughfare a "veritable artery" of art galleries, indie patisseries and other "hallmarks of hipness."
"Toronto is generally seen right now as a cosmopolitan, cool place that is very committed to innovation and creativity," Toronto Mayor John Tory says.
But traffic congestion and sky-high home prices could detract from the regional bid, which includes Mississauga, Brampton and the Halton, York and Durham regions, and is being led by Toronto Global, a new agency created to attract foreign investment to the area.
Toronto is Canada's second-least affordable housing market after Vancouver, according to a June, 2017, report by RBC, with the average household spending 45.9 per cent of its income to cover ownership costs for an average house bought in the first quarter of this year.
The city is also second to Vancouver in terms of congestion, according to a 2016 report from the Toronto Foundation. Torontonians love to complain about the Toronto Transit Commission – one need not look further than the popular Twitter hashtag "#TTCfail" for proof. In spite of that, the American Public Transportation Association bestowed its "outstanding public transit system of the year" award on the TTC this year and Mr. Tory notes that plenty of transit improvements are on the way and would be completed by the time the Amazon headquarters would be built.
Housing costs and traffic congestion are simply the byproduct of Toronto being a desirable place to live, Mr. Tory says. "We're attracting a lot of talent from around the world, which is why the population is growing. That contributes to increased demand for transit, but it's the same reason why we're able to rank very high on the talent list," he says. "You can't have it both ways."
Vancouver is not only geographically the closest major city to Seattle, but also the home of Amazon's biggest satellite office in Canada. As such, the folks running its bid seem comfortable with their chances. Maybe too comfortable.
"They already know a lot about Vancouver – enough, we feel, to want to locate here; it is now a matter of showing them how they can do so," said James Raymond, a research manager at the Vancouver Economic Commission (VEC) who is also the Project Execution Lead for the HQ2 bid.
The city does tend to speak for itself. In August, The Economist ranked it the third-most livable city in the world. That said, a Collier's report on office space for the second quarter of 2017 found its regional vacancy rate was 6.3 per cent, with a per-square-foot cost tied with Toronto for the most expensive in the country.
It has one of the best tech-talent pools in the country, with approximately 75,000 tech workers in the Metro area.
For all that, despite Mayor Gregor Robertson's vocal support, the Vancouver bid has been relatively quiet, leaving other cities to wrestle for the spotlight. "With more time and resources, we may have opted to run a formal public and stakeholder engagement campaign," Mr. Raymond wrote in an e-mail, though he said a recent survey put public support for the bid at about 88 per cent.
Also on VEC's plate at the moment are Vancouver Startup City events and a future study on the city's film and TV industry. According to Ingrid Valou, spokesperson for the VEC, "there are a lot of people really pushing themselves to ensure that none of our other work suffers as a result" of the Amazon bid process.
If former Windsor mayor Eddie Francis were pitching Amazon chief executive Jeff Bezos on locating a $5-billion (U.S.) complex in the southern Ontario city and neighbouring Detroit, he would start with a challenge.
"My question to Amazon is, 'What will be your legacy from this decision; do you want your legacy to be as a catalyst for renewal?'" said Mr. Francis, who left politics three years ago and is now CEO of WFCU Credit Union in Windsor.
In what's viewed as a long-shot bid, billionaire Dan Gilbert is leading the only cross-border pitch for Amazon's second headquarters from two cities with a combined population of approximately 900,000 and rusty, industrial roots. Windsor Mayor Drew Dilkens and city officials of all stripes declined to comment on the proposal.
Windsor has teamed up with its U.S. neighbour to win high-profile events in the past, including jointly hosting an NFL Super Bowl in 2006. But a relatively shallow talent pool and infrastructure issues, such as limited mass transit, mean the two cities are underdogs in the Amazon sweepstakes, according to international-business specialist Andreas Schotter, who previously made decisions on factory locations while working at Volkswagen AG.
"Amazon needs to locate in a globally connected community, one with high livability and a diverse urban experience," said Mr. Schotter, a professor at the Ivey Business School at the University of Western Ontario. "Detroit is not a global city, it is a regional centre focused on autos … and Windsor and Detroit will find it difficult to sell livability."