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September 10, 2017 | Forbes
Amazon has set off a firestorm of discussion with its announcement that it’s looking for a location for its second headquarters. Urbanists, economists, and business journalists are debating where they should go next based on the content of an RFP that Amazon put out. While there have been some great pieces analytically weighing the pros and cons and creating objective lists, this will not be one of those pieces. As a long-time Pennsylvanian, I am going to make an unabashedly biased, full-throated case that Amazon should come to Philadelphia.
First let’s deal with the definitions. The Philadelphia metro area is somewhat relevant, but mostly as a secondary source of potential labor. Instead, I'll focus on Philadelphia City, which is contiguous with the Philadelphia County. At 1.5 million people, I would argue the city alone is the most relevant unit of observation. This also crosses Amazon’s required threshold of 1 million people.
What’s important to know about Philadelphia is that it is booming over the last few years. Employment in the city was flat for almost a decade, but since 2013 it has been booming and over the last few quarters has outpaced the U.S. overall. Philadelphia has momentum, and if you look at the past 10 years of data like the NYT did you’ll miss this.
The momentum in Philadelphia is not just limited to the job market, but is if anything more stark in building. As of July, there were 30 high rise buildings under construction. In the center city core alone, there was 4.4 million square feet of commercial and mixed use construction either completed or under construction in 2016. This is on top of another 9 million of residential/mixed use. And all of this is in the dense core of the city, where for many other big cities that have been booming for longer there is less room to grow.
Across the river from Center City is the University City neighborhood where Drexel, the University of Pennsylvania, multiple medical institutions, and Amtrak’s 30th street station are located. In 2016, there were 29 new development projected completed in this neighborhood, totaling 6 million square feet of office, research, academic, and medical space according to the University City District. Job growth in this neighborhood is huge, and also focused in STEM, with JLL estimating 80% growth in middle to high wage jobs from 2008 to 2013.
So that’s 10.4 million square feet of commercial space under construction or completed in 2016, and keep in mind this is not the wider metro area or even the full city, but just Center City and University City neighborhoods.
Indeed, while the recentness of Philadelphia’s boom may seem like a weakness, it is in fact a strength. It means that there is a lot of space and room to grow, and at relatively affordable prices. According to the Center City District, asking rents in the downtown core for office space are $29/sf compared to $82/sf for midtown Manhattan, $56/sf for Boston, and $52/sf for DC.
The low costs are also good news for Amazon workers. According to 2011-2015 ACS data, median gross rent in Philadelphia is $922 compared to the U.S. average of $928. This is cheaper than Denver ($962), Chicago ($965), Boston ($1,320), D.C. ($1,327), and Baltimore ($951).
Philadelphia has other factors that Amazon is looking for too. The city has a major airport, which is undergoing $900 million in capital improvements. Geographically Philadelphia is located in between New York City and Washington D.C., and has a centrally located Amtrak station that can get you to New York in 1.5 hour and D.C. in 2 hours. There are a number of colleges in the City including Drexel and Penn, both of which are investing and expanding. There is also Rutgers and Haverford and many more within the wider metro area. Finally the city has a relatively well functioning transit system, and just in case they need one, there is a port.
Philadelphia also has multiple practical locations that could fit the 8 million square feet that Amazon will require.
These are just some big planned developments. The point is, Philadelphia is planning on expanding significantly over the next few years and even decades, and Amazon would fit nicely in this plan.
There is a broader Pennsylvania story as well. As the Philadelphia Inquirer reported in their discussion of this issue, PA recently approved a $22.5 million package for Amazon just to build fulfillment centers in the state.
The company already has a lot of fulfillment centers in the state. While 50,000 jobs will make them a big player no matter where they go, in Pennsylvania they already are getting favorable treatment, and this would add to that political power.
So that is my case for Philadelphia. It’s centrally located between New York and DC, in a state with a growing number of fulfillment centers, and is a low cost, booming, major metro with an airport, good public transportation transportation, and leading universities. It's a city on the upswing with great assets but lots of room to improve, and Amazon can save money by getting in on closer to the ground floor... but not as dangerously close to the ground floor as with some other post-industrial cities that are just beginning to turn around.
Are there reasons not to choose Philly? Of course. The city's wage tax is onerous, and some of the public services are low quality. The level of trash on the streets and sidewalks in some neighborhoods is really incredible. And Eagles fans are... lets just say, a bit much. But the pros outweigh the cons according to my extremely biased calculations.
Oh and if it's not Philly, then I would suggest Pittsburgh.