Is Vancouver better off without Amazon HQ2?

Second headquarters would have put pressure on tech startups, real estate: local CEOs

Amazon.com Inc. announced in November it would expand its presence in Vancouver, adding 1,000 workers to 402 Dunsmuir Street. The tech giant, however, will not be setting up its HQ2 in the city | Jonathan Weiss/shutterstock

Like an online shopper who loaded his cart but couldn’t pull the trigger at checkout, Vancouver’s efforts to prove itself the right fit for Amazon.com Inc.’s (Nasdaq:AMZN) second headquarters came to a premature end this month.

But the region is not exiting the highly publicized HQ2 competition with an empty shopping cart either.

The Seattle-based tech giant announced January 18 it had whittled 238 bids down to 20 – Toronto being the only Canadian city to make the short list.

Despite official confirmation Vancouver was not moving on for further consideration, it appeared the writing was already on the wall for the city months before the short list was released.

In early September 2017 Amazon issued an open invitation across North America to make a pitch to host the tech giant’s HQ2.

The new offices weren’t meant to be a mere regional satellite. Members of its C-suite would have the option of working at either HQ1 or HQ2.

And Amazon made it clear it planned to invest US$5 billion in the economy over 15 to 17 years while hiring as many as 50,000 employees.

Its Seattle presence includes 40,000 employees across 33 buildings occupying 8.1 million square feet.

The Vancouver Economic Commission (VEC) assembled a regional team including representatives from the B.C. Ministry of Jobs, Trade and Technology; the City of Vancouver, the City of Surrey and the Metro Vancouver Regional District.

The Vancouver campaign did not offer cash, land or additional tax incentives in its bid, calling these incentives a “race to the bottom.” Instead, it campaigned on the region’s access to talent coming out of post-secondary institutions and overhead savings gained through lower health-care costs, labour costs and tax rates at the time of the bid.

So could the second headquarters really be just a hop, skip and a jump up the Interstate 5? The proximity could either hurt Vancouver’s bid or play in its favour.

But by November the answer was obvious: Amazon liked Vancouver, but not in that way.

On November 3 the tech giant announced it was expanding its Vancouver footprint by adding 1,000 more workers to its B.C. roster of nearly 2,000.

Amazon had signed a lease for 150,000 square feet at 402 Dunsmuir Street, two blocks from its present downtown location at Telus Garden at 510 West Georgia Street. In its HQ2 request for proposal, Amazon said it required 500,000 square feet of available space upon its Day 1 arrival – a tight fit for a market like Metro Vancouver, hence the VEC’s regional bid.

“We continue to stand 100% behind the Metro Vancouver proposal – the result of an unprecedented effort in regional economic development – which fully demonstrates what Vancouver has to offer any business that chooses to make this region its home,” the VEC said in a statement the day it was announced Vancouver didn’t make the short  list.

VEC manager of research and analysis James Raymond, who led the project execution team for the HQ2 bid, told BIV his organization observed the volume of foreign direct investment (FDI) leads and requests for information had “quintupled in volume” throughout 2017.

“Having Vancouver in the public eye during the HQ2 bid has certainly done us no harm,” he said in an email.

But Raymond added that it’s been difficult to gauge the overall take-away from the bid process.

“It’s important to keep the following in mind: Amazon is not disclosing its reasons for selecting or not selecting a city for the short list, which is quite unusual in the followup for most FDI leads,” he said.

“As such, we can’t tell you about any ‘lessons learned’ from the Amazon HQ2 project, but we hope to seek feedback from Amazon when the time is right.”

Based on the short-listed cities, which also include Boston, New York City and Miami, Raymond said it’s clear bids on the Eastern Seaboard were at a “huge advantage.”

Meanwhile, the prospects of Amazon entering the Vancouver technology scene – on a scale never before witnessed in the region – has been met with a mixed response from local tech leaders.

“Vancouver already has so many unique challenges related to housing, transportation, the cost of living and, of course, recruitment of technical talent – Amazon HQ2 would have put an additional strain on Vancouver’s tech companies and our ability to attract and retain top technical leaders,” Unbounce CEO Rick Perreault told BIV in an email.

“Amazon already has quite a presence in Vancouver, so, fortunately, we’re already reaping some of the benefits associated with having a big player in our city.”

Perreault added that while he’s rooting for the Toronto bid, he said Amazon’s entry into Vancouver would have put exceptional pressure on smaller startups.

Bench CEO Ian Crosby said if Amazon chose Vancouver, he expected local and foreign tech talent to come pouring into the city to meet the increased demand.

“But it would come at a cost,” he said.

“Without a housing strategy in place to deal with the influx of tech talent, HQ2 would have pushed housing demand and prices to the brink, and existing Vancouver residents would have been the first to feel the pinch.”

Canada Drives CEO Cody Green said that although Vancouver seemed to check all the boxes for Amazon – the request for proposal underscored the need for a population of at least one million and easy access to an international airport – he did not believe Vancouver was ever in the running.

“Our proximity to Seattle would have created an immense concentration of Amazon’s operations in the Pacific Northwest and not exposed them to a new local talent pool to the extent a lot of the other contenders could,” he said.

“The footprint necessary to build the HQ2 was also going to be at odds with our relatively high real estate prices compared to other regions.”

Dave Weisbeck, chief strategy officer at Visier, said Vancouver is “absolutely better off” not becoming the home of HQ2.

“The reality of Vancouver’s tech sector is it struggles to break out of either being startups looking to be acquired or an outpost for large U.S. companies looking to creatively bypass H-1B visa limits or acquire talent at a lower price,” he said.

“The reality of corporations is they have centres of gravity where decisions are made, and that is going to be where Jeff Bezos works, which will remain Seattle.” •