On September 7, Amazon announced that it is searching for a location for a second corporate headquarters (HQ2) in North America and would be accepting proposals from interested cities and regions. This announcement has generated significant buzz since the new site is expected to eventually employ 50,000 people and could provide a tremendous economic boost. The deadline for submissions was on October 19 and Amazon received 238 proposals from across North America. While we will have to wait until 2018 to learn the final decision, it is an interesting exercise to examine what Amazon has done for Seattle and what it could do for other U.S. and Canadian cities.
Seattle’s Economic Success Comes with Skyrocketing Housing Prices
There is no doubt that Amazon has been a major catalyst in Seattle’s success over the last decade. The company has grown from 7,500 total employees in December 2002 to 341,400 globally today, with more than 40,000 of those jobs based in Seattle. Amazon moved its headquarters to downtown Seattle in 2010, and since then the population of Seattle has grown by 10%, more than double the growth rate in the national population.
Amazon estimates that between 2010 and 2016 its investments in Seattle contributed an additional $38 billion to the city’s economy, boosting GDP growth. Seattle’s annual real GDP growth has averaged 3.07% since 2010, nearly a full percentage point higher than the national growth rate. In 2016, Seattle’s economy surged by 4.3% compared to the 1.5% expansion for the entire U.S. Since 2010, the city has created over 282,000 jobs, a whopping 16.5% increase (compared to 13% nationally), and the unemployment rate has dipped from 10.3% to 4.2%.
Not surprisingly, this rapid growth has led to a surge in housing demand and pushed up home prices. Seattle’s median selling price for single-family homes is tenth highest in the nation, out of 153 metro areas surveyed by the National Association of Realtors. In 2016, the median price was $412,000 compared to the national median of $236,000. According to the S&P CoreLogic Case-Shiller Home Price Index, the growth in Seattle home prices has surged just in the last two years. Prices soared by 10.7% in 2016 (the fastest growth rate among the 20 cities the index covers) and 9.7% in 2015; this compares to growth rates of 5.4% and 5.6% for 2016 and 2015, respectively, for the S&P 20-city composite.
Metropolitan areas with more than one million people
A stable and business-friendly environment
Urban or suburban locations with the potential to attract and retain strong technical talent
An urban or downtown campus
A similar layout to Amazon’s Seattle campus
A development-prepped site
Using these criteria, we can identify the U.S. metropolitan areas with more than a million people. We can then use two economic variables to target cities that would benefit most from hosting the new headquarters but could also reasonably absorb a large number of new residents. To do this, we screened on cities where the median home price is below the national average and the unemployment rate (using the 2016 average) is above the national average. This yielded a list of 12 metro areas that would stand to benefit from housing the new Amazon headquarters.
Table 1: U.S. Cities
2016 estimated population*
Unemployment rate 2016
2016 median home price
New Orleans LA
* Population estimates based on U.S. Census Metropolitan Statistical Area data
Sources: U.S. Census Bureau, U.S. Bureau of Labor Statistics, National Association of Realtors
A few things stood out on this list. First, every city on the list, with the exception of Houston, is located east of the Mississippi River (note that both New Orleans and Memphis are on the Mississippi). Also, five of the cities are located in the southern U.S. (Atlanta, Birmingham, Houston, Memphis, New Orleans), while five are situated in the Rust Belt (Buffalo, Chicago, Cleveland, Detroit, Pittsburgh).
The skew towards the eastern half of the U.S. would appear to be a good diversification move for Amazon. In addition, as a group, the Rust Belt cities present some interesting possibilities.
These former manufacturing hubs, with the exception of the greater Chicago area, have all seen declining or meager population growth for more than 25 years. The hardest hit cities have been Buffalo and Pittsburgh, with population declines of 4.5% between 1990 and 2010. Along with Cleveland, whose population fell 1.2% during those two decades, the population declines have continued since 2010. In all five of these cities, population growth since 2010 has been well below the national average, with population declines in three of the five cities.
Once called the Factory Belt, representing America’s dominance in heavy industrial manufacturing, the trend toward global deindustrialization in the late 20th century hit this region hard. Becoming home to the company that has revolutionized the retail industry through technology would usher in a new era of technological innovation, bringing with it renewed growth and energy.
Cities North of the Border
Amazon specifically opened the selection process to metro regions across North America, so it’s not a given that the new headquarters will be in the United States. Using the same screen as for U.S. cities (population over one million, home prices below the Canadian national average, and unemployment rate above the national average), three Canadian cities make the grade.
Table 2: Canadian Cities
CAD Average home price (9/2017)
USD Home price
Unemployment rate (2016)
Sources: The Canadian Real Estate Association, Statistics Canada
Located in the province of Alberta, both Calgary and Edmonton have the disadvantage of geographical proximity to Seattle. Montreal, on the other hand, is an interesting choice, given its location in the southeastern part of Canada, in relative close proximity to major U.S. northeastern cities. Political instability related to the separatist movement of the 1980s and early 1990s has now subsided, and the city has seen a business and cultural resurgence in recent years.
All In the Running
It appears that all 15 cities identified above have submitted bids, either related to their specific metro area or as part of larger state or regional proposals. Obviously, Amazon will base its final decision on a wider range of economic factors than we have isolated here, as well as the vision for the new site as described in the various proposals. But imagining the potential benefits of this move, while acknowledging the negatives, is still an interesting exercise.
VP, Associate Director, Thought Leadership and Insights
Sara Potter is responsible for developing applications that facilitate the analysis of global markets at a macro level, highlighting FactSet’s vast benchmark and economic content sets. Since joining FactSet in 1999, Ms. Potter has also managed the economic database development team, where she was responsible for the integration of third-party economic content as well as the development of FactSet Economics data. Ms. Potter received a M.A. in International Economics and Finance from Brandeis University and holds a B.A. in Economics and French from Dartmouth College. She is a CFA charterholder.