Friday, September 08, 2017

Amazon Cometh..... or not

So two days in a row.  It won’t be a pattern, but it's hard not to comment on the economic development news of the day/month/year, namely that Amazon dropped an RFP of sorts to build a 2nd Headquarters outside of Seattle, somewhere in North America. It has set off a frenzy among cities and regions thinking they will land what Amazon promises to be a huge new job creator. Something on the order of 50 thousand net new jobs which is a number that huge for even the biggest metro regions and hard to imagine here. Thus it is that Pittsburgh is seeking to join the fray. 

Why did Amazon do this? I really think they were encouraged by the very recent news of how the site selection for new Foxconn production facility went. In the end,  Wisconsin was picked for the potential new site, a ‘win’ that came from what is reported to be up to $3 Billion in public incentives, a number and a deal that economists are only beginning to debate the efficacy of.  Seeing that states are still very much engaged in (pick your industry of choice) chasing, Amazon saw they should be able to extract a deal at least as good as Foxconn received, potentially much bigger. Given they are reaching post-saturation in Seattle, growth has to be placed elsewhere and most likely they can get somebody else to pay for it. It all becomes a no brainer to throw out the bone and see what comes back.  The full project size of what Amazon is teasing is far larger than Foxconn’s planned impact, think about that. 

So to be clear… everyone wants Amazon, but they have laid out some incredibly difficult criteria.  I suppose that if you are Amazon, you can ask for (and expect) to get a pony because it’s hard to see how their full criteria could be met by any site in any region. You can read their full RFP yourself here, but here are just a few of the highlights. 

They want some normal things: access to an airport and major highways to begin. They need a lot of space, and I mean a lot. More on that later but right there the choices in Pittsburgh get very narrow. This is all akin to the not too distant site selection Westinghouse Nuclear went through when they wound up deciding to move to Cranberry vice some alternatives including Charlotte, NC.

But this is Amazon and they also clearly spell out they want a downtown or downtown-like location. They want access to the major population center, someplace pedestrian friendly and access to “rail, train, subway/metro" and then lastly "bus routes". That makes this a very different type of site selection than is typical for projects this scale. I will note they have bus routes listed there last, but hold that thought as well. 

So if you take their criteria at face value, or honestly if you take each criteria at about half their asked for values you pretty much rule out anything in the greater Pittsburgh region, let only anything in the City of Pittsburgh.  How much space do they want?  One option is 100 acres of ready greenfield, and the potential to build 8 million square feet of office space How big is 100 acres of greenfield? The former civic arena site is advertised as 28 acres and is probably not even that, and is far from being a greenfield.  8 million square feet?  The US Steel Building is ~2.5 million square feet of usable office space.  So if you think you are going to get close to those criteria, it won’t be anywhere near Downtown or environs.  Oakland? Stop there. You will have to look to those locations again out toward Cranberry, or the Airport, but then you have to go back to the criteria to be close to a surfeit of public transit.

The long under development Almono site is obviously going to come up as an option. The site is big enough… 178 or so acres.  Not exactly a greenfield, but much work has already gone into it.  It is hard to see how the site meets the pedestrian friendly or public transit access criteria, but let's say they are not going to be too strict on either of those requirements. I think the big issue with the Almono site is that so much effort has gone into planning the site to include mixed uses and integration with the nearby neighborhood already, to go with a big corporate campus would almost require throwing all that away and starting over.  Again, possible I suppose but hard to see at this point.

But you think I’m being all Briem-naboby, which isn’t the case.  If indeed Pittsburgh has any chance of getting the Amazon site it has to start with some reality check based on what they have very publicly stated they are looking for. Otherwise, any attempt to bring Amazon here is just for show. That, and I have the location.


If you really want to plop down a big new campus, close to Downtown, not a bad commute from the airport, close to major roads and potentially ready for redevelopment, I say it would have to be the former Western Penitentiary Site on the Ohio River.   The site only recently shut down and would have to be cleared and prepared (not a trivial task).   If the site is not quite big enough, there are a lot of potential expansion spaces nearby that should work. Take a look:

A great location along the river is a big plus.  Public transit is a problem, but Amazon is clearly looking for better public transit than we have to offer. Their criteria lists rail, train, subway/metro before adding in ‘bus routes’.  The Western Penitentiary site….  The state would have to promise to fund the expansion of the North Shore Connector a few more stops. Seems like a big thing, but given all they are asking for that may be one of the easiest things to pull off.  So now you have transit right into Downtown.  Walkability is a little weak, but you can point out the bike trail along the river that also goes right to the site and extends already out to Millvale.  You could stretch it and call it the Lawrenceville to Amazon Bikeway, think what Larryville real estate prices will look like in a decade?  Personally if this ever came to pass I'm buying up all the Millvale real estate I can afford. 

Also this fits into another narrative.  If you really dig into the states decision to close the prison here, you will see that the data did not really support Pittsburgh being the one site to shut down. Marginally it should have been SCI Waymart. But in the end, the decision came down to close the site in Pittsburgh because it was beleived it had a greater, and unquantified, redevelopment potential. Well, here is that redevelopment potential on steroids. 

So there you go.  Of course, the real killer in all this is just where I started.  If Wisconsin was willing to put up ~$3 billion for Foxconn, you have to believe the incentives for this project will be much higher. Pennsylvania was long listed as a short list contender for the Foxconn project, but you really so no sign of that at the end and that is likely in part that Pennsylvania had no ability to play with those kind of $$$.  So where would it get a bigger fund to pull this off.  That I just do not know. Probably they need to pass a full budget in Harrisburg first. The great irony of this all is that the era of states putting up huge sums of money into ad-hoc tax competition chasing new investment was ushered in by Pennsylvania itself when it 'won' the competition to bring Volkswagen to New Stanton in 1976.  So old is new again, but Pennsylvania no longer has the resources to compete in the game it created. 


Blogger Bram Reichbaum said...

If it takes a while for the NCX to come online, we can experiment with a water taxi to its present terminus.

If they'd ever want to expand and maybe even do R&D, is the green part of Brunot Island on the table? It could be their little Cape Canaveral. If we could get them "development rights" it's not billions in tax credits, but a nice amenity.

If this happens, do McClure and Eckert gentrify? Or would we have to gentrify them in order to make it happen? Paging the URA? 😬

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