The highly coveted second corporate headquarters of e-commerce giant Amazon.com would be a welcome addition to Austin, but the $5 billion project undoubtedly would produce more housing and transportation woes in one of the country’s fastest-growing regions, said panelists at a ULI Austin event.
When moderator Scott Flack, president of Austin-based commercial real estate developer Live Oak–Gottesman, asked whether the second headquarters of Seattle-based Amazon would be a good thing or a bad thing for Austin, panelist Jeff Coddington, senior vice president in the Austin office of commercial real estate services company JLL, responded that it would be both good and bad.
“It will be a good thing on the employment side,” said Coddington, a resident of Austin since 1980. “Obviously, there’s going to be a lot of growing pains that go along with that. You need only look at the footprint they’ve made in Seattle, and the kind of collateral damage and collateral benefits that have come out of that.”
Coddington added that Seattle has “seen that movie”—referring to the substantial growth triggered there by Amazon—and Austin would be the sequel if it were to land the Amazon project, nicknamed HQ2.
“Personally, I’d love to see it here,” Coddington said. “It’d be transformational for our city and certainly transformational for any city that gets it. If we’re fortunate [to win HQ2], it’ll come with some challenges, too.”
Another panelist, Dan Campbell, principal at Austin-based real estate developer Endeavor Real Estate Group, said that if Amazon picks Austin for HQ2, it would represent “Dell 2.0.” Dell Technologies, based in the Austin suburb of Round Rock since 1994, employs about 12,000 people in the Austin area—making it one of the region’s largest employers—and pumps hundreds of millions of dollars each year into the regional economy. Dell has also spawned dozens of local entrepreneurs.
Alongside the positive “Dell 2.0” effect, Amazon’s HQ2 would exacerbate the Austin area’s existing problems with housing affordability and traffic congestion, according to Campbell. Local leaders would be key in addressing how the Austin area would accommodate HQ2, he added.
Amazon has received 238 proposals from North American communities trying to attract the project. Amazon has said its second headquarters eventually will generate as many as 50,000 jobs; that figure does not include any spin-off jobs—perhaps tens of thousands of positions—that would be created at other companies.
Given that Amazon is a tech innovator with a pile of cash and is constantly adapting to complex challenges, Flack said, the company could help ease any difficulties caused in bringing tens of thousands of jobs to Austin.
For her part, panelist Marcy Phillips, vice president of development in Austin and Denver for multifamily real estate company AMLI, is jazzed about the prospect of Amazon choosing Austin for HQ2. Chicago-based AMLI owns and operates apartment developments in the Austin and Seattle markets.
“We are benefiting hugely from Amazon [in Seattle], so this is a wonderful thing if Austin gets it,” Phillips said.
Many prognosticators view Austin as a top contender for HQ2. Amazon is expected to make a decision about the project in 2018.
Beyond HQ2, the ULI Austin panelists said that Amazon’s dominance in e-commerce in particular and the e-commerce explosion in general have affected—for better or worse—various sectors in commercial real estate in Austin and elsewhere.
In the office sector, Coddington said that e-commerce has had a “hugely positive” impact on absorption in the Austin market. He cited several expanding employers in Austin that depend greatly on e-commerce, such as online coupon provider RetailMeNot, e-commerce software developer Volusion, and online shopping service Stitch Fix.
While the office sector is riding the e-commerce wave in Austin, the retail sector has in many cases been swamped by online shopping and in other cases has been buffeted by it.
Campbell said that the worlds of online and brick-and-mortar retailing continue to collide, with some traditional retailers still figuring out how to compete in e-commerce.
Traditional retailers like Best Buy that are succeeding with both the brick-and-mortar and online models might not be adding the same number of stores that they opened 20 years ago, he said, but they’re also not initiating a slew of store closures.
Furthermore, Campbell pointed out that formerly online-only retailers like eyewear purveyor Warby Parker and clothing seller Bonobos have been venturing into brick-and-mortar retail to enable shoppers to get a close-up look at products.
Within AMLI’s 150,000 square feet (14,000 sq m) of retail space in mixed-use projects in the Austin market, Phillips said, more e-commerce retailers are renting space so that people can, for example, try on clothes. But those shoppers aren’t walking out of a store with their purchases, she said. Rather, the merchandise is being shipped to them.
“That’s just the nature of the beast right now,” Phillips said.
Amid the ongoing shift in retail, grocery-anchored shopping centers and high-end shopping centers are doing fine, Campbell said, whereas developments in the middle—namely power centers—are being squeezed.
Campbell said his company, Endeavor, is focusing on retail developments in urban and suburban markets that deliver “really unique” experiences and a rich mix of offerings like retailers, restaurants, and service providers.
“Is retail changing? Completely,” he said. “Personally, I’m pretty darn excited about the change because I think it’ll create more sustainable projects that really become alive and eventually become worth more than the projects we’ve been doing all throughout the past ten years.”