It seems like a can’t miss opportunity. Tens of thousands of jobs, billions of dollars in investment and bragging rights as the second home for one of the world’s richest companies.
Amazon’s announcement that it’s searching for a second North American home caused mayors and municipal leaders across the continent to jump at the chance to play host.
A number of Canadian cities have put themselves forward as suitors, including Halifax, Montreal, Winnipeg, Calgary, Edmonton and others.
Much of the talk about potential Canadian locations for Amazon’s second headquarters has focused on Toronto and Vancouver.
But how realistic a possibility is it that Amazon would choose a Canadian city for its new campus, and is it something that cities should want in the first place?
Toronto’s tech tiff
“There’s a raging debate that’s happening right now,” says Bilal Khan, CEO of the Toronto innovation hub OneEleven, and he says there are generally two schools of thought.
There are those who see the potential for a giant like Amazon to come in and suck up all of the tech talent in the city. Amazon has the resources to pay workers higher salaries than any startup company, raising the market value of talent.
“For a startup that’s really, really important,” says Khan. “You think about trying to compete for some of that talent to be part of your company to help your company grow.”
The other side of the argument sees the Amazon bid as a huge opportunity for a city with a growing tech industry.
“We are a world-class city, we are coming into our own, it’s really our time. So we can absorb a company like Amazon,” says Khan.
But for Khan, the argument comes down to a choice between helping a giant like Amazon or building homegrown, Canadian companies.
“Obviously it’s the latter,” says Khan. “Our primary focus needs to be around the long-term economic growth of Canada, and that is going to be predominantly focused on how do we help Canadian companies grow and become the next Amazons and Googles.”
Bill Tam, the president and CEO of the BC Tech Association, says he’s already seen evidence of the kind of wage competition big companies like Amazon can bring when they move in. But he says there are benefits to driving up salaries.
“That’s something we definitely have to be mindful of,” says Tam. “There’s no question that Vancouver is among the highest cost-of-living jurisdictions and having wage levels that start to mirror the cost of living here is a positive outcome.”
Amazon already has an office and a distribution centre in Vancouver, and Tam says the city’s tech community is behind the bid to expand the company’s presence there.
“I think that’s an opportunity that’s too attractive to pass up,” says Tam. “The folks I’ve talked to here in Vancouver all are taking this with the mindset that says this is really an opportunity to galvanize people in our community.”
But it’s not a view shared by all observers. Peter Hall, a professor of Urban Studies at Simon Fraser University, thinks building something as big as Amazon’s second headquarters in Vancouver would put too much pressure on the city’s already scarce land base.
“I think it’s hard to see how Vancouver could capture enough of the benefits and how Vancouver could avoid enough of the negative spinoffs,” says Hall.
Playing the incentives game
With so many jurisdictions entering the bidding process, Amazon’s decision could come down to which location offers the greatest incentives. In its request for proposals, the company explicitly states that it is looking for municipalities to offer tax credits, land and workforce grants, as well as discounts on utilities and municipal fees.
It’s easy to find other examples of locales paying top dollar to attract companies. Electronics giant Foxconn recently chose Wisconsin as the site of a new manufacturing plant after receiving an economic incentive package worth $3 billion US over 15 years.
“There’s nothing new about jurisdictions in Canada offering incentives and structuring tax arrangements and providing infrastructure in order to attract businesses,” says Hall.
But there’s a limit to what can be gained by offering generous packages, he says.
“Attracting key companies … absolutely has economic benefits,” says Hall. “But if it comes at the price of giving away more than you get, then you haven’t gotten out ahead.”
Winners and losers
“I view the opportunity to have an Amazon headquarters in your city as a little bit of a mixed bag,” says James Thomson, the former business head of Amazon Services.
‘It’s pretty staggering what has happened.’
-James Thomson, former head of Amazon Services
Thomson says cities simply need to look at Seattle to see the potential downsides.
“If I look at my experience being in Seattle now for 10-plus years, residential real estate has more than doubled in price, commercial real estate has nearly tripled in price,” says Thomson.
When so many people in a city work for one particular company, especially a company that can pay as well as Amazon, it can create issues of inequality.
“It’s pretty staggering what has happened,” says Thomson. “And for anybody who doesn’t happen to work for Amazon, how do you still live in Seattle?”