Can cities survive a mega-brand move-in?
Large corporations can reshape a city — for better or worse
With so many suitors vying to be the home for Amazon’s second headquarters, the frenzied process has started to resemble a dating reality show — like a Bachelor for cities.
And many giddy cities are indeed proposing rosy economic incentive packages.
“Some governors and mayors have already begun floating subsidies of as much as $7 billion,” [1] according to the Washington Post. Others rolled out creative approaches to getting Amazon’s attention — including New York, which flirtatiously lit buildings Amazon orange around town.
Scrambling in the bid scrum may just be worth it for some cities. Amazon expects the HQ2 project to create 50,000 high paying jobs, invest more than $5 billion in construction and operations, and be a full equal to its Seattle headquarters.[2]
“It’s a stamp of approval and a clear signal to other potential investors and future citizens that the city’s physical construction space, housing and education, workforce talent, infrastructure, and government services meet such a high standard,” said Christine Carmichael, IBM’s Global Industry Marketing Director of Government & Education.
There are, however, downsides to having a company dominate a city. Just ask Seattle.
With its breakneck expansion, Amazon soon turned Seattle into a new company town. Amazon accounts for nearly 20 percent of the city’s total office space.[3]
That’s created gridlock on the roads and sky-high housing prices. Apartment rents this year are 63 percent higher than in 2010. Seattle now also has the nation’s third-highest concentration of mega-commuters — people traveling at least 90 minutes each way to work.[4]
There’s added risk if the mega-company stops being so mega and experiences a sharp business downturn.
In the 1950s, Detroit “Motor City” boasted the highest median income and highest rate of home ownership of any major American city.[5] But the collapse of auto manufacturing there turned the birthplace of the American car industry into a ghost town.
Cities so intertwined with companies also risk stumbling along with their corporate champions.
In Wolfsburg, Germany, Volkswagen employs 60,000 in a town whose working-age population is around 77,000. BASF, a chemicals giant, has 35,000 employees in a modest Ludwigshafen, Germany. Tata Steel still dominates Jamshedpur in India and provides many public services.[6]
The Angle:
How can all these cities currently rolling out the red carpet prepare if Amazon or another large company moves in and spurs rapid growth?
The chosen city will have to invest heavily in infrastructure — the earlier the better. Seattle invested in its public transportation, notably bucking a national trend by increasing its bus ridership.[7]
Smarter roads, underpinned by IoT sensors, could provide the data needed to reduce congestion and pollution, as well as determine where to invest crucial funds for maintenance or new infrastructure. Beijing is using artificial intelligence to predict how bad pollution will be in the city 72 hours in advance, and then identify and reduce those pollution sources.[8]
Learn more about how IBM’s AI, cloud and IoT solutions can help agencies transform their infrastructure and make their public safer.
[1] https://www.washingtonpost.com/news/business/wp/2017/10/23/amazon-receives-238-proposals-for-second-headquarters/?utm_term=.5f3d120c7807
[2] https://images-na.ssl-images-amazon.com/images/G/01/Anything/test/images/usa/RFP_3._V516043504_.pdf
[3] https://www.seattletimes.com/business/amazon/thanks-to-amazon-seattle-is-now-americas-biggest-company-town/
[4] http://www.seattletimes.com/seattle-news/data/seattles-mega-commuters-we-are-spending-more-time-than-ever-traveling-to-work/
[5] https://www.theguardian.com/world/2009/nov/01/detroit-michigan-economy-recession-unemployment
