Luring Amazon: Could Des Moines Metro Area Handle 50,000 More Workers?

DES MOINES, IA — The capital city threw its hat in the ring and delivered a proposal Wednesday to be the location of the second corporate headquarters for Amazon. Cities had until Thursday to submit bids to lure the e-commerce giant and its expected $5 billion investment to its first major expansion project outside Seattle.

Des Moines is a good location to locate corporate headquarters — dubbed by Amazon as HQ2 — because the community is home to a growing tech sector, Mike Swesey, senior vice president of economic development for the Greater Des Moines Partnership, told WOI-TV. "It's one of our fastest growing sectors, so we'll start putting the infrastructure in place to support that sector much like we did the insurance and financial services sector."

Amazon announced last month that it was seeking a location for its expansion that will employee 50,000 people whose salaries will average more than $100,000 a year. The company detailed qualifications for the area it plans to select: a highly educated workforce, nearby colleges and universities, a commute of 45 minutes or less, close access to highways, available mass transit and an international airport.

And that the community have a million residents.

Des Moines, with a capital city population estimated at 215,472 in July 2016, according to the U.S. Census, swells to almost 635,000 counting area suburbs, but still is less than half the size of the smallest of the 15 cities presumed to be contenders for the Amazon project.

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CNBC reported Wednesday that more than 100 cities expressed interest in being the site for Amazon’s $5 billion investment — for which it in turn is likely to seek billions in tax credits and other incentives. Many of those communities are below the population threshold of 1 million.

Des Moines, though smaller than some other communities who want to host the company, should be considered, Swesey told WOI, because tech giants Google, Apple, Facebook and Microsoft already have shown the Des Moines metro area to be a worthy location, so the community has experience hosting big business. He added that having young and well-educated population were pluses, along with the fact that since the cost of doing business is competitive, Des Moines is attractive due to being 15 percent below the national average in that area.

The Greater Des Moines Partnership reportedly suggested two locations within Des Moines and some areas in suburban communities, WOI reported.

While landing a top tier employer like Amazon could be a feather in Des Moines’ cap, it also could come at a higher price for current residents, one group says.

The online housing company Apartment List studied the likely impact on annual rent costs in the 15 major cities likely courting the corporate behemoth HQ2. It found price increases would be likely to spike by 0.5 percent to 2 percent in those cities if Amazon were to move in — and that’s on top of projected annual rent increases averaging 3.1 percent annually for the past 10 years. That could put employees without Amazon's six-figure salaries in a tight spot when seeking housing.

In Seattle, Amazon's home base, the company has grown from occupying 9 percent to 19 percent of the available prime office space in the past three years. Its 8.1 million square feet of space exceeds that of the next highest 43 companies in the city combined, according to the Seattle Times. Apartment List found the new pool of renters that flocked to the city for high-paying Amazon jobs “coincided with rent increases that outpaced almost all other U.S. cities and the fastest growth rate in home prices nationwide.”

Apartment List analyzed data from the U.S. Census and Bureau of Labor Statistics to arrive at those figures and to determine how much new housing a metro can build, the amount of slack in the housing market and the impact of an influx of high-wage workers. It concluded the result would “cost renter households up to $29,581 over the next ten years."

It also found, based on current job growth rates, that an additional 50,000 Amazon workers and 66,250 supplementary workers to be added over ten years could lead to many metros adding more jobs than new housing. Apartment List said only 10 of the nation’s 50 largest metros produced enough new housing to keep pace with job growth in recent years. The number of households in the U.S. grew by 11.2 million over a 10-year period between 2005 and 2015, while only about 9.9 million new housing units were constructed during that same period.

The Apartment List study also found that smaller metro areas with lower wages or inadequate housing stocks would see rents rise the most from the Amazon HQ2, while metro areas with large housing stocks would see less impact on rents, closer to the 0.5 percent projected increase.

“The data showed that locations with the largest rent increases are smaller metros, with populations between 1.3 million people and 2.8 million people,” according to its findings.

Amazon has said it will study the city's bids and announce its desired location in early 2018.

Image via Pixabay