Houston Should Not Be Surprised Nor Disappointed It Did Not Make the Cut in the Amazon HQ2 Sweepstakes

by CoyDavidson on January 22, 2018

Houston Was Never Going To Be A Candidate For Amazon HQ2 And It Shouldn’t Need A Participation Trophy

Houston was never going to be a serious candidate for the location of the second North American Headquarters for Amazon, we all knew that and if you didn’t believe that, then you were just being a loyal “homer.”

Greater Houston Partnership CEO Bob Harvey called Amazon’s Houston snub a “wake-up call” for the city. That I agree with! The so called snub was the fact that Houston did not even make list of the twenty finalists. I for one was not surprised that Houston was not among the finalists, the largest city not to make the cut.

I have lived in the Houston area all my life save and except 5 years in Austin attending the University of Texas in the early 1980’s. I have practiced commercial real estate in Houston for 27 years. I have been involved in real estate transactions in quite a few major cities around the country five of which are Amazon’s list and I think Houston is truly a great city, most Houstonians do think it is great city, but that is not necessarily the consensus perception around the rest of the country, so get over it Houston, particularly if Amazon ultimately picks Austin or Dallas. Austin by the way is considered one of the handful of favorites depending on who you listen to, along with Dallas which has a proven track record of attracting major corporate relocations in the last several years.

Is Houston a World Class City?

Beauty is in the eye of the beholder, so the answer to that questions depends on who you ask? Way back in 2011 I wrote an article about Houston’s image problem, that post caught some people’s attention and even landed me an interview on the radio program Houston Matters to discuss that very subject.

I talk to to commercial real estate professionals and business people all over the country and not everyone is naive to all the dynamics of the Houston marketplace and the inherit strengths of the Houston economy. Houston is the energy capital of the world, home to NASA’s Johnson Space Center, has a truly “world class” medical center and one of the most important ports in the nation. People and companies are going to continue to move to Houston because it is a job creation machine for numerous reasons. Houston’s image has improved in my opinion, but it still has work to do. Hurricanes that drop 50 inches of rain on your city and damage over 100,000 homes don’t help.

Houston was in recent years home to the second most Fortune 500 headquarters in the United States, but in 2017 with twenty (20) Fortune 500 HQ’s ranks fourth behind New York City (64), Chicago (34) and Dallas-Fort Worth (22). The vast majority of Houston’s Fortune 500 headquarters are oil and gas concerns and a rebound in energy prices or the right M&A activity might add one or two in coming years but Houston appears likely to given up that bragging right in Texas permanently to our neighbors to the north. Their is your real economic development wake up call.

Austin continues to evolve into one of the country’s major tech hubs. We all know the story of Dell Computer and it’s success in Austin, and technology giants such as Apple, Facebook, Google and Oracle while not headquartered there, all have significantly expanded their presence and employee count in the state capital in the past few years. Austin isn’t just attracting technology companies from elsewhere, there are also starting and growing there.

So Why Didn’t Houston Make the Amazon HQ2 Cut?

Long time Houston real estate journalist Ralph Bivins noted that Houston’s city leaders really missed the mark with the site they chose to submit to Amazon and while that can be debated among real estate and economic development professionals, their were other important criteria ( public infrastructure, educational institutions, the tech scene and government incentives ) for Amazon where Houston just really didn’t measure up, and correcting those issues are going to require some long-term initiatives. Plain and simple, Amazon just wasn’t a viable prospect for Houston, so I am not surprised at all that it was not among the twenty finalists.

The Houston area has no shortage of attractive submarkets to propose a suburban corporate campus, The Woodlands, Energy Corridor, Sugar Land, even Clear Lake depending on the industry type. Let’s not forget the Houston area is home to one of the largest corporate campuses in the country, Exxon-Mobil and while it is not their corporate HQ which happens to be in DFW, Exxon Mobil has way more employees in Houston than anywhere else in the United States because the energy talent is here.

The consensus opinion about technology firms is that they prefer larger cities with dense urban cores that offer the most attractive jobs and draw talented young people. If Houston is going to get serious about attracting large companies from outside the city, desiring an urban location, particular technology companies which are driving office leasing activity in the United States, then it has some issues to address. Amazon just taught Houston this lesson.

Houston may not ever be a real player to attract major information technology firms, Compaq computer was a home grown company but they are long gone, purchased by HP in 2002. Houston isn’t lacking in human capital when it comes to technology talent which has historically been concentrated primarily in the energy and medical sector. Houston had been among the leaders in STEM (science, technology, engineering or mathematics) job growth among major metros prior to the energy downturn.

Houston is a “pretty cool” city, it is just that not as many as we care to admit outside of our own residents perceives it to be. The “cool factor” is an issue whether we want to believe it or not. So go ahead Houstonians be proud of your city, we should be, just recognize our city leaders, business people and residents have a lot of work to do, if we want to be the city who routinely makes the short list of the cool companies in the innovation economy looking for a new home base or a new city for expansion.

Jeff Bezos grew up in Houston, he knows what the city is about, He was never going to put a second HQ here, more warehouse space is likely! Making the final 20 cities considered would have been a participation trophy. So don’t sweat it Houston, just learn from it. Houston has some real assets in terms of healthcare, life sciences, aerospace and other engineering fields to leverage. That is where the focus should be in order to get the next big win.

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