Why Houston Lost the Amazon Race

HOUSTON – (By Ralph Bivins, Realty News Report) – Mayor Sylvester Turner called it correctly.

It’s a “wake-up call,” the mayor said, and “there’s a lot of work that still needs to be done.”

Mayor Turner was bemoaning the embarrassing defeat Houston suffered in the Amazon HQ2 sweepstakes. On Thursday, the Seattle-based firm announced the 20 cities selected as finalists for the massive second headquarters of Amazon. Houston was not on the list.

Amazon’s HQ2 was the biggest economic development trophy ever: a $5 billion, 8 million-SF campus with 50,000 well-paid employees.

The Greater Houston Partnership spearheaded an effort to lure Amazon to what they called the Innovation Corridor – a conceptual four-mile stretch along the spine of the Metro rail from downtown to the Texas Medical Center.

But it didn’t work and Houston ended up as the largest city in the nation to be left off Amazon’s short list.

Why did Houston fall short? A look at Amazon’s RFP (Request For Proposals) offers some insight.

Amazon’s RFP Requirements and Suggestions:

RFP – Population over 1 million: Houston accomplished.

RFP – International Airport within 45 minutes: Houston accomplished.

 RFP – Urban or downtown campus: The premier location for Amazon would have been the former Exxon headquarters, a 45-story, 1.3 million-SF tower at 800 Bell. Shorenstein Properties bought the building in 2013 for about $50 million. Exxon Mobil vacated the building, but a planned redevelopment has been delayed since the bottom fell out of the Houston office market. The Exxon building is near METRO Rail and a number of surface parking lots ready to be developed as additional Amazon office space. The Downtown environment has the amenities and density to appeal to a Millennial work force. Plus a number of high-rise multifamily buildings are under construction within walking distance. The recently christened “Innovation Corridor” proposed by the Greater Houston Partnership included the 1939-vintage Sears store at 4201 Main. But Houston’s Innovation Corridor, which stretched over four miles did not appear to meet Amazon’s preference for urban density, although it allowed Houston to tout the Texas Medical Center and Rice University. A pure CBD bid would have been better. Result: Houston Missed the Bullseye.

RFP – 500,000-SF Ready for Occupancy in 2019: The aforementioned Exxon Mobil building probably could have been reconfigured to deliver a lot of space to Amazon’s deadline. Or, Lord knows, there’s plenty of sublease space available in downtown Houston. Or the old Post Office on Franklin Street could have been an option. Other high-profile private bidders, Midway’s East River and McCord’s Generation Park would have faced a tough deadline to conjure up 500,000 SF of space with all the corporate campus trappings, but it was possible. Again, the Central Business District seemed like the best option. Result: Houston Missed the Bullseye.

 RFP – As much as 8 Million-SF Ready for Occupancy by 2027 or Beyond: This is a huge requirement. But 2027 is a long way off. There is no doubt in my mind that Houston’s development community could have created a world-class campus in 9 years. Result: Houston was capable.

 RFP – Amazon Campus Must Have On-Site “Direct Access to Rail/Train, Subway/Metro, Bus Routes”: Houston’s failure to build a sufficient METRO Rail was enough to ensure that Amazon would reject Houston. The short-sighted leadership of the past failed us. Voters keep electing rail opponents like U.S. Rep. John Culberson. When we did finally build something, Houston took the cheap route, and built the METRO Rail at-grade, which took away lanes from cars and became a safety issue. No matter how many times METRO officials claim the accidents are the fault of dumb drivers or dumb cyclists, the fault lies with the failure to build an elevated train system. For political reasons, the rail expansions went to places like Northline Mall, which hasn’t been a major destination retail location since the 1960s. The Katy Freeway tragedy – ignoring the rail right-of-way on the north side of the freeway and opting to build the world’s widest freeway instead – was one of the biggest errors ever committed by Houston leadership. Another error is about to be finalized – putting the terminus of the bullet train from Dallas at Northwest Mall near Highway 290, instead of downtown. So we compromise again. Amazon does not want its 50,000 HQ2 employees driving to work. Result: The sins of the past doom us functionally and create a flashing neon sign saying: Podunk.

 Of course, Amazon is seeking a ton of incentives, like tax abatements or free land. And whatever the winning city gives Amazon, it’s probably worth it.

Amazon says its existing headquarters in Seattle generates these side effects: 233,000 room nights filled at Seattle hotels annually by Amazon visitors; 24 restaurants on-site at the HQ, annual compensation to its 40,000 employees is $25.7 billion and an estimated 53,000 jobs created by other Seattle companies in the Amazon orbit.

It’s been too long since Houston scored a big win in the economic development game.

Austin and Dallas are on Amazon’s short list. Why isn’t Houston?

Has Houston become Milquetoast City? Decades ago, when I wrote the breaking news story for the Houston Chronicle reporting that Exxon had selected Irving, Texas, instead of Houston, for its corporate headquarters, GHP chairman Randall Onstead was angry. It was an insult to Houston, he said. Earlier, Kenneth Schnitzer, founding chairman of the old Houston Economic Development Council was a fiery leader in tough times.

Are we devolving into a city where it’s OK to lose? Where it’s OK to give a huge contract extension to our losing NFL coach, Bill O’Brien?

Houston can’t become accustomed to losing. We can’t go home teary-eyed and hide under the covers because we lost the Amazon race. Houston is home of Mission Control. In this city the first domed stadium was built, and Astroturf was created. We built the world’s largest medical center.

Houston needs a big economic development win. Leadership talent exists in this town. May the right leader for these times rise up, figure it out, and score a major victory for Houston, Texas. And soon.

Commentary by Ralph Bivins, Editor of Realty News Report.

Jan. 22, 2018 Realty News Report Copyright 2018