Millions of square feet of developable land, a list of business incentives and a fast-growing economy could make the Santa Clarita Valley the best hope of Los Angeles County when it comes to catching the eye of Amazon.com Inc.
The e-commerce giant announced last month that it is inviting major metropolitan areas to pitch potential sites where the company could create a second headquarters on par with the capacity of its massive Seattle campus.
The vision is for a second HQ to host a huge workforce to handle the tremendous growth Amazon anticipates over the next 10 to 15 years.
Enter the city of Santa Clarita, named the most business-friendly city last year and 2008 by the Los Angeles County Economic Development Corp. The city could become the featured choice as the LAEDC and representatives of other business groups, various companies and elected officials get set to present a unified countywide bid as the Oct. 19 deadline nears for formal proposals.
“We certainly are participating in this process, and believe that the Santa Clarita Valley is a leading location in the L.A. region, given the availability of land, workforce and business friendliness,” said Holly Schroeder, chief executive of the Santa Clarita Valley Economic Development Corp.
Amazon envisions taking up to 8 million square feet of commercial buildings that are sustainable, fiber connected, close enough to walk among and situated on 100 developable acres.
It also wants to be surrounded by a high-tech labor force from which it can hire 50,000 employees, particularly software development engineers. The area needs to have the housing and infrastructure to support that workforce, plus public transportation of all forms, but particularly rail lines at the new site to move employees.
Amazon would like to locate in an area with a population of 1 million or more within a 30-mile radius, an international airport within a 45-minute drive and a network of major highways within a couple of miles.
The communities around the second headquarters should offer a high quality of life and plenty of culture, education and recreation, and state and local government should provide generous incentives – “critical decision drivers” – the company said.
Amazon, in turn, points to what its 33-building presence has given Seattle: $3.7 billion in buildings and infrastructure, 40,000-plus jobs, $43 million for the city’s public transportation system, and 233,000 hotel rooms occupied last year from visitors and guests. Indirectly, the company says its presence has brought $38 billion of investment into the local economy, 53,000 jobs and numerous Fortune 500 companies or division headquarters.
Conventional wisdom appears to have accepted the likelihood that Amazon will pick a city on the East Coast for its second HQ, giving some balance to its national profile.
That hasn’t stopped hopefuls from around the country and region – the Orange County city of Irvine seems to be every bit the candidate of any that might come out of Los Angeles.
A key to any bid in the county could be the Santa Clarita Valley, which can offer land – about 8 million square feet spread over several new and existing business parks.
They include the Center at Needham Ranch, with 4 million square feet; a 132-acre entitled site where CBRE Group Inc.’s Trammell Crow Co. and Clarion Partners in New York just bought a 54-acre chunk to develop; Southern California Innovation Park, with about 1 million square feet; and Valencia Commerce Center with another 3 million square feet.
And Newhall Ranch, proposed by Aliso Viejo-based Five Point Holdings, would bring an additional 11.5 million square feet of commercial and industrial space.
Newhall Ranch’s space is not necessarily contiguous, Schroeder said.
That’s not a definitive requirement by Amazon, although the company has said the buildings should be close enough to “foster a sense of place and be pedestrian-friendly.”
Existing buildings and infill sites could also work, the e-tailer said.
“(Amazon knows) this is a lot (to ask for),” Schroeder said, “so they’re trying to say, We’re open to a lot of solutions to our needs. I think they’re trying to encourage creativity and that they’re open to a variety of solutions.”
Other local sites have found their way into the news – the nearly 500-acre Fairplex in Pomona and the 46-acre site of the former Aerojet Rocketdyne Holdings Inc. plant in Canoga Park (see related item in Silicon Beach column, page 8), an idea put forth by L.A. Councilman Bob Blumenfield.
Chris Tilly, an urban planning professor at UCLA’s Luskin School of Public Affairs, said he thinks Amazon’s executives want a dense area with an existing and efficient public transportation system that gets employees to and from their campus so the company doesn’t have to help with that.
That would mean the Santa Clarita Valley and Los Angeles would have to increase the public transportation infrastructure for such a large workforce, he explained.
“I think the transportation element is a serious problem,” Tilly said. “You either need density or you need the transportation, so the company can picture having a large collection of people easily accessible to headquarters facilities. Once you say dense, you’re not talking about these areas.”
Carrie Rogers, who is leading the county’s proposal effort as vice president of business assistance and development at the LAEDC, said the county as a whole meets all of Amazon’s criteria, including public transit.
“We’re at a point where (the system) can handle what Amazon wants, but the good news is (the new headquarters) is not going to happen overnight,” Rogers said.
Santa Clarita does offer public transportation into downtown Los Angeles, but it’s not an extensive network such as in urban, denser areas. However, while those urban areas have transit, they might not have enough land for what Amazon envisions.
Companies searching for a location often want things that conflict with each other – such as an area where they can reduce costs but also where they can hire top talent, explained Andy Shapiro, partner in site selection firm Biggins Lacy Shapiro & Co., based in Princeton, N.J.
“The decision-making process is inherently contradictory and involves balances and tradeoffs,” Shapiro said. “The key to making location decisions is understanding where the balance is. No one is going to find one place which has straight A’s.”
Amazon’s decision to put its proposal out to bid from the start has spawned mass speculation among cities, counties, states, real estate brokers and site selection firms. Companies don’t typically go public with location searches until they have narrowed down the potential sites to just a few, he said.
Amazon’s decision for a public process reminds him of an auction, and it’s creating a circuslike atmosphere.
“And that could be what Amazon is after,” Shapiro said. “Amazon has gotten bruised a bit in the workplace for some practices, and this may allow them to gain an upper hand. They’re putting themselves out there as a huge economic generator.”
Amazon also doesn’t spell out its overall objective for the second headquarters, while most companies have clear purposes and goals when searching for a new location, such as wanting to get access to a different geographic region or be in a different political climate, he said.
“Factors for headquarters are very subjective,” Shapiro said, making it hard to speculate the driving factors.
Amazon has also stressed in its proposal request its preference for a technically skilled workforce, specifically one strong in software development engineers, and near to a major university system.
That’s another strength of the county, said the LAEDC’s Rogers. The organization is the region’s lead entity that works to attract companies.
There are 120 universities and colleges in the county that produce more engineers each year than any other county in the United States, she said. However, the LAEDC still needs to highlight which ones excel in software engineers.
Santa Clarita Valley also has a plus in that aspect, with 54 percent of its residents possessing at least a four-year college degree, according to its economic development agency.
Rogers said the county as a whole meets all of Amazon’s requirements but only certain areas will make it into the final submitted proposal.
“We have to be realistic, and make sure sites that have been identified meet every single site criteria and then some,” she said.
Amazon has made it clear that incentives are a big part of the selection process.
But that is not a top strength for California compared with generous offerings other states use to attract companies.
For example, Wisconsin Gov. Scott Walker just signed a bill to give a $3 billion incentive package – mostly in cash – to Foxconn Technology Group, a subsidiary of Taiwan’s Hon Hai Precision Industry Co. Ltd., to build a flat-screen plant that could eventually employ 13,000 people.
Amazon, in its proposal, quotes it could potentially spend $5 billion on the second headquarters over 15 to 17 years. It has spent $3.7 billion on its Seattle campus.
“The initial cost, and ongoing cost, of doing business are critical decision drivers,” the company wrote.
Sid Voorakkara, deputy director of external affairs for Gov. Jerry Brown’s Office of Business and Economic Development, or GO-Biz, said Brown is very responsible with what the state does with public money, and does not provide companies with dollars upfront as subsidies based on promises.
Examples of what the state does offer include the California Competes Tax Credit, New Employment Credit and others.
“When you make an investment in new hires or capital, that’s where California provides these economic incentives,” Voorakkara said.
He said the state uses its other strengths and assets, such as its major seaports that provide access to Asia and Latin American markets, a highly skilled workforce, and other industries and businesses that are here already to attract similar companies.
GO-Biz will provide help as needed to the individual areas submitting proposals, he added, or compile a proposal for the entire state, if that’s preferred.
“The governor sees this as a valuable opportunity for California,” Voorakkara added.
In Santa Clarita Valley, business incentives exist in the form of a lighter tax burden.
It has no gross receipts tax, no business license fee, no utility user tax, no payroll tax and the city offers a use tax rebate program.
Despite that, Schroeder knows that the LAEDC group will have to address California’s stereotype of not being business friendly, and reverse it, if possible.
“California has been labeled as not being business friendly,” Schroeder said. “So, we need to overcome that perception, and that perception is often an expense-driven analysis. I think a company like Amazon looks at (other factors) more than that. We need to emphasize the entirety of the package – the cultural element that would contribute to their success if they were in the L.A. region.”
Carol Lawrence is a staff reporter for the San Fernando Valley Business Journal, a sister publication of the Los Angeles Business Journal.
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