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Amazon's HQ2 locations show just how far the suburbs have come

Suburbs, with abundant and less expensive land, are a viable alternative to the congested and expensive urban cores

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It’s a huge win for the suburbs. On Tuesday, Amazon.com Inc. confirmed that it had picked not one but two locations for its planned second headquarters, which it has dubbed HQ2. And instead of choosing downtown-centric locations in either New York City (Manhattan) or Washington, D.C., Amazon picked suburban neighbourhoods in Queens and Arlington, Va.

The world’s largest e-commerce and cloud computing company had launched the competition to host HQ2 in 2017, inviting bids from cities across North America. Amazon dangled the prospect of 50,000 high-paying jobs and billions of dollars in construction spending as bait.

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No fewer than 238 cities joined the bidding frenzy. Many offered huge tax breaks running into the billions of dollars and other incentives to entice Amazon. Earlier this year, Amazon announced a shortlist of 20 cities. Toronto was the only Canadian city to make that list.

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In the end, the high-stakes real estate dating game ended with the suitor choosing two sites for its second home. While many pundits were surprised by the fact that the HQ2 will be split between two sites, even a bigger surprise must be the suburban locations.

The proposed locations mark a high point in the coming-of-age story of the suburbs, which were once viewed as nothing more than bedroom communities for workers who would leave every morning for work in the urban core. The suburbs of the past were single-purpose residential communities peppered lightly with small-scale office and some retail space.

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Today, big city suburbs are often vibrant communities in which people can live, work, relax and play. Clusters of high-rise buildings, which were once an exclusive hallmark of downtowns, are now just as readily spotted in communities far from the core.

The rise of suburban office real estate was popularized in Joel Garreau’s 1991 book, Edge City: Life on the New Frontier. Garreau defined Edge Cities as suburban places with new developments of five million square feet or more of office space, 600,000 sq. ft. or more of retail space, and a total number of jobs that exceeds the number of bedrooms.

Robert Lang, a professor of public policy at the University of Nevada, expanded the definition of suburban office markets. First in Edgeless Cities and later in Beyond Edgeless Cities, Lang focused on the large swaths of rental office space located outside of primary and secondary downtowns.

Lang’s analysis of 13 large U.S. commercial real estate markets revealed that the suburban Edgeless City contained 40 per cent of the office space in the surveyed cities, including New York and Washington, D.C. However, the average across 13 markets hid some of the diversity — whereas 57 per cent of the regional office space in New York was in the primary downtown area, only 29 per cent of the office space in Washington, D.C., was similarly situated.

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The locations mark a high point in the coming-of-age story of the suburbs, once viewed as bedroom communities for workers who would leave every morning for the urban core

Suburban office markets have matured even further since the publication of Edgeless Cities. That Amazon has selected two suburbs (albeit of relatively high density when compared with other cities) for its HQ2 offers further evidence in support of a growing future for suburban office real estate.

A recent study by the CMHC suggests that the benefits of moving to the suburbs for affordable housing options are offset by high commuting costs. That might be true for those who must commute back to the urban core every day for work. But when employers also move to the suburbs, the commute distance and time for suburban residents can decline significantly.

Mississauga, Ont., serves a good example of a balanced suburb, with fewer than 27 per cent of the residents commuting to a different city (mostly Toronto) to work.

By choosing suburban locations for HQ2, Amazon has recognized that the suburbs may not be just bedroom communities. The suburbs, with abundant and less expensive land, are a viable alternative to the congested and expensive urban cores.

Not only can workers find relatively inexpensive housing, but suburban work locations also offer the opportunity for reverse commuting — going against the primary direction of traffic — in peak hours of travel. This transportation capacity will remain underutilized unless high-density suburban employment locations, such as the ones proposed by Amazon, are developed.

Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

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