Three improvements Indianapolis can make to claim Amazon’s second headquarters

There's a lot of buzz around the country, wondering where Amazon will build it's second headquarters. Many cities, including Indianapolis, are competing for the great honor, but only one will claim the prize. On this episode, we sat down with Associate Faculty in Real Estate, John Snell, MBA'77, who helps us unlock three improvements Indianapolis can make to bring Amazon to the Circle City.

Show Notes:

MATT:

Amazon continues their search to build their five-billion dollar, second headquarters facility – a business venture that brings tons of excitement within the Indianapolis community. Back in January of this year, Amazon announced that Indianapolis was one of 20 cities, carrying the potential to host the massive e-commerce and tech headquarters. So what does this city need to change in order to make Amazon a home? On this episode, we’re going to explore three improvements Indy can make to claim Amazon’s 2nd headquarters. Let’s get to the podcast…

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MATT:

Welcome to another episode of the ROI Podcast, presented by the Indiana University Kelley School of Business. I’m your host, Matt Martella alongside my pal, Associate Dean of Academic Programs, Phil Powell. Real quick, before we jump into our topic today, I want to say congrats to you Phil and a HUGE thank you to our listeners - this past weekend, the ROI Podcast hit a major milestone. We are officially over the 10,000 download mark since this podcast first aired back in April of 2017!

PHIL:

(Remarks)

MATT:

And again, this would not be possible without you, our listeners. So from the bottom of our hearts, thank you! And as this show grows, we would love your feedback. So head to our podcast on iTunes and leave a review! Rate our show, tell us what you enjoy or leave a topic of interest you want us to explore because at the end of the day, it’s all about you – our audience.

Okay Phil, as we know, there’s still a lot of anticipation for many major cities in the US, wondering where Amazon will call its second home. Among cities like Denver, Chicago, New York and Atlanta – we find that Indianapolis has also made the short list of “finalists,” so to speak.

PHIL:

And though it may be a surprise to many around the country, Indy offers some great amenities to a company like Amazon. We’re centrally located in the country with quick access to major markets like Chicago, Detroit, Columbus, St. Louis and Nashville, we have a major airport close by that houses the 2nd largest FedEx hub in the country, and our tech industry has experienced major growth – largely attributed to the big tech players who’ve made Indy home; companies like SalesForce, Angie’s List, and Interactive Intelligence, to name a few. So we find that Indiana has the potential already, but with these other great cities in the running, there’s improvements to be made.

MATT:

And that raises the question, what do we need to do, as a city, to acquire Amazon H-Q two? We sat down with one of our own faculty members, John Snell, who carries over 37 years teaching experience at the IU Kelley School of Business and is the owner and president of Snell Real Estate Evaluation Company - a commercial real estate consulting, appraisal, and brokerage firm. He helped us analyze commercial real estate in Indianapolis that could hold the key to make this city beat the rest.

The first improvement Indianapolis needs to make, according to John, is we need to increase the number of rental properties downtown. According to the U-S Census, between 2011 and 2016, Indianapolis has seen the demand for rental housing surpass the demand of those looking to buy a home. In fact, since 2011, as the renter occupied housing, here in Indy, increased by just over 1% while owner occupied housing went the other direction, shrinking by the same amount. So we’re seeing a trend that’s not just here, but across many Mid-west cities, like Toledo and Cleveland. People would rather rent than buy a house inside city limits. And John Snell knows why…

JOHN SNELL: The Millennials have, by far, you know, to a greater extent selected rental versus owner-occupancy. So we have a far lower supply of homes, single-family, on the market and that's changed the urban setting as well... I can live downtown, work downtown, you know, I can maybe not even have a car if I chose not to, now in this city. And you can stay in that environment. So those are huge changes to real estate.

PHIL:

And there are a number of reasons why we’re seeing the Millennial Generation prefer renting versus buying a home. One is that this generation carries the largest amount of student debt then previous generations. According to the Federal Reserve, at the end of the first quarter there was $1.44 trillion in outstanding student loans. It’s hard to add a $150,000 mortgage on top of a $40,000 student loan. Yet, that does not fully explain why. According to an article posted by the City Journal, the demand to live downtown is rising globally and the technology industry is a major contributing factor. According to Mario Polese from the City Journal, well-paying jobs are making their way back to the city. So mix that into the social scene and Mario says people want to be able to walk across the street to get a coffee or sandwich at midnight or a beer around noon at the pub next door – without having a commute. It’s the access to these amenities that’s also driving the demand of downtown living.

MATT:

And that leads us to the second thing Indianapolis can do to claim Amazon’s second headquarters – Indy needs to increase the lifestyle services available to downtown residents.

JOHN SNELL: So as tech looks at the kind of space they want and, you know, the kind of space they want to be housed in, the market has had to completely change, you know, what they offer, what they provide. And then as those new users come in, they tend to be more progressive. They tend to be younger and they have a different life-style. They are very much more likely to live urban. So it's amazing what the domino effect can look like from just the seed of your question. How much does that change? It changes everything.

MATT:

Going back to your point, it seems as though people who come downtown want access to variety. Just working downtown, how valuable is it to have 30 different restaurants within a few miles of your office?

Phil:

(Response)

MATT:

And even though we have major attractions like the Colts, Pacers, major concerts, and an active social scene – there are problems the city needs to address to keep young professionals downtown the majority of their career.

JOHN SNELL: I don't think a city can sustain itself, sustain this level of growth if you grow out of it by the time you're 28 or 30 and move away or move to the burbs.

In our interview, John made reference to education as one major improvement – how the Indianapolis Public School district needs to work on keeping younger, higher paid families from making an exodus to the suburbs. Yet, it’s not just Indy, inner city schools across the country have a hard time competing with suburban districts. According to the Indiana Department of Education, IPS received a much lower rating than the suburban districts surrounding the city. So our urban community needs to work with the school board to help build an attractive education system for both teachers and students. As these younger professionals settle down to raise families, it’s no longer the question of what hot dog stand is open at 3-AM, but it’s what school will set my kid up for the most success?

PHIL:

Of course, there’s more than simply education to improve upon. John says the ease of access to grocery stores and retail shops also play a big factor for keeping families downtown.

JOHN SNELL: So for example, just a grocery store in downtown Indianapolis is really something we've only had significantly for the last five years. It's been unusual. We don't have a growing retail. Circle Center Mall has been kind of suffering. There's still a lot you look at and say there's a lot that needs to get better. And it's probably services and just dealing with, can you sustain that core into a more diverse demographic market.

PHIL:

Improvement is the key here, and as a city, we’re moving in the right direction. Just this past February, the Indianapolis Business Journal published an article titled, “Visit Indy reports sixth straight year of rising visitor spending.” According to Visit Indy, the economic impact of visitors in 2016 was $5.2 billion dollars. That’s up from $4.9 billion made in 2015. So we are making downtown fun. If we can blend the attractions for guests and retail for permanent residents, we will discover a sustainable urban environment that keeps families from leaving.

MATT:

Finally, the third improvement Indianapolis can make to give Amazon a second home is market to a new employee talent pool. Since there is a rise in people moving to downtown environments, according to the U-S Census, why not leverage that in marketing campaigns? Make downtown feel more attractive to the younger generation.

JOHN SNELL: I think we used to be a much less dynamic place to live. So whether it's the continued expansion of the sports franchises, but the liveliness of downtown, the fact that it's a more livable urban environment, I think it's now made us more competitive for younger talent. And I think bringing younger talent into a market changes the city. And all of a sudden, it attracts users like the Amazon interest in Indianapolis, would be based upon being able to attract that employment base.

PHIL:

And it’s the younger generation that brings life to a city because they’re more inclined to stay out until midnight at the restaurants or take the risk of starting a trendy boutique in a re-developing part of the city. It’s also this generation that will take over as executives and managers – which in turn will change how business is even done in the long run. Attracting this young talent to the city gives major companies, like Amazon, a large talent pool they can build their company on. Indianapolis has a big advantage because we have such a close proximity to major universities, like IU, Purdue, Butler and Notre Dame, just to name a few. All of which produce some of the brightest minds in the country. So we need to draw that talent here, in the city so Amazon will draw to us.

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MATT:

So let’s recap. Amazon is on the hunt for a second headquarter location and Indianapolis is on their list. Each city offers great amenities, however at the end of the day, only one can house the multi-billion dollar e-commerce giant. If Indy is going to be that city, there are three improvements we must make. First, we need to increase the number of rental spaces available downtown. The demand for urban rental property is rising. People want work and social activities in close proximity, without commuting. Second, we need to continue making improvements to lifestyle services available to downtown residents from education to retail in order to keep families from making an exodus to the suburbs. Finally, we need to continue to leverage the demand for downtown living – create marketing campaigns that draw the brightest minds to the circle city; ultimately giving Amazon the best pool of talent to grow their organization.

As always, thank you Phil and thanks for listening to the ROI Podcast, presented by the IU Kelley School of Business. I’m your host Matt Martella, see you next time.

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