September 13, 2017 3:55 pm
Updated: September 13, 2017 4:30 pm

The downsides of Amazon choosing a Canadian city for its second headquarters

WATCH: Amazon wants to build a second HQ in North America and Canada wants in. Marketing and branding expert Tony Chapman offers his thoughts.

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City leaders across North America are frantically trying to woo Amazon into selecting their cities as the home of its new $5-billion, 50,000-employee mega complex — though winning such a lucrative bid could have its own negative impacts for smaller Canadian cities.

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Amazon announced last week its intention to build a second headquarters in addition to its Seattle office and will be soliciting bids from cities across the continent, but large metropolises aren’t the only regions vying to make an offer.

American and Canadian cities alike have placed themselves in the running to play host to the formidable tech giant, with Vancouver, Winnipeg, Edmonton, London and Toronto already expressing interest. While there are obvious advantages to becoming Amazon’s second home, the new addition could send economic shock waves into less robust economies.

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“The city would have a right to be concerned and intimately involved in the process of planning where such a complex should go,” explains Richard DiFrancessco, an associate professor with the University of Toronto’s Geography and Planning department.

While he explains that bringing in a company like Amazon would have a plethora of positive impacts, it would require a great deal of planning, flexibility, and ultimately money from the municipality.

READ MORE: Toronto to bid for Amazon’s second North American headquarters

DiFrancessco explains that beyond the lush tax incentives any city courting the e-commerce king would need to offer, Amazon would need to build its giant complex on a wide berth of open space. “The city would ultimately have to pay to link infrastructure to it and taxpayers would potentially pay very dearly. It amounts to, I’m sure, millions of dollars per kilometre.”

Craig Patterson, the director of Applied Research at the University of Alberta’s School of Retailing, says that very few cities can handle Amazon’s new headquarters. He explains that Amazon will need to staff its 50,000-person branch, meaning that Canadian-based tech firms run the risk of having their employees lured away by their new neighbour.

READ MORE: Vancouver making a bid to host Amazon’s new headquarters

Patterson adds that 50,000 employees likely means a population increase of up to 100,000 people, depending on how many employees move to the area with their families or spouses. Beyond that, there’s the issue of increased housing costs as a result of an influx of high-paid labour.

WATCH: Amazon looks for a new city for second HQ

“You’re going to have a lot of high-earning people moving into a region. In San Francisco, it’s a struggle to find affordable housing. It’s been a struggle for those who don’t earn those high incomes,” Patterson explained.

The example of Google’s headquarters in Mountain View, Calif., demonstrates that there are very real challenges that come with becoming home to a multinational tech company. Google’s 24,000 employees make up approximately 9.7 per cent of Mountain View’s workforce and the company owns over 10 per cent of the city’s taxable property, according to a report by The Verge.

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As a result, in addition to high property values and added congestion on commuter streets, Google has developed a rather tense relationship with the Mountain View city council, who have often pushed back on Google’s expansion ambitions.

Patterson says that in a smaller city, a company the size of Amazon is likely to play a large role in municipal decisions.

READ MORE: Possibility of hosting Amazon North American headquarters has Alberta mayors excited

“It would almost be like giving them a chair on city council,” Patterson stated. Furthermore, he adds that Amazon’s reputation precedes it when it comes to negotiating. “Amazon is an aggressive company and I think it’s going to be aggressive in everything they do.”

Lastly, from a cultural standpoint, Patterson says that the city selected for Amazon’s new headquarters may undergo major changes. Since Amazon launched in Seattle in 1994, the company’s presence has had a drastic impact on the city’s culture.

READ MORE: London eyes bid for Amazon’s second headquarters

Patterson explains that the influx of people and industry into the city changed the languages that were primarily spoken there, forced the city to improve the transit system and even changed the type of restaurants available in the city centre.

“The face of the city could be transformed,” Patterson said.

© 2017 Global News, a division of Corus Entertainment Inc.

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