Dallas fares well in operating cost comparisons for Amazon’s HQ2
Dallas fares well in a comparison of costs of operating Amazon's second headquarters in 20 finalist cities, according to an analysis prepared by a global site selection firm.
The Boyd Co., a New Jersey-based location consultancy, compared the costs of payroll and benefits, electricity, amortization, property and sales tax for an “Amazon HQ2-like” corporate headquarters with 50,000 employees and 8 million square feet of Class A office space. Startup and relocation costs were not considered.
Dallas ranked seventh cheapest among the 20 Amazon (Nasdaq: AMZN) HQ2 finalists, with a total annual operating cost of slightly over $7.1 billion. Show Full Story
That’s 22.5 percent lower than the $8.7 billion annual operating cost estimate in New York City, the most expensive city on the list. But it’s 7 percent higher than the $6.6 billion annual operating costs in Nashville, the least expensive city among the HQ2 finalists.
Austin, the only other Texas finalist city, has a projected $7.3 billion operating cost for HQ2, or 3 percent higher than Dallas.
Other expensive cities include Boston, at $8.2 billion; Newark, New Jersey, at $8.1 billion; Los Angeles, at $8 billion; and Washington D.C., at $7.9 billion.
Check out this chart for comparisons to other cities.
The operating cost comparison underscores the need for incentives in expensive markets like New York, Boston and Newark, said John Boyd, principal of Princeton-based The Boyd Co.
The operating cost breakdown in Dallas includes $6.9 billion for labor (payroll and benefits), $13.6 million for electric power, $81.3 million in property and sales tax, and $142.9 million in amortization. Amortization reflects the annual cost of amortizing office construction costs over 25 years at an interest rate of 3 percent.
Operating costs in New York City include $8.4 billion for labor, $31.6 million for electricity, $115 million for property and sales tax, and $213 million in amortization.
“Labor costs tend to dominate the equation,” Boyd said. “When we’re talking about a corporate headquarters, we’re talking about nonexempt executives, and there tends to be less of a huge variance for these highly recruited executives.”
Dallas also has an edge on construction costs, Boyd added.
“Construction costs for a project of this size is enormous amounts of money,” he said. “That’s a big advantage that Dallas has versus highly unionized, highly regulated non-right-to-work markets like Boston, New York, L.A. and Newark. Construction costs are significantly higher in those markets versus Dallas.”