Briggs: Indianapolis neighborhoods aren't ready for Amazon

It's good that the mayors of Indianapolis and Fishers are collaborating to persuade Amazon that it should open a new headquarters in Central Indiana. But I'm not convinced that city-suburb relations is the most important dynamic at play here.

Indianapolis Mayor Joe Hogsett and Fishers Mayor Scott Fadness can talk all they want about the region's business climate, increasingly tech-savvy workforce and proximity to universities. They can argue, correctly, that investments in everything from tech startups to bike trails have made metropolitan Indianapolis a more attractive place for companies and workers.

Yet, some of the conversations most indicative of a city's readiness for a company such as Amazon happen outside the purview of mayors. They occur at the neighborhood level in community meetings, churches, coffee shops and breweries.

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Based on how several Indianapolis neighborhoods have responded to recent development proposals, it would be hard to conclude that Indianapolis is the right city to host Amazon's next headquarters.

Before I explain, it's helpful to consider why Amazon.com Inc. is looking for a new headquarters in the first place. It's not typical for companies to open multiple, equal headquarters. But that's what Amazon has said it will do with HQ2, its name for a projected $5 billion investment that would create 50,000 jobs over time.

Amazon earlier this month opened up its search process to any metro area with at least 1 million people and a willingness to dig deep for taxpayer incentives. Cities and regions have until Oct. 19 to submit their proposals to Amazon, which is expected to make a decision next year.

Amazon has stressed that there will be no fundamental difference between HQ2 and its existing headquarters in Seattle. That raises an obvious question: Why doesn't Amazon just invest another $5 billion there and keep hiring more people on the talent-rich West Coast?

The answer is that it can't, or at least Amazon executives have concluded it is not an option.

Amazon already occupies a mind-boggling chunk of Seattle office space — 8.1 million square feet, with plans to expand to 12 million square feet within five years, according to The Seattle Times. The newspaper recently reported Amazon has consumed 19 percent of prime office space in Seattle, a greater share than any other company in any other city.

The combination of Amazon's mass and Seattle's restrictive land-use policies have led the company to decide it's time to start expanding elsewhere. Based on that experience, it seems likely that Amazon will want to choose a city with unlimited growth potential so it doesn't have to launch a sweepstakes for HQ3 in 20 years.

This is where Indianapolis starts to fall short, despite having otherwise promising assets to offer.

Let's assume that HQ2, like the Seattle headquarters, would require at least 12 million square feet of real estate. To put that into context, the entire Indianapolis office market, including the suburbs, consists of 36 million square feet of rentable space, according to CBRE Group. The addition of Amazon would necessitate a building boom on a scale that Indianapolis has never seen before.

That's just commercial real estate. Amazon's effect on housing might pose an even greater challenge.

Housing affordability, for now, is one of the best arguments that Indianapolis can make to a company such as Amazon. The company's employees grumble about the lifestyle and cost of living in Seattle and would appreciate a market with more suburban-style housing options, according to a recent Bloomberg article.

In that regard, Indianapolis seems like a top-tier option. The median sales price in Marion County in July was $138,450, according to MIBOR Realtor Association. That's an increase of 6.6 percent over the previous year, yet still low enough to make Indianapolis one of the nation's most affordable big cities.

That's great for people moving here because of good jobs. But a massive influx of high-earners might not be so good for the people who already live here — and eventually could cause some of the same problems Amazon's workforce is having in Seattle.

It doesn't take any imagination to see what adding tens of thousands of Amazon employees might do a housing market. That already has happened in Seattle, where the median sales price topped $700,000 this year and has been soaring to new records month after month.

To be sure, Seattle's housing crisis is the result of more than just one big company (it's also home to Starbucks Corp., and Microsoft Corp. is in the suburbs). But residents of Seattle and Indianapolis have one key similarity that bodes ill for affordable housing: an aversion to density.

Seattle's density phobia is baked into its public policy. More than half of the city's land is zoned for single-family use, making it difficult for developers to add units fast enough to keep pace with the growth of Amazon and other companies.

In Indianapolis, Downtown housing prices already have risen to a level that shuts out all but affluent buyers and renters. Prices in other popular neighborhoods, such as Fountain Square and Broad Ripple, are moving in a similar direction.

One simple solution to rising prices is to build more homes — particularly apartments, condominiums, townhomes and rowhouses. For every proposal to construct such buildings outside of Downtown, though, there are NIMBYs (an acronym for not-in-my-backyard activists) ready to fight increased density.

Recent multifamily housing projects that have collapsed under the weight of neighborhood opposition to density include the proposed redevelopment of an Irvington property called the Coal Factory into apartments and a TWG Development plan to build a four-story apartment building at a former AT&T site in Meridian-Kessler (Milhaus Development has since taken over the site and won a court victory to build apartments there).

Developers have even had to battle residents Downtown, where density already exists. J.C. Hart and Strongbox Commercial are constructing a five-story apartment complex in the commercial 500 block of Massachusetts Avenue, but they had to overcome objections from neighbors in Ransom Place to win approval.

My point isn't to pile on NIMBYs — heck, I might even be a NIMBY. It's rational to want to maintain the area around your home as it was when you decided to live there.

What I'm saying is that Indianapolis can't earnestly chase Amazon if it also wants to remain a land of single-family homes. In the event that Indianapolis' long-shot pitch to Amazon succeeds, it would mean fundamental change for the city and its neighborhoods.

Hogsett and Fadness have obvious incentives to compete for companies the size of Amazon. Indianapolis' neighborhoods have not demonstrated a commensurate willingness to accommodate that level of growth.

Regardless of what happens, Central Indiana residents should be proud that the region is being mentioned among top contenders for Amazon. But this also is a moment for introspection. If Indianapolis neighborhood leaders aren't interested in allowing new types of development in their backyards, then Amazon should look elsewhere for a city that it won't outgrow.

Call IndyStar business columnist James Briggs at (317) 444-6307. Follow him on Twitter: @JamesEBriggs.