Amazon’s search for its ultimate HQ2 location is drawing to a close. Amazon’s search team made a visit to Chicago last week to check out potential sites and personally hear the city’s pitch. But as the naming of the winner nears, there’s been more than a little resistance to the sweepstakes. Activists have become increasingly vocal about negative community impacts like rising home prices and rents, and low-income resident displacement. Economic development experts have been decrying the giveaways (in the billions) for Amazon, which may never be recouped. Those are good reasons to oppose Amazon in your city.
But there’s an even bolder claim to be made — we don’t need Amazon. We’re good.
So says Nishu Thukral, CEO of Pangea Money Transfer, a mobile platform for instantly sending money from the U.S. to persons overseas. Thukral and Pangea area both based in Chicago, one of the 20 finalists for the HQ2 prize. Thukral joined the business four years ago as COO and has used the service himself to send money back to his family in India. The business has since grown to serve hundreds of thousands of customers in America, sending hundreds of millions of dollars to people worldwide. And he’s quite satisfied with Chicago as a base of operations. “Chicago has as good a talent pool as any city,” said Thukral in an interview. “With schools like the University of Chicago, Northwestern, the University of Illinois-Chicago and others, Chicago has excellent access to tech talent. Chicago’s in a good position for future tech growth.”
But it isn’t simply about the talent pool for Thukral; his market is international. He likes Chicago’s growing access to venture capital, and the ability to build a world-class tech company “without the distractions” that come with other tech hubs. Thukral likes where Chicago is today, bursting beyond its manufacturing roots and embracing the new economy. “Chicago is definitely a younger tech community,” he said, compared to Silicon Valley, Boston, Washington, D.C. and others. Thukral views that as a strength. “Chicago’s tech scene is developing organically, and will likely develop its own Google or Facebook. The environment is right, the capital exists, and it’s only a matter of time. I hope Pangea is on that trajectory.”
Thukral may be onto something. A recent report by professional services giant KPMG asked more than 800 global technology leaders for their opinion of what cities would be recognized as a leading global tech innovation hub over the next four years. The top 10:
That’s right, Chicago was ranked eighth internationally by global technology leaders, and behind only New York and Washington, D.C. in the U.S.
Another recent report by commercial real estate giant CBRE assessed tech talent for the top fifty metro areas in North America, and found that Chicago was sixth in North America in terms of tech talent pool size (more than 140,000 in the tech talent market, behind the Bay Area, New York, Washington, D.C., Toronto and Dallas/Fort Worth) and fourth in the production of new tech talent, as measured by tech degree completions at local universities (following New York, Washington, D.C., and Los Angeles). For a metro of its size, Chicago showed up as an affordable market for a tech startup. Assuming a sample tech firm with 500 employees and utilizing 75,000 square feet of space, CBRE estimated a one-year cost of about $42 million in rent, and tech, non-tech and management wages, ranking it 19th out of the 50 North American metros evaluated.
Venture capital investment is rising in the Chicago area. Geographer and economist Richard Florida recently wrote about VC investment by metro area and found that Chicago ranked sixth in VC investment in 2017 (behind San Francisco, New York, Boston, San Jose and Los Angeles). Florida rightly noted that the gap between Chicago and the top five is large — first-place San Francisco brought in more than $25 billion in VC funding in 2017, fifth-place Los Angeles brought in more than $6 billion, and sixth-place Chicago brought in $1.8 billion — but also noted that “large, dense, diverse and economically advanced” metros are at the forefront of VC investment, and Chicago is certainly in that class. And its transportation assets and general affordability make it an attractive option.
The City of Chicago is already preparing one near-Loop location for tech expansion, and developers are responding. Following Google’s move to a Midwest headquarters in Chicago in 2015, the Fulton Market area just west of downtown is booming with new tech-oriented development. The area is a former warehouse district in the process of being transformed by new office and residential development. McDonald’s will open its new headquarters in the neighborhood this year, moving into Chicago from suburban Oak Brook, and development throughout the area was spurred by the opening of a new Chicago Transit Authority (CTA) train station in 2012.
Chicago still has challenges that could prove to be an impediment to future economic growth. Although Chicago’s violent crime has dissipated somewhat in 2018, it still makes troubling headlines. The fiscal performance of the city, county and state leave much to be desired. And Chicago is among that group of Rust Belt cities with demographic challenges that are a legacy of its transition from the old manufacturing economy to today’s modern one. An economy that continues to improve may be the saving grace for each of the city’s challenges.
And Chicago may not need Amazon to make it happen.