Why Amazon needs state fairgrounds site: location, location, locationTech Companies

For Amazon.com Inc., the real estate was key.

The Seattle-based e-commerce juggernaut is expected to be the occupant of a massive 3.8 million-square-foot warehouse center to be built for $400 million on 78 acres of the former Michigan state fairgrounds site in Detroit at Woodward Avenue and Eight Mile Road. If completed, it would be the company’s largest in the region, anchoring a key chunk of real estate that has perplexed developers for years.

Although Amazon (NYSE: AMZN) has an outpost at the Tri-County Commerce Center in Hazel Park just a couple miles away, nothing with the scale and location in the immediate area could come close to matching the vacant fairgrounds property.

The co-developers, Detroit-based Sterling Group and Dallas-based Hillwood Enterprises LP, declined to comment and have not responded to a request for one, respectively. They are not seeking city tax incentives, officials said last week.

Peter Burton, principal of Bingham Farms-based developer Burton-Katzman LLC, said the state fairgrounds site is a solid fit for Amazon because of its access to freeways and other major thoroughfares like Eight Mile and Woodward. There are few sites in the region with that size and kind of freeway access.

“I get it, from a logistical standpoint,” Burton said.

Amazon takes about 140,000 square feet at the Tri-County Commerce Park (the former Hazel Park Raceway) and 575,000 square feet at Liberty Park Commerce Center, the former site of the Liberty Park recreation complex, both developed by New York City-based Ashley Capital. The Hazel Park property and Sterling Heights properties are what’s known as”last-mile” facilities, which are the final stops Amazon’s packages make before reaching their ultimate destination: consumers’ doorsteps.

The fairgrounds building, on the other hand, is for shipping, sorting and other processing.

“The reality is all the different facilities around town, they all serve different purposes,” said Luke Bonner, senior economic development adviser for Sterling Heights and CEO of Ann Arbor-based economic incentive, real estate and economic development consulting company Bonner Advisory Group LLC. “This is a pretty large facility. If you think about the size of facility vs. the amount of employees, this will be a highly roboticized plant, which leads me to believe it will be a sorting type of facility.”

Susan Harvey, senior vice president in the Canton Township office of Ashley Capital, said Amazon’s parking and square footage needs mandated a site as large as the fairgrounds.

“I know the fairgrounds site is going to be attractive because they need so much parking,” Harvey said.

For example, the Pontiac Silverdome site — where Amazon’s 3.5 million-square-foot facility is rapidly rising — is expected to employ 1,500 and have 2,150 parking spaces. That’s one worker for every 2,333 square feet. Detroit’s would have one worker for every 3,167 square feet.

What Amazon found at the fairgrounds was a city happy at the prospect of 1,200 new jobs — as controversial as those jobs have been in recent years, with concerns over worker treatment — and a large swath of land at its northern entryway developed with the third-largest company in the world planting a flag there.

Bonner said the decision to plot the facility within Detroit city limits has advantages for Amazon, which has an office location in the 150 West Jefferson building downtown but also decided not to put its so-called “second headquarters,” or HQ2, in Detroit and Windsor after a hard sell from the two cities across the Detroit River from each other.

“From a corporate standpoint, putting a facility that size in Detroit is fantastic,” Bonner said.

Amazon’s next targets remain to be seen, but Jeff Bezos’ company’s future growth in the region isn’t a speculation; it’s a certainty. It’s just a matter of where the next Amazon building rises out of the ground.

“I’m not surprised anymore,” Harvey said of Amazon’s continuing growth in Southeast Michigan. “I’ve stopped being surprised. There’s another one, another one and another one.”

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