U.S. Markets close in 4 hrs 37 mins

The best cities for Amazon's new HQ: Moody's

The location of Amazon’s (AMZN) next headquarters is one of the business world’s hottest topics of discussion right now.

Back in September, the company said it was looking for a new city to house a second headquarters — dubbed HQ2 — and that it would be seeking proposals from cities by October 19.

Reuters reported on the day of Amazon’s announcement that Dallas, Houston, Toronto, St. Louis, Kentucky, and Miami were committed to make bids. Cities including Philadelphia and Chicago have sent delegations to Seattle — the location of Amazon’s current headquarters — to find out more about what the company wants. While states like New Jersey have held internal bidding processes to determine which city will get the state’s official backing for an application to house Amazon’s next headquarters.

The bronze statue of Sylvester Stallone portraying the boxer from the film “Rocky III” is seen shortly after workers installed it near the steps of the Philadelphia Museum of Art in Philadelphia. (AP Photo/Matt Rourke)

Bloomberg View columnist Conor Sen argued that Toronto, Boston, Washington, Atlanta, Dallas and Denver are the cities that best meet Amazon’s criteria. And Axios outlined why Denver, Chicago, Phoenix, Minneapolis, and Detroit are the best candidates for Amazon’s new home.

In a new analysis published Thursday, Moody’s economists Mark Zandi and Adam Ozimek found that Austin, Texas and Philadelphia meets the Amazon’s desires for its new HQ best, with Atlanta, Pittsburgh, and Rochester, New York not far behind.

What Amazon wants

What has been to some extent lost in discussion around which city Amazon will pick for a new HQ is what Amazon wants in the city that will house a new headquarters for 50,000.

As the company laid out in its initial release, it is looking for:

  • Metro areas with more than one million people
  • A stable, business-friendly environment
  • Urban or suburban locations with the potential to attract and retain strong technical talent
  • Communities that think big and creatively when considering locations and real estate options.

The company also said that it doesn’t need an urban or downtown campus, a layout similar to its existing headquarters in Seattle, or a development-prepared site.

“Amazon HQ2 will be a complete headquarters for Amazon – not a satellite office,” the company said.

Amazon’s Seattle headquarters.

And so this framework narrows down the contenders to the 64 metro areas (which excludes Seattle) in the U.S. with more than one million people, but also leaves an opening for almost all of these cities to make a case for Amazon.

Five key categories — and a wild card

To break down the attributes of America’s biggest metro areas and how they might appeal to what Amazon seems to be looking for, Zandi and Ozimek chose five categories on which to rank cities.

The pair chose business environment, human capital, cost, quality of life, and transportation as the categories most important to Amazon and quantifiable. A sixth category, geography, was considered by Moody’s and “ranks metro areas based on unstated subjective regional and geographic factors that we believe Amazon will be considering but are subject to more debate than the five other categories.”

Fireworks explode over downtown Austin, Texas,on Thursday, July 4, 2013. (AP Photo/Austin American-Statesman, Jay Janner)

Business environment captures factors like the willingness of a city to offer tax breaks and reflects growth rates for overall and tech-related employment in the area over the last five and ten years. Austin, Nashville, and Dallas top this area.

Human capital — which you can think of as the supply of educated workers in the area — looks at how many college grads live in, or have moved to, a metro. This factor also looks at how many colleges are close by and ranks Los Angeles, New York City, and Washington D.C. as the top cities for this factor. Population, Zandi and Ozimek notes, is a huge factor in a city’s quality of human capital.

Quality of life ranks New York City, Seattle, and San Francisco as the top three and looks at dining and recreation options per capita as well as the crime rate and diversity. The drawback of these cities, Zandi and Ozimek note, is that they are also some of the most expensive in the country.

Cost puts Buffalo, NY, Oklahoma City, and Memphis as the top three. This area looked at the cost of acquiring land and real estate for both housing employees and commercial development, while also looking at salaries for workers in jobs that closely match what Amazon lists and Moody’s cost of doing business measure.

New York City ranks highly on Moody’s ranking of potential Amazon headquarters locations with high human capital and a high quality of life. REUTERS/Brendan McDermid

Transportation explored public transit options, walkability, bikability, and distance to a major airport. San Francisco, Minneapolis, and Seattle ranked in the top three.

Geography is something Moody’s calls a “wild card” as it’s less measurable than the other five factors but also considers some more strategic corporate factors Amazon might keep in mind.

“Arguably, Amazon will want to diversify into a different labor market as much as possible; therefore we award points for metro areas farther away from Amazon’s Seattle headquarters,” Zandi and Ozimek write.

“The Northeast scores the highest because of the access to the economically important Northeast Corridor and the political power center of Washington DC. Finally, this category awards points for the number of Amazon fulfillment centers in the state and distance to Jeff Bezos’ closest non-Seattle homes. Taken together, geography helps bring Pennsylvania’s two metro areas to the top of the list.”

You can read Zandi and Ozimek’s full analysis here, and read a more detailed discussion of each city that lands in the top 10 from Moody’s here.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

Read more from Myles here: