Amazon's struggle to revive a Seattle neighborhood could be a worrying omen for its second headquarters

Matt Weinberger/Business Insider

• Amazon has brought economic growth to Seattle over the past 20 years, but it hasn't figured out how to create a thriving neighborhood.
• Businesses are booming during lunch hours and happy hours, but dead at night.
• The company's new headquarters, HQ2, could bring similar challenges to a new city.

Thanks to Amazon, Seattle may very well be America's largest company town. But as the nation's largest retailer seeks to expand to a yet-undecided US city, one shortcoming of Amazon's growth stands out.

The company has proven it can create a bustling office park, just not a thriving neighborhood.

The best case study for Amazon's attempt — and struggle — to revitalize a rundown portion of Seattle is the neighborhood of South Lake Union. An old warehouse district through most of the 20th century, a slew of local businesses tried to breathe new life into the neighborhood in the 1990s. Many failed.

It wasn't until Amazon began consolidating its buildings there in 2010, joining a small cluster of biotech companies, that South Lake Union began to see an economic boom of its own. Amazon has since purchased a number of buildings in the neighborhood that it rents out to some 32 local businesses, 24 of which are restaurants or cafes, the Seattle Times reports.

In total, Amazon owns 20% of Seattle's prime office space. Most of its 8.1 million square feet of property are located in South Lake Union.

Only loyal during the daytime

These days, the businesses that rent space from Amazon in South Lake Union have no problem putting people in seats during lunchtime and happy hour. Some 40,000 Seattleites (and counting) work for Amazon; many venture beyond the office for food.

Then comes the dinner rush, or lack thereof. South Lake Union's businesses have struggled to convert daytime patrons into loyal evening crowds. Many restaurants have had to revamp their menus or change their focus entirely in an ongoing battle to stay relevant to customers, according to the Seattle Times. This is a challenge for Amazon, not just the city, since the company leases out so much property that it has a vested interest in those businesses thriving.

This challenge — energizing a neighborhood to make it enticing for the larger population beyond the Amazon employees who show up mid-day — is one the online retail giant is likely to face again depending on where it builds its second headquarters. 

Early plans for HQ2, as the company is calling it, include bringing 50,000 high-paying jobs to a new city at a cost of $5 billion. Amazon has said the office space will be "a full equal" to the existing HQ in Seattle. The company's requirements for its new location: a population of at least 1 million people, an international airport, and a stable business environment. Philadelphia, Chicago, Boston, and Denver are all in the running, among many other cities.

A sign of things to come

Urban planning experts have voiced concerns —and in some cases direct criticisms — related to the possibility that Amazon's influx of high-wage earners will cause housing prices to rise dramatically, exacerbate congestion on roadways, and hurt local businesses.

"While a new Amazon headquarters could be a boon for many communities," Brooks Rainwater, director of the City Solutions and Applied Research Center at the National League of Cities, told Business Insider, "city officials will have to weigh the impact it could have on the broader economy and ensure that the economic growth it brings would be both equitable and sustainable."

Neighborhoods tend to function best when people from many socioeconomic groups have a chance to interact with one another, research suggests. 

The wisdom from urban planners is that HQ2 could go either way. Depending on how city government works to shape Amazon's inevitable growth, businesses could stay buzzing during peak hours or fall flat. No matter what happens, however, Amazon will change the face of whatever city it chooses.

NOW WATCH: Amazon's transformation of Whole Foods puts the entire grocery industry on notice