Amazon has launched a $5bn (£3.8bn) search for a site for a new headquarters, asking cities across the US and Canada to make their pitches.
The new HQ will be the world’s largest e-commerce company’s second in North America, and “will be a full equal” to its current headquarters in Seattle, Amazon founder and chief executive Jeff Bezos said.
“Amazon HQ2 will bring billions of dollars in upfront and ongoing investments, and tens of thousands of high-paying jobs. We’re excited to find a second home,” Bezos added.
The company is willing to look beyond the US for its new location, explicitly opening up to Canadian cities.
The pitch to cities from Amazon is simple: the company will bring highly skilled employment worth billions to the local area. Amazon says the second HQ will include “as many as 50,000 high-paying jobs”, and notes that the construction and economic impact of the building “is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community”.
Amazon estimates that in the last six years alone, it has brought an extra $38bn to Seattle’s economy. “Every dollar invested by Amazon in Seattle generated an additional $1.40 for the city’s economy overall,” the company says.
Eileen Burbidge, a partner at venture capital firm Passion Capital and the chair of Tech City UK, said any city would want to entice Amazon to its area. “The ‘prize’ is tremendous if any city/state is able to land Amazon, given its commitment to 50,000 new jobs and $5bn of investment in the HQ2,” she said. “I believe without question that it is beneficial for cities to attract large HQs such as Amazon’s.”
In exchange for all that economic growth, the company has a long list of requirements for any city which wants to bid for its presence. Amazon lists a number of “core preferences”, including a 45-minute drive to an international airport, mass transit (such as a tram or subway stop) connected directly to the site, and at least 500,000 square feet of office space available by 2019.
“It seems that Amazon will be looking at incentive packages to be offered by states/cities,” Burbidge said. “Whether those be tax/other financial incentives or other support and favourable conditions for its capital and operating expenditure forecast.”
In a seven-page document provided to cities interested in bidding, Amazon also lists a number of “decision drivers”, including “the presence and support of a diverse population”, “a strong university system” and “an overall high quality of life”.
But simply being a nice place to live is unlikely to be enough to win the company over. Amazon also lists financial incentives to “offset [its] initial capital outlay and ongoing operational costs” as a “key preference”.
“The initial cost and ongoing cost of doing business are critical decision drivers,” the company warns interested governments when asking for a detailed list of all incentives available, including “land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions”.
The practice of offering hefty financial incentives to woo big employers to a specific location is widespread, but has come under increasing criticism in recent years. In July, the state of Wisconsin offered a reported $3bn in state subsidies to Taiwanese manufacturer Foxconn to entice the firm to build an LCD manufacturing facility. But critics noted that the deal would only bring 3,000 jobs in the short term, potentially rising to 13,000 over the following six years.
Jennifer Shilling, a Democratic Wisconsin state senator, said in July of Foxconn: “The bottom line is this company has a concerning track record of big announcements with little follow-through. Given the lack of details, I’m skeptical about this announcement and we will have to see if there is a legislative appetite for a $1bn-to-$3bn corporate welfare package.”