At midnight tonight, Amazon will close applications for the most high-profile and high-stakes corporate headquarters competition in history.
It has been a little over a month since the Seattle-based tech giant announced plans to open a second “fully equal” corporate headquarters in North America — and boy, what a month it’s been.
Special Coverage: Amazon to build second HQ in North America
Cities immediately started rallying their economic development teams to brainstorm ideas for landing the 50,000 jobs and $5 billion investment that Amazon says HQ2 will bring. Ideas ranged from outrageous: gifting Amazon a 21-foot cactus. To practical: asking local business students to come up with pitches. To out of touch with Amazon’s ethos: a 600-person HQ2 committee isn’t likely to impress Amazon CEO Jeff Bezos, who is infamously against teams that are so large they can’t be fed with two pizzas.
Wacky stunts are attention-grabbing but Amazon exec Jeff Wilke says the company is taking a data-driven approach to site selection. Amazon is looking for a metro area with more than 1 million people, quality transit options, and incentives from local governments. Those could come in the form of tax credits and exemptions, relocation and workforce grants, utility incentives, and fee reductions, Amazon says.
The incentives have become a lightning rod, with critics claiming that one of the most powerful tech companies — valued at $474 billion — shouldn’t ask for tax breaks and other government deal-sweeteners from jobs-hungry cities.
The search also became a bit of a reckoning for Amazon’s hometown, Seattle — bringing out differing opinions among those who think the city’s anti-business attitude is driving the tech titan away, others who believe it’s a good thing for Seattle for the company to grow elsewhere, and still others who believe this is just about the company finding more room to expand.
It’s true, Amazon does need more room than Seattle can realistically offer, without a major zoning change that could squeeze out longtime industrial businesses. The new facility will eventually occupy 8 million square feet of office space, according to Amazon’s RFP.
If all of this sounds a little dizzying, continue reading and we’ll get you up to speed faster than a Prime customer can get diapers delivered to the doorstep.
Where will HQ2 end up?
This is the $5 billion question. In the weeks following Amazon’s announcement, everyone has been trying to answer it. GeekWire co-founder John Cook laid out his top six contenders here, making a strong case for Toronto, Boston, Austin, Pittsburgh, Chicago, and Atlanta.
Chicago is certainly putting a lot of horsepower behind its proposal. The Windy City formed a 600-person committee co-led by Mayor Rahm Emanuel and Illinois Gov. Bruce Rauner, to lure Amazon HQ2. (Maybe they’ve got bigger pizzas in Chicago than we do in Seattle.)
Pittsburgh has emerged as a dark horse in the race: two top Amazon execs have close ties to Steel City, and Carnegie Mellon provides a steady pipeline of technical talent. Then there’s Toronto, a city with several top universities and easy access to the East Coast, which also takes the tumultuous U.S. immigration climate out of the international recruiting equation.
Amazon doesn’t have the only RFP in town. GeekWire is searching for the next great North American tech city for GeekWire HQ2
Toronto is also the best bet if we base our speculation on data … and Amazon does love data. GeekWire contributing writer Tim Ellis cross-referenced Amazon’s four leading criteria — metropolitan areas with more than 1 million people; a stable and business-friendly environment; locations with the potential to attract and retain strong technical talent; communities that think big and creatively when considering locations — with demographic data of 59 North American metro areas. After Toronto, the top tier included Ottawa, Boston, Philadelphia and Chicago.
But all of this amounts to little more than speculation, even if it is informed by hard data. As this RFP process reminds us, Amazon is a company that likes to defy expectations, take risks, and play the very long game.
When will Amazon break ground?
Amazon will take the rest of the year to review its RFP submissions. That’s going to be a lot of paperwork. This morning, we’ve already received press releases from Irvine, Calif., Buffalo and Rochester and seen proposals from New York, Philadelphia, Jacksonville, Baltimore, Denver, Houston, and many more. No doubt, Amazon is receiving dozens, if not hundreds, of proposals, though the company isn’t speaking publicly about the number of submissions until after tonight’s deadline passes.
It’s also not clear exactly when Amazon will reveal the winner. The RFP just says “Final Site Selection and Announcement” will take place in 2018. The initial build out will take place in three phases. During Phase I, Amazon will spend $300 million to $600 million on 500,000 to 1 million square feet of offices. By Phase III, the facility will be 2-3 million square feet. “Phase IV and beyond will grow organically,” the RFP says. “At full build-out, the campus or park may exceed 8 million square feet.” Phase I will begin in 2019, according to the RFP.
It is also possible that Amazon will abandon the project; the RFP says the company “may select no proposals and enter into no agreement.” But that seems unlikely given the big, public RFP circus of the past month.
Why is Amazon doing this?
Amazon is a secretive company with its hands in just about everything, which makes reading its massive palm impossible. That being said, a few likely reasons for the HQ2 search have emerged.
The first one is obvious. Amazon has an insatiable appetite for growth that can’t be satisfied by its humble hometown, which is already dealing with a huge population spike and the congestion issues that come with it. It’s entirely possible that Bezos and his team sat down, outlined growth goals, and decided, “there’s not room for us here.”
There’s also the talent pipeline to consider. Amazon needs more engineers than Seattle is currently supplying and a second location opens up access to a new labor pool. As Wilke, CEO of Amazon’s Worldwide Consumer business, noted at the GeekWire Summit last week, “Not everyone wants to live in the Northwest.”
We Seattle die-hards might guffaw at that, but that doesn’t make it untrue. Offering two geographically diverse locations gives Amazon a recruiting edge.
We also can’t ignore the more dubious factor that may have played a role: hurt feelings. In Seattle, Amazon has become a target for the frustrations that go along with head-spinning growth. Famously liberal Seattle isn’t predisposed to be business-friendly in the first place. That acrimony has sharpened in recent years, as the city grapples with a housing affordability and a homelessness crisis, unprecedented traffic, and a widening chasm between the wealthy tech community and long-time residents.
Amazon’s HQ2 search has exposed a rift between civic leaders on what kind of message to send to the city’s biggest private employer. In the wake of the announcement, Seattle City Councilmember Kshama Sawant accused Amazon of “using its monopoly power to gobble up swathes of prime real estate, and extract plum deals from the city’s Democratic establishment.” But just this past week the majority of councilmembers (not including Sawant) said that kind of attitude “does not leave a good taste in anyone’s mouth” in a letter to Bezos.
It’s hard to say what role the tension between Amazon and residents of its hometown played in the decision to establish HQ2. But the company did have its reasons for conducting such a public search.
As GeekWire editor Todd Bishop put it, “Certainly Amazon’s algorithms could come up with a short list of cities that would meet its needs, without issuing an RFP. But this process is about making a public statement in Seattle and elsewhere, as much as it is about finding a second home. Amazon is saying it wants to be appreciated.”
What does this mean for HQ1?
Amazon’s HQ2 search has forced Seattle to do some soul-searching. In the weeks following the announcement, leaders of the tech and business community have been critical of Seattle’s civic leaders and residents for creating an unwelcome environment for the tech titan.
“The negative attitude of many citizens and of our government to business in general and to Amazon in particular, has created an environment for Amazon and, even more importantly its employees, that is unpredictable and outright hostile,” Heather Redman, chair of the Seattle Metropolitan Chamber of Commerce, said when the news broke.
Local politicians were caught off guard by the announcement, calling it a “jolt” and “wakeup call.” As the dust settled, King and Snohomish County began putting together a regional response to the RFP, with Seattle’s support. Nearby Tacoma is also submitting a proposal. Washington state’s bids could include a range of potential tax credits and programs, according to an email obtained by the Puget Sound Business Journal.
But any city in close proximity to Amazon’s original headquarters looks like a longshot, especially considering that Wilke comment at the GeekWire Summit.
“Not everybody wants to live in the Northwest,” he said. “It’s been terrific for me and my family, but I think we may find another location allows us to recruit a different collection of employees.”
That doesn’t mean Amazon is abandoning its growth plans in Seattle. This week, the company confirmed plans to lease at least six floors of office space above the downtown Seattle Macy’s store. Earlier this month, Amazon announced plans it will take all the 722,000 square feet of office space in the Rainier Square redevelopment project. Amazon has committed to approximately 1.2 million square feet of new office space in Seattle recently.
Amazon employs 50,000 people in Seattle — the same amount it could eventually hire at HQ2, according to Wilke. Another 6,000 jobs are coming, and Amazon is gearing up to occupy 2 million additional square feet of office space in its hometown. The company hasn’t given any indication that its HQ1 growth will slow in the short term as a result of HQ2.