Amazon Opens Search for Second Headquarters City in North America -- 4th Update

By Laura Stevens and Cara Lombardo Features Dow Jones Newswires

Amazon.com Inc. said Thursday it plans to open a second headquarters in North America to house up to 50,000 employees, signaling the company has no plans to slow its hiring tear of recent years.

Continue Reading Below

The Seattle-based company is seeking proposals by Oct. 19 for a location for the facility, which it said could cost as much as $5 billion to build and operate. Amazon plans to pick a site next year.

The new headquarters' staff would be largely new employees. The jobs would be in addition to the 100,000 full-time positions that Amazon said earlier this year it would create through mid-2018, most of which are in the online retailer's warehouses.

The second location will "be a full equal to our Seattle headquarters," Amazon Chief Executive Jeff Bezos said in prepared remarks. It will "bring billions of dollars in upfront and ongoing investments, and tens of thousands of high-paying jobs," he said. "We're excited to find a second home."

Over the past two decades, Amazon has grown from an online bookseller founded in Mr. Bezos's garage to a sprawling tech giant. It now has a Hollywood studio, a booming device business including its artificial intelligence assistant Alexa, and a very profitable cloud-computing service.

To staff the expansion, the number of employees at Amazon's Seattle headquarters has grown rapidly over the past decade from a few thousand to more than 40,000. But Amazon recently has faced both space and hiring constraints as a result, according to people familiar with the company's thinking.

Continue Reading Below

Amazon has struggled to attract and retain enough engineers to keep pace with the company's growth, the people said. It competes for talent in the region with Microsoft Corp., and is about 800 miles north of the heart of the tech world in California's Silicon Valley. It is unlikely Amazon would choose a location in an area like Silicon Valley, where it would face fierce competition for engineers from companies including Alphabet Inc. and Apple Inc.

Other tech giants have caused recent frenzies over new locations. Tesla Inc. Chief Executive Elon Musk in June hinted the electric-car maker would build a new factory, while electronics manufacturer Foxconn Technology Group said in July it would be building a $10 billion plant in Wisconsin.

Amazon itself has announced many new warehouses, most recently in New York, and in August held a job fair to hire 50,000 people.

Amazon currently employs more than 200,000 people in the U.S., with about 130,000 in the company's warehouses. It already has regional offices sprinkled throughout the U.S., including in Austin, Texas, Northern Virginia, Detroit and Los Angeles. The new headquarters will be in addition to those locations.

In soliciting bids for the project, which Amazon calls HQ2, the company is prioritizing metropolitan areas with more than a million people that are within 45 minutes of an international airport and near a strong university system.

Incentives from state and local governments will be "significant factors" in its decision, Amazon said. The announcement is likely to set off a frenzy among states and municipalities eager to recruit the company. Amazon has received more than $1 billion in incentives since 2000 from state and local governments to help the company build its warehouses, according to Good Jobs First, a group that is critical of corporate tax credits.

"They're going to want a gazillion dollars in benefits," said Erik Gordon, an assistant professor at the University of Michigan's Ross School of Business. "It's going to be a big price tag and expectedly so, because who else can bring you tens of thousands of jobs -- good jobs -- and change the image of who you are?"

Amazon expects the new jobs, many which will be in software development, to have average compensation of more than $100,000. Mr. Gordon said cities outside of traditional technology hubs could use Amazon's headquarters to help quickly remake their image.

The competition to win Amazon's business will be fierce and could break records for tax-incentive packages, say consultants who advise companies and local governments on such deals.

Mark Sweeney, partner at the Greenville, S.C.-based McCallum Sweeney, advised Boeing Co. on its record-setting $8.7 billion tax-incentive package with the state of Washington in 2013. Mr. Sweeney says he thinks states will offer a package in "that neighborhood."

"I would expect the interest to be unmatched and unrestrained by every location, even ones that really don't have a much of a shot," he said. In addition to tax breaks on property, state and city income tax, Mr. Sweeney expects that states will offer to pay Amazon cash through tax rebates. Other incentives like grants for training employees, adding public transportation or other infrastructure could also be part of a deal.

"It's probably going to be the largest economic development project that's been announced in a decade," said Greg Burkart, a Detroit-based consultant with Duff & Phelps. "This is the same economic impact as a medium sized city."

There are about 50 metropolitan areas in the U.S. with populations of more than one million people, according to U.S. Census estimates, and more elsewhere in North America.

Communities are eager to land a flagship corporate tenant because of the positive impact on the service sector -- hospitality businesses, real-estate markets and philanthropy. Amazon moved its Seattle headquarters downtown in 2010, bringing an additional $38 billion in investments to the local economy through 2016, the company said.

Amazon joins companies such as Boeing and General Electric Co. in drawing publicity to the early stages of its selection process. The company knows its brand is strong and that it will receive aggressive proposals, said James McGraw Jr., CEO of KMK Consulting Co., a Cincinnati-based economic-development firm. "There's no downside risk of bad PR," he said.

Amazon, which has long favored growth and investments over profit, has expanded rapidly with dozens of programs, including its instant-delivery service Prime Now and AmazonFresh. The company completed its acquisition of Whole Foods last week and began overhauling the grocery chain by lowering some prices and integrating Amazon services.

Once the second headquarters is built, Amazon senior leaders will get to choose whether they locate their teams in the Seattle headquarters, HQ2 or both, the company said.

--Shayndi Raice contributed to this article.

Write to Laura Stevens at laura.stevens@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

September 07, 2017 16:37 ET (20:37 GMT)