Amazon Opens Search for Second Headquarters City in North America -- 5th Update

Amazon.com Inc. on Thursday launched an unusual plan to establish a second corporate headquarters in North America, signaling the online retail giant's growth ambitions for the years ahead and setting off a race among local and state governments hoping to win it over.

Amazon said it was soliciting proposals for a new campus location, which eventually could result in the company investing more than $5 billion and creating up to 50,000 high-paying jobs, many in software development and most of them new. Proposals are due Oct. 19, with a decision expected next year.

The move to build a second headquarters, which Amazon Chief Executive Jeff Bezos envisions as a full equal to the company's Seattle campus, follows years of rapid growth.

The company has built dozens of new warehouses in the U.S. and around the world to fulfill online orders quickly, and recently wrapped up a roughly $13.5 billion acquisition of grocer Whole Foods Market Inc.

The new hiring comes on top of the 100,000 full-time jobs that Amazon said in January it would be adding through mid-2018, mostly in its fulfillment centers.

Cities from Toronto to Chicago to Denver raised their hands Thursday, saying they would submit proposals. The competition to win Amazon's business likely will be fierce and could break records for tax incentive packages, according to consultants who advise companies and governments on such deals.

"I would expect the interest to be unmatched and unrestrained by every location, even ones that really don't have much of a shot," said Mark Sweeney, partner at the Greenville, S.C.-based McCallum Sweeney Consulting. Mr. Sweeney's firm advised Boeing Co. on its $3.2 billion tax-incentive package with the state of Washington in 2003 to manufacture a new jet there. In 2013, Boeing Co. received an $8.7 billion tax-incentive package with the state of Washington that set a U.S. record. Mr. Sweeney, who didn't work on that deal, anticipates states will offer Amazon a package in "that neighborhood."

In addition to tax breaks on property, state and city income tax, Mr. Sweeney says states could offer to pay Amazon cash through tax rebates. Other incentives such as grants for training employees, adding public transportation or expedited permit approvals could also be part of a deal, consultants said.

Amazon said it would prefer its new headquarters to be in a metropolitan area with more than a million people, near a strong university system and within 45 minutes of an international airport.

The project likely will go down as one of the biggest economic developments announced in a decade, said Greg Burkart, a Detroit-based consultant with Duff & Phelps Corp. "This is the same economic impact as a medium-size city," he said.

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 profit-driving cloud-computing service.

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.

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, California's Silicon Valley.

It is unlikely Amazon would choose a location in an area like Silicon Valley, where it would face intense competition for engineers from companies including Alphabet Inc. and Apple Inc. "There's only so much talent," says Tom Gimbel, founder and CEO of national staffing and recruiting firm LaSalle Network. By entering a new market, "people will be clamoring to work for them."

Other tech giants have caused recent frenzies over locations for facilities. Tesla Inc. CEO Elon Musk in June hinted the electric-car maker would build a new factory, while Foxconn Technology Group, formally known as Hon Hai Precision Industry Co., said in July it would be building a $10 billion factory in Wisconsin.

Amazon itself has announced at least 25 new warehouses since the beginning of the year, most recently in New York, and in August held a job fair to hire 50,000 people. Executives have told Wall Street the company is in a period of heavier investment, expanding abroad and building out video content for its Prime service.

That expansion has come at a cost, dinging profit in recent quarters and leading the company to warn it could post its first loss in more than two years in the third quarter. Acquiring Whole Foods and building a second headquarters will only add to that.

Few companies choose to form dual headquarters outside of mergers, said Erik Gordon, an assistant professor at the University of Michigan's Ross School of Business.

Splitting departments can hinder collaboration. "It's a complicated thing to do, which is why it's rare," he said.

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

Amazon is used to divvying up work between employees across multiple time zones and buildings. Mr. Bezos tries to maintain a startup culture despite the company's size. Teams are typically kept small -- if a group can't be fed with two pizzas, it is too big -- and there is a strict process for developing new ideas and inventing devices, which includes writing six-page papers for explanation.

Amazon has 33 buildings at its headquarters in Seattle, comprising 8.1 million square feet. Across the U.S., it employs more than 200,000 people, with about 130,000 in the company's warehouses. It just added an additional roughly 87,000, primarily in the U.S., with its acquisition of Austin, Texas-based Whole Foods.

The company already has regional offices sprinkled throughout the U.S., including in Austin, Northern Virginia, Detroit and Los Angeles. The new headquarters will be in addition to those locations.

Amazon said it plans to build the project in phases, with $5 billion in capital investment over the first 15 to 17 years. The first phase of building, for between 500,000 square feet and 1 million square feet of office space ready in 2019, will result in an estimated $300 million to $600 million capital investment, it said. The company will consider existing buildings and greenfield sites of 100 acres.

Communities are eager to land a flagship corporate tenant because of the positive impact on the service sector. Amazon's existing Seattle headquarters, which it moved downtown in 2010, has since brought an additional $38 billion in investments to the local economy through 2016, the company said.

"The presence of a new Amazon headquarters will almost certainly create significant economic benefit to the jurisdiction," said Stockton Williams, executive vice president of content at the Urban Land Institute. "Incentives are always part of the equation."

--Jacquie McNish and Shibani Mahtani contributed to this article.

Write to Laura Stevens at laura.stevens@wsj.com, Shayndi Raice at shayndi.raice@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

September 20, 2017 13:36 ET (17:36 GMT)