Amazon names locations for new US HQs

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EPA

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Long Island City, where Amazon is planning expansion along the East River, is one of the fastest growing areas in New York

Amazon plans to build major new campuses in New York City and next to the Pentagon near Washington DC, and expand its operations in Nashville.

The decision comes 14 months after the tech giant kicked off a continent-wide competition by announcing a search for a “second headquarters” location.

The contest drew 238 bids, as local officials leapt at the chance to land a potentially transformative investment.

The three locations could create some 55,000 jobs in the next two decades.

Amazon said it expected to invest about $2.5bn each in New York and Arlington, where the offices are planned to host as many as 25,000 “high-paying jobs”.

It said Nashville, Tennessee would become Amazon’s new East Coast hub of operations, creating another 5,000 positions.

In exchange, the firm is due to receive more than $2bn (£1.9bn) worth in tax benefits and other incentives from the state and local governments.

How did it make its decision?

Amazon had originally said it was looking to build a single “HQ2” in a large urban area, with proximity to a major airport and access to mass transit.

The company said at the time that the new premises would create as many as 50,000 jobs and cost at least $5bn to build and operate.

However, Amazon eventually decided to split the jobs and investment between two different locations.

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Amazon’s offices in New York and Arlington are expected to host about 25,000 workers

On Tuesday, the firm said the division would allow it to “attract more top talent”, especially in software development, when hiring starts in 2019.

Chief executive Jeff Bezos said: “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come.”

What was the reaction?

Shares in property companies expected to benefit shot up after rumours of Amazon’s selections circulated this month.

On Tuesday, top politicians in New York and Virginia cheered the announcement, while property firms reported surging interest in the two neighbourhoods.

Others voiced worries that the influx of workers would drive up housing costs, crowd highways and otherwise strain local resources, as Amazon’s expansion has in its hometown of Seattle, where it employs more than 45,000 people.

Alexandria Ocasio-Cortez, a newly elected member of Congress who represents Long Island City, the New York neighbourhood Amazon has chosen, said her office had received numerous calls from constituents expressing “outrage” about the tax benefits the firm is due to receive.

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So what about those tax benefits?

Amazon is known for its negotiating prowess.

The firm has already won at least $1.6bn in subsidies, according to Good Jobs First, a not-for-profit organisation that tracks the perks offered by states and towns.

The latest benefits – which include more than $1.7bn in incentives from New York, and more than $500m from Virginia – are tied to Amazon’s delivery of its promises for jobs and investments.

Some of the funds will go to improve transport, parks and other infrastructure in the neighbourhoods.

Analysts said Amazon’s selection of New York and Washington, thriving regions where many major US companies, including Amazon, already have a presence, shows that incentives are not what drive corporate decisions anyway.

Google, for example, is also planning a major expansion in New York. Amazon also already employs more than 4,700 people in the state.

In this case, the ability to recruit highly educated workers seemed to be the top concern, said Mark Muro, a senior fellow at the Brookings Institution, a think tank in Washington.

“It does remind that the subsidy game is often doomed, or often leads to disappointment,” he told the BBC.

The outcome “suggests that there were only two places they could go”.

What does the decision tell us about the US economy?

Since the 1980s, tech companies have clustered in a handful of coastal cities in the US, helping to fuel a growing economic gap between those areas and the rest of the country.

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While Amazon initially appeared to be casting its net wide, its final selection will reinforce those trends, said Mr Muro.

“It’s in a way a missed opportunity for the nation to channel major new investment into new places, especially ones in the heartland,” he said.

Losers on the firm’s 20-city short list included Newark in New Jersey, Columbus in Ohio and Miami in Florida.

“The digital economy for now at least is organised around superstars,” Mr Muro said. “This is about the big getting bigger, the strong getting stronger, the rich getting richer.”

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Reuters

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The area of Arlington, VA selected by Amazon is close to the Pentagon and Reagan National Airport

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