Amazon said no to cactus, yes to data in hunt for new office

Amazon’s 4-month search for a second headquarters is coming to an anti-climatic conclusion: The company is said to be picking at least two, smaller locations, and will likely use data from the hundreds of cities that applied to plan a longer-term, more incremental expansion.

Over the course of its much-hyped selection process, Amazon gathered information from 238 municipalities wooed into the running for the e-commerce giant’s next campus, which came with promises for 50,000 new high-paying tech jobs and $5 billion in investment. Cities from coast to coast and even Canada tripped over themselves to offer incentives from tax breaks to a 20-foot-tall cactus and even the renaming of cities, and politicians, themselves.

Amazon respectfully refused the cactus. But it kept hundreds of millions of dollars worth of free information from the cities to create the biggest corporate site location database in the world, according to Richard Florida, an urban studies professor at University of Toronto. Amazon’s well-publicised hunt for HQ2 was a “ruse,” he said. “I always thought this wasn’t about one site and was part of a corporate location strategy looking for different sites and different talent,” Florida said. “Headquarters two and three are just the beginning.” Amazon didn’t respond to a request for comment.

Amazon launched one of the biggest municipal sweepstakes in the U.S. in September 2017 and was quickly inundated with information from cities about their transit systems, talent pools, available real estate and billion dollar tax incentives. It has announced 20 finalists and is scheduled to make a final decision by the end of the year.

As the search comes to a close, Amazon is now said to be dividing its next corporate sites between Long Island City in New York and the Crystal City area of Arlington in Northern Virginia, near Washington DC, according to people familiar with the matter.

The process was public enough to give Amazon valuable publicity as a highly-coveted company while still keeping most of the details of each city’s bid hidden, which maximized Amazon’s bargaining power and will pay off for years to come when it plans further expansions, said Jed Kolko, chief economist at Indeed.

“Amazon now has insight into what cities would be willing to offer and possibly, plans localities have for investments in infrastructure,” he said.

Google took a similar approach when it launched its experimental Fiber fast internet service almost a decade ago. The web giant and unit of Alphabet Inc., sent out a “request for information,” and hundreds of cities responded, including one that offered to rename itself “Google.” Like Amazon HQ2, Fiber didn’t match the early hype, but Google gathered valuable data on how towns and cities handle telecom and utility build-outs and what municipalities were willing to compromise on.

In the future, Amazon probably will come to rely less on site-selection consultants, who often get paid commissions based on the incentive packages they help companies secure from governments, said Greg LeRoy, executive director of Good Jobs First, which monitors government investments in businesses. Amazon has fueled an economic boom in its hometown of Seattle, where it is also often blamed for traffic problems and skyrocketing housing costs that squeeze some residents out of the city. By choosing more than a single location, it may be seeking to avoid criticism that its arrival will burden local infrastructure.

Julia Pollak, labor economist for the online jobs marketplace ZipRecruiter, said Amazon’s HQ2 bid was a “very smart” negotiating power play that would likely result in the e-commerce goliath spreading its reach into multiple cities. Other cities included on the shortlist Amazon released in January include Atlanta, Dallas and Miami.

“They courted all these cities and got them to reveal their willingness to pay incentives,” Pollak said. Even if Amazon slices up the size of its next campus, city officials have “already revealed their cards,” she said. The benefit of putting down roots in multiple locations across North America is access to a larger number of lawmakers and powerful allies to help lobby for government contracts, Pollak said.

Each city comes with its benefits: New York has top finance and marketing talent, Washington DC has a proximity to Capitol Hill, Miami offers links to Latin America, while Toronto provides a way to hedge against immigration restrictions in the US. “This is not about 1 city or 2 cities,” tweeted Stacy Mitchell, codirector a the Institute for Local Self-Reliance.