Amazon plans $7b second headquarters

Bidding set to be intense, with cities dangling tax breaks in return for 50,000 new jobs

CHICAGO • Amazon.com wants to build a US$5 billion (S$6.7 billion) second headquarters in North America, kicking off a battle between cities and states to offer tax breaks that could bring in 50,000 new jobs.

The e-commerce giant aims to create HQ2 - a "full equal" to its Seattle office, said chief executive Jeff Bezos in a statement on Thursday. It wants HQ2 to be in a metropolitan area of over a million people, with an international airport, good schools and mass transit.

It is likely to seek a cheaper city than Seattle and score subsidies. It promised up to 50,000 jobs averaging over US$100,000 in yearly compensation for the next 10 to 15 years.

Cities and states that have already said they will bid include Dallas, Toronto, Miami and St Louis. Chicago Mayor Rahm Emanuel has made a case for his city in talks with Mr Bezos, according to a Chicago spokesman.

Companies with two headquarters are rare, and distance could present a management challenge, but some investors and analysts see the geographical diversification as a way to cut costs and reduce risks. The conglomerate would also have an easier time breaking up later if it so chooses.

"Amazon is changing radically, and it depends so heavily on disruptive thinking. Moving to a new city and finding a new talent pool is a good idea," said HRC Retail Advisory chief Antony Karabus.

Incentives such as fee cuts and relocation packages would be a major part of the decision, said Amazon.

Local governments have gone to great lengths to secure jobs and investment. Wisconsin's legislature, for instance, recently voted to give Taiwanese manufacturer Foxconn a US$3 billion incentive package to build a US$10 billion liquid crystal display factory in the state.

Amazon's plan should boost its political leverage at a time when it is being blamed for the decline of brick-and-mortar retailers. US President Donald Trump has criticised Amazon as doing "great damage", costing jobs in cities and states. The planned site for the Foxconn plant is in the home district of Speaker of the House Paul Ryan.

Amazon said it is seeking proposals by Oct 19 and will select the location next year.

More than 50 cities have the metropolitan population that the company is targeting. Likely states could include several in the Midwest, where Amazon has many warehouses, as well as Texas, which is the base for the Whole Foods Market grocery chain it acquired this year.

Amazon has been awarded more than US$1 billion in state and local subsidies since 2000, according to estimates by watchdog Good Jobs First. It says Texas leads the pack in terms of the value of subsidies to Amazon, followed by Illinois, Kentucky and Ohio.

Seattle has become an expensive city, placing 44th on the Economist Intelligence Unit's Worldwide Cost of Living rankings.

"The high cost of living and the high cost of real estate - all of that adds up to why expanding in that market is not viable," said managing director Burt Flickinger of retail consultant Strategic Resource Group.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 09, 2017, with the headline 'Amazon plans $7b second headquarters'. Print Edition | Subscribe