‘Location, location, location’ is all very well, but for Amazon, ‘access to talent’ takes all.
November 20, 2018 7 min read
Opinions expressed by Entrepreneur contributors are their own.
When Amazon finally announced the location of its new second headquarters (HQ2), multiple cities were sorely disappointed, and many observers, surprised. Rather than put all its eggs in one basket, Amazon elected to split the baby and set up shop in two locations: New York City and Arlington, Virginia.
How many cities were bummed out? The Wall Street Journal put the number that bid on HQ2 (with Seattle being the first) at an extraordinary 236.
Competition bamong the andidate cities was, in fact, fierce. Bloomberg opinion columnist Shira Ovide likened the selection process to the popular reality-TV show, The Bachelor. The difference was that this beauty contest atmosphere led to plenty of free publicity for Amazon and some bizarre ploys on behalf of the contestants.
According to the Seattle Times, Tucson, Ariz., actually sent Jeff Bezos a giant cactus as a gift — which was rejected. CNET reported that the mayor of Kansas City, Mo., purchased 1,000 items on Amazon, then left a fact, stat or story about the city as a product review. “The idea was easy — make Kansas City the most well-reviewed city on Amazon,” Mayor Sylvester “Sly” James Jr. said in a statement.
As with any competition, however only one contestant ultimately emerged triumphant — or in this case, two did. Here are five reasons why Amazon decided on New York and Arlington for its HQ2.
Access to talent
Amazon is a secretive company, so we’ll likely never know the exact criteria that ultimately led to the choice of New York City and Arlington for HQ2. But the consensus among observers is that access to a talent pool of qualified candidates to fill the 50,000 positions the company will hire for was the single biggest determining factor in the decision.
Amazon is not alone in its struggle to find qualified workers. As of October 2018, the U.S. unemployment rate sat at 3.7 percent, according to the Bureau of Labor Statistics, and this was the lowest in 48 years. Choosing a location in the country’s most densely populated city, New York — which in 2017 attained a record-high 8.5 million population, according to the New York Times — gives Amazon easy access to a potentially huge and diverse talent pool.
Attracting (and retaining) employees
Few would dispute New York City’s standing as one of the world’s premier cities. And Arlington is less than three miles from downtown Washington, D.C. — the 20th most populous city in the nation and the seat of American political power. As noted above, Amazon plans to recruit existing New York City and D.C. area residents for many of the 50,000– plus positions it has pledged to create.
Inevitably, though, Amazon seeks to cast a wider net by attracting and retaining employees from across the country and around the world. As Jeff Bezos put it in Amazon’s HQ2 release, “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come.”
A survey by Glassdoor found that location was the fourth most critical factor that job-seekers take into account when looking for a new position; it’s behind only salary, growth opportunities and work/life balance. Location also has a significant impact on No. 3: work/life balance.
Amazon’s press release makes the lifestyle benefits of each location clear. Long Island City (LIC) — the Queens neighborhood where half of HQ2 is to reside — is described as “a mixed-use community where arts and industry intersect.” The release goes on to note that, “[LIC] is a diverse community with a unique blend of cultural institutions, arts organizations, new and converted housing, restaurants, bars, breweries, waterfront parks, hotels, academic institutions and small and large tech sector and industrial businesses.”
Amazon describes Arlington, meanwhile, as home to “abundant parks and open space with sports and cultural events for residents of all ages throughout the year.”
Amazon’s language is clearly aiming to boost both locations’ appeal to both current employees and future prospects to be based at HQ2.
While 238 cities vied for HQ2, arguably few of them have the infrastructure to absorb the 50,000 employees that Amazon plans to hire. Of the 20 finalists, as reported by Recode, the vast majority were large cities.
As Amazon has grown, it has come under heavy fire in its first home of Seattle for everything from skyrocketing real estate prices to “stealing Seattle’s soul,” according to The Times. By basing HQ2 in or near cities with sufficient capacity to accommodate the inflUX of Amazon employees, the company may be seeking to circumvent the bad publicity and resentment this sudden population growth might create in smaller cities.
Despite this protective strategy, nevertheless, the inevitable backlash has already begun.
Each of the 238 cities vying to become Amazon’s second home offered the company incentives far more significant than a giant cactus or even something as major as its very own city — which Atlanta did, according to the Journal-Constitution. Companies do not always publicly reveal the details of the financial incentives they’re offered, but Amazon was forthright about the enticements it received.
From New York State, Amazon received “performance-based direct incentives of $1.525 billion based on the company creating 25,000 jobs in Long Island City.”
Amazon also signaled its intention to apply for additional incentives from the Big Apple.
Virginia, meanwhile, offered Amazon “performance-based direct incentives of $573 million based on the company creating 25,000 jobs with an average wage of over $150,000 in Arlington.”
While these subsidies are substantial — in New York, for example, Amazon expects to save $48,000 in taxes over ten years for each job it creates — they were not the most lucrative. Slate recently compiled a list of over-the-top incentives by the candidates that lost.
Examples? Montgomery County, Md., proposed $6.5 billion in tax breaks and an additional $2 billion in infrastructure upgrades meant to benefit Amazon workers.
Newark, N.J. — a stone’s throw from New York City — offered $7 billion in tax breaks. Those numbers indicate that, while important, government incentives were far from the sole determining factor in Amazon’s selection.
As Amazon becomes an ever more ubiquitous facet of American life, speculation that it may one day be the subject of antitrust regulation grows. In this context, there’s been conjecture that by building HQ2 in the backyard of the president and lawmakers, Amazon seeks to exert more influence over any attempts to curtail its rapid growth.
It will be years before the impact, positive or otherwise, on the two cities Amazon selected for HQ2 can be gauged accurately. But for now, there is much reason for optimism. Bill de Blasio, New York’s mayor, was one of those optimists, stating, “This is a giant step on our path to building an economy in New York City that leaves no one behind.”