Amazon names locations for new US HQs

A building in the Crystal City area of Arlington, Virginia that is reportedly considering as part of its new second headquarters is seen in Arlington, Virginia, U.S. November 6, 2018.Image copyright

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The Crystal City area of Arlington, VA is close to the Pentagon and Reagan National Airport

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 up to 55,000 jobs in the next two decades.

Amazon said it expected to invest about $2.5bn each in New York and Arlington, where it has planned offices that will 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 jobs.

In exchange, the firm is due to receive more than $2bn dollars 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 (£3.9bn) to build and operate.

However, it later emerged that Amazon planned to split the jobs and investment between two different locations.

Amazon said the move would allow it to “attract more top talent”, especially in software development.

What was the reaction?

Shares in property companies expected to benefit shot up as rumours of the decision circulated this month.

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.

As rumours swirled earlier in the week, New York City Council Member Jimmy Van Bramer, who represents the area slated for the new offices, said any deal had “to work for Queens, not just Amazon”.

“We must ask how such a complex would impact the people who live in the surrounding neighbourhoods,” he said.

“This isn’t a done deal. The local community must be heard here.”

What about those tax benefits?

The prospect of tax breaks and other benefits going to Amazon, which is generating record profits, has also been controversial.

The firm, known for its negotiating prowess, 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.

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

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 to a growing economic gap between those areas and the rest of the country.

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.

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

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