US and Canadian cities vie for new Amazon headquarters

This month, Amazon announced that it was searching for a North American city in which to locate a second headquarters. Immediately, the race was on among cities for this prize, not just because of the size of the project – Amazon intends to hire as many as 50,000 new full-time employees at an average salary of $100,000 over the next ten to 15 years and make $5bn in capital expenditures – but also because initial responses are early as October 19. Amazon plans to make the final site selection and announcement in 2018.

Amazon’s request for proposal (RFP) is eight pages long and includes some obvious criteria: the headquarters must be located in a metro area with more than one million people, and there must be a stable and business-friendly environment. Transportation is also important: there must be an airport nearby and a good mass transit system. To that end, likely candidates for the project appear to be Atlanta, Austin, Chicago, Dallas, Denver, New York City (Brooklyn to be precise), Toronto and the Washington, DC area, including northern Virginia.

But the RFP also includes other less tangible criteria. Amazon wants to be in an urban or suburban location that can attract and retain strong technical talent, and it wants to the community to “think big and creatively” about location and real estate.

These last two criteria speak volumes about the search for talent in the US, where the economy is nearing full employment and good workers are becoming increasingly difficult to hire, especially credentialed tech workers. Amazon’s search also highlights other aspects of life in the US now, namely the ever-rising cost of housing and the expectations of millennials to work in modern, collaborative office environments. To be sure, workers have always wanted nice office space but as the millennial generation is now the largest in the workforce employers are particularly eager to meet their expectations.

Hence Amazon’s search. The company could have, after all, remained in Seattle, or located in San Francisco, two areas where tech talent is in abundant supply. It did not because, simply put, housing in those cities is too expensive for even $100,000 salaries, and competition for tech talent has become too intense.

“A city’s housing affordability is important as it drives a large chunk of employee compensation,” says Adam Fountain, managing director at Seattle investment bank Broadmark Capital. “For a company like Amazon with slim margins that is significant, maybe even more so than other companies.”  

In fact the availability of talent has become just as important to companies during the site selection process as such qualifications as transportation and good roads, says Mary-Claire Burick, president of the Rosslyn Business Improvement District in northern Virginia. In the end it will be the economics that will decide the deal, she says, “but once you clear that hurdle talent is an important driver”.