AMZN Amazon.com Inc

By Laura Stevens and Shayndi Raice 

Amazon.com Inc. plans to split its second headquarters evenly between two locations rather than picking one city, according to a person familiar with the matter, a surprise decision that will spread the impact of a massive new office across a pair of communities.

The driving force behind the decision to build two equal offices for "HQ2" -- in addition to the company's headquarters in Seattle -- is to allow it to recruit more of the best tech talent, according to the person familiar with the company's plans. The move will also ease potential issues with housing, transit and other areas where adding tens of thousands of workers could cause problems.

Under the new plan, Amazon would split the workforce with about 25,000 employees in each place, the person said.

Amazon is in advanced talks with multiple cities but hasn't made a final decision on which two locations it will pick, according to people familiar with the matter. The Wall Street Journal reported on Sunday that Amazon was in late-stage discussions with a small handful of communities including Crystal City in Northern Virginia, Dallas and New York City.

An announcement could come as soon as this week, people familiar with the matter said.

In the ferocious attempt to woo Amazon, finalist cities and states have offered tax-incentive packages -- Newark and New Jersey, for instance, proposed $7 billion in incentives -- not to mention the hundreds of thousands of dollars spent on pricey site-selection consultants, advertising campaigns and quirky publicity stunts. The decision to split the locations would give Amazon access to more than one such incentive package

But the plan to halve one of the biggest proposed economic developments in years could also be viewed as a letdown for the 20 locales that Amazon chose as finalists earlier this year. When Amazon initially announced plans for HQ2 more than a year ago, it promised to bring as many as 50,000 employees and more than $5 billion in investments to the new location over nearly 20 years.

Amazon expects to view all three of its main U.S. offices as headquarters with similar executive and back-office functions, the person familiar with the effort said. But the split means the company is essentially creating two offices smaller than its Seattle headquarters, which holds 45,000 workers.

Jeff Finkle, president of the International Economic Development Council, a group that represents economic-development officials across the country, said it is going to be harder now for any one community to claim to have won an Amazon headquarters.

"Many of these communities were hoping to brand themselves as the co-headquarters with Seattle," he said. "I think it becomes just a regional office or a back office or a major office but not a co-headquarters."

Still, Mr. Finkle thinks both winning areas will have achieved an economic victory with possibly 25,000 new jobs, the investments associated with a major tech campus and potentially interest from other companies.

The latest shift highlights how unpredictable this site-selection process has been for the 238 cities and regions that submitted proposals more than a year ago. Amazon had defied convention by turning the search into an unusually public beauty pageant.

During the process, Amazon's thinking shifted as executives concluded that splitting its offices would allow it access to more tech talent than in just one location, the person said.

A tightening labor market in the U.S. and a period of low unemployment has made competition for workers even fiercer since Amazon began its search. Not only are cash-rich tech giants like Amazon competing to hire the brightest software engineers, computer programmers and artificial-intelligence experts, so are automotive, banking and retail companies. Amazon has been hiring aggressively across many of its businesses, including for its profit-driving cloud-computing division and for its AI assistant, Alexa.

By building two headquarters, Amazon can tap different geographic regions for talent, including some who may not want to move too far from home. It may also not be competing with other major tech giants in a given area, like it does with Microsoft Corp. in the Seattle area. The company will continue hiring experts in machine learning, AI and supply chain -- all areas Amazon currently hires for in Seattle.

Additionally, the decision would allow it to lessen the potential headaches for chosen areas. Amazon has wanted to avoid being the only large company in town, something it has dealt with in Seattle, according to people familiar with the company's thinking. Adding 50,000 workers -- even over more than a decade -- would likely cause some hiccups for transit systems and potentially lead to issues like a lack of affordable housing.

Northern Virginia's Crystal City, a neighborhood in Arlington County, appears to be a front-runner to take one of the two final positions, according to people familiar with the matter. In Northern Virginia, Amazon is already negotiating with government officials on incentives, while it is also talking with JBG Smith Properties, a real-estate investment trust, about the Crystal City real estate it owns. Part of the negotiations there involve nailing down the investment targets Amazon would have to meet to qualify for incentives, one of the people said.

Crystal City, just across the Potomac River from Washington, D.C., has an urban feel, numerous government offices and a ready-to-go campus with empty, older office space. The area has good access to tech talent and transportation, two factors that rank high on Amazon's wish list.

Betting websites have had Northern Virginia as the favorite for most of this year. Amazon Chief Executive Jeff Bezos has a home in the D.C. area and owns the Washington Post. The region was also the only metro area where Amazon named three finalists; D.C. proper and Montgomery County, Md., were the other two.

Another top candidate, Dallas, has a lower cost of living and public-private partnership incentives, in the form of tax abatements, grants, infrastructure cost sharing and other methods to offset project and operational costs. It is also in Texas, which doesn't levy personal income taxes, something that could prove attractive to workers for relocation.

In New York, one neighborhood Amazon has explored is Long Island City, in Queens, the Journal previously reported. That borders the East River overlooking Manhattan and is being developed with high-rise buildings filled with young professionals.

After a campaign rally on Monday, New York's governor, Andrew Cuomo, told reporters he was doing everything he can to lure Amazon to the state.

"We've put together a very strong incentive package, and we've had great meetings," Mr. Cuomo said. "It's been very positive. And anything else I can think of that'll get us over the top -- anything they want named Amazon. I'll change my name to Amazon Cuomo if that's what it takes, because it would be a great economic boost."

--Jimmy Vielkind contributed to this article.

Write to Laura Stevens at laura.stevens@wsj.com and Shayndi Raice at shayndi.raice@wsj.com

(END) Dow Jones Newswires

November 05, 2018 19:32 ET (00:32 GMT)

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