Experts Predicted Amazon's Decision to Select Multiple Locations for New Headquarters
Amazon reduces corporate risk by choosing multiple cities for its new headquarters.
HQ2 is the search for the second headquarters for the Seattle, Washington based online retailing giant Amazon. Earlier this week, the company announced the winners of this year long search, giving Amazon not only a HQ2, but a HQ3 as well. Out of the twenty finalists, the Long Island City neighborhood in New York City and Crystal City, an area located in Arlington, Virginia across the Potomac River from Washington, D.C. arose victorious. While this may come as a surprise to people, numerous urbanists speculated from the beginning Amazon would select multiple locations for their second headquarters.
City Observatory, a think tank devoted to urban analysis, predicted in January 2018 that Amazon would choose multiple locations for HQ2. Similarly, Joe Cortright, the president of the regional economic consulting firm Impresa, stated that it would be in Amazon’s best interest to have multiple sites for the new headquarters. By diversifying, Cortright suggests that Amazon will be able to utilize a city’s unique work specialization, minimize negative effects on housing markets, and to increase its leverage in negotiation with other HQ2 winners. Indeed, Amazon never clearly stated a singular location for the new headquarters in its official request for proposals.
A $5 billion-dollar investment into one city is a risky venture because real estate is immobile and the local labor markets may not be able to support the new business. Thus, diversifying the locations mitigates risk by curbing the negative effects Amazon may have on local workforce and real estate markets. With this expansion, Amazon needs to fill 50,000 high-paying white-collar jobs. Thus, Amazon’s final decision was heavily influenced by each region’s talent pool. Not many metropolitan areas can meet that demand, including Washington, D.C., which only supplied about half of the total in professional and business services employment gains.
Richard Florida, a professor for the University of Toronto and an urban studies theorist, stated it was never about Amazon selecting one new location, but rather, it was a broad corporate locational strategy. Florida wrote, “think about a corporate locational strategy or spatial division of labor, where different kinds of places serve or fill different corporate needs.” Thus, New York City is a logical choice because it is the financial hub for the East Coast, and Washington, D.C. provides tech talent and proximity to the federal government.
Florida continued by suggesting Miami would provide Amazon a direct connection to Latin America, both Boston and Pittsburgh would provide the tech talent, while Columbus or Indianapolis would benefit Amazon’s logistics. Amazon selected New York City and Washington, D.C. because of the unique identity and added value each location would provide.
In addition to the major investment in another headquarter, Amazon is growing exponentially across the country, with expansions in states such as Alabama, Illinois, Michigan, Missouri, Nevada, Ohio, Oklahoma, and Wisconsin. By splitting the new headquarters’ location, Amazon is adding to their cross-country expansion. Not only will these two locations increase their nationwide dominance as an online retailer, but it will mitigate Amazon’s risks and play to New York City’s and Washington, D.C.’s regional job strengths.