Amazon is searching for new headquarters, and L.A. wants to be in the running

Amazon is searching for new headquarters, and L.A. wants to be in the running

L.A. Times - http://www.latimes.com/business/la-fi-amazon-headquarters-20170907-story.html

Amazon launched a search for a second headquarters city in North America that would cost $5 billion and employ up to 50,000 people, and Los Angeles plans to be among the candidates.

“I can confirm we are planning to bid,” said Alex Comisar, a spokesman for Los Angeles Mayor Eric Garcetti. He said further details would be coming.

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The announcement by the Seattle-based online retailing giant likely will set off a scramble among dozens of major U.S. metropolitan areas to capture the contract for Amazon’s so-called HQ2 project.

“We expect HQ2 to be a full equal to our Seattle headquarters,” Amazon Chief Executive Jeff Bezos said in a statement Thursday. “Amazon HQ2 will bring billions of dollars in up-front and ongoing investments, and tens of thousands of high-paying jobs. We’re excited to find a second home.”

Amazon is now soliciting bids for the project and said it would give priority to areas with more than 1 million people that are within 45 minutes of an international airport.

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In addition, “a highly educated labor pool is critical and a strong university system is required” in the area, Amazon said in its request for proposal from potential bidders.

“We want to invest in a community where our employees will enjoy living, recreational opportunities, educational opportunities, and an overall high quality of life,” the company added.

Amazon also made clear that metro areas likely will be required to grant incentives to attract the company. The company asked bidders to identify state and local incentives available, including tax credits and utility incentives.

“The initial cost [of the project] and ongoing cost of doing business are critical decision drivers” in which area would be selected, Amazon said.

Amazon, with sales of $136 billion last year, employs about 380,000 people, including thousands at several fulfillment centers in California.

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At first glance, Los Angeles and Orange counties would appear to be viable candidates: They have a large available workforce, nearby airports, nearby universities and access to the West Coast ports, which are among the busiest in the nation.

Amazon also has nine sprawling fulfillment centers in California, including five in the Inland Empire, and earlier this year, it announced plans to build two new centers, in Redlands and in Eastvale, near Riverside.

The company also has a film and television production arm, Amazon Studios, based in Santa Monica.

The TV division of the studio shoots many of its shows in the Los Angeles region, including “Transparent,” “Bosch” and “The Last Tycoon.”

In just a few short years, Amazon Studios has become a major Hollywood player. The studio produced last year’s Academy Award-winning “Manchester by the Sea” and has been successful in luring prestige talent, including Woody Allen, Matthew Weiner and Richard Linklater to create original movies and TV series.

For L.A., the prospect of an Amazon headquarters “is a huge opportunity for the city,” in large part because of the economic benefits Amazon would generate in the region, said Lloyd Greif, head of the Los Angeles investment bank Greif & Co. and a former chair of the Los Angeles County Economic Development Corp.

“In terms of the importance to the city, I think the Olympics [in 2028] would pale against this,” Greif said.

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But Greif said the city’s bid “likely would require a partnership between Eric Garcetti, [Gov.] Jerry Brown, the LAEDC and others” to create a package of incentives, available land and other features that would appeal to Amazon.

“This would be a regional and state effort … a combined proposal of state and local incentives and cooperation,” Greif said.

One downside might be that Amazon may not want both of its headquarters on the West Coast. L.A.’s high housing costs also may work against it.

Both rent and home prices have soared in recent years in the region, putting a strain on family budgets and the ability to take out a mortgage, although Amazon noted that employment at its second headquarters would be “high-paying jobs.”

There are several other big cities that also meet Bezos’ requirements.

Many wasted no time making their pitches, signaling a fierce battle among many of the nation’s largest metropolitan areas could be imminent.

“We’re all abuzz this morning about Amazon’s announcement,” said St. Louis Mayor Lyda Krewson, according to the St. Louis Post-Dispatch. She said city officials were “putting together a team right now to make a very competitive” proposal.

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Pittsburgh Mayor Bill Peduto simply tweeted, “On it,” with a link to Amazon’s proposal-submission page.

Chicago Mayor Rahm Emanuel has spoken to Bezos several times about bringing HQ2 to the Second City, according to the Chicago Sun-Times.

“Chicago’s unmatched workforce, world-class universities and unparalleled access to destinations throughout the world make it the perfect headquarters location for companies large and small. That’s also why Chicago has led the nation in corporate relocations for the last four years,” mayoral spokesman Grant Klinzman said in an email to the newspaper.

And Nashville Mayor Megan Barry told the Tennessean that she was “confident that our socially progressive, pro-business climate, talented workforce, and overall great quality of life offers the type of environment that they are looking for.”

Amazon did not specify why it needs a second headquarters, and the company declined to elaborate. But the move might simply reflect Amazon’s relentless growth, both internally and by acquisitions, and its Seattle headquarters already employs 40,000.

Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said Amazon’s hunt for a second headquarters is about a lack of affordability in Seattle and appeasing President Trump.

“They’ve kind of priced themselves out of Seattle. Rents there are so crazy, and it makes sense that people are turning them down for employment because they’d rather go somewhere more affordable,” Pachter said.

“Mostly, this is more of just the same, which is Bezos showing Trump that he’s creating jobs and he’s not a jobs destroyer.”

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Does L.A. stand a chance?

“Too expensive — it doesn’t solve anything,” Pachter said. “I personally think this is more about housing than anything else. So Riverside makes more sense than L.A. Or Bakersfield. But you couldn’t pay me to live there.”

Then again, he said if Garcetti is able to promise massive tax breaks and broker attractive real estate deals, L.A. might have a shot.

Amazon’s sales have more than doubled in the last four years. And late last month, Amazon completed its $13.7-billion purchase of Whole Foods Market Inc., a chain of 470 grocery stores that focus on organic and natural foods.

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