Over a year after its initial Request for Proposal (RFP) was issued, Amazon has finally announced the location of its second headquarters (HQ2). Two locations—Long Island City, New York and Arlington, Virgina—ended up being selected, with the previously announced 50,000 jobs being split between them, and an additional 5,000 jobs allocated to Amazon’s Operations Center of Excellence in Nashville, Tennessee.
The very public search for HQ2 made site selection a more recognized term and brought awareness to the site selection industry. While the Amazon HQ2 project was large and high profile, the search followed the typical site selection process. However, Amazon’s process also exhibited some key differences. Below is an overview of each phase of the typical site selection process, with a brief description of what Amazon did at each step.
During the planning stage, a company first determines that it needs additional capacity. Companies also typically focus on employee retention, and conduct a zip code and transportation analysis of its existing workforce to assess if the risk that the disruption caused by a relocation could be magnified by increased employee attrition.
After assessing workforce and expansion opportunities in the vicinity of its existing HQ, Amazon determined that growing its Seattle headquarters was not the best option. It needed to diversify with a second headquarters location (HQ2). It then needed to determine where its new HQ2 should be located.
DEFINITION OF THE PROJECT
Once a company has determined that it needs additional capacity, it will define the parameters of the project. First, it will determine the specs of the project—what activities will occur at the facility, employment needs and numbers, building/site requirements, and capital investment numbers. At this phase of the process, a company will also determine the criteria that will make the project a success in terms of needs (absolutes for success) and wants (preferences).
Amazon laid out the details of its HQ2 project in the RFP it issued in September 2017. The RFP had four key preferences:
Metropolitan area with more than one million people
A stable and business-friendly environment
Locations with the potential to attract and retain strong technical talent
Communities that think big and creatively when considering development locations and real estate options
In the RFP, Amazon also went into the specific details of employment (50,000 jobs), building/site requirements, and financial investment ($5 billion). The RFP then laid out additional key preferences and decision drivers, followed by a detailed list of information requested.
EVALUATION OF LOCATIONS
After a company has defined its project, it considers specific locations. If the project will be an industrial facility, the company may be looking at specific sites at this point, whereas an office project site search might still be looking at general metropolitan areas. Either way, the locations proposed in various RFP responses will be screened against the project criteria, site visits will be completed, comparative analyses among short-listed competing locations will be performed, and ultimately, finalist locations will be identified.
Amazon’s RFP solicited responses from any interested community, and ultimately generated 238 responses from across North America.
NEGOTIATION AND FINAL RESEARCH
When the finalist locations are determined, detailed negotiations begin. Often, negotiations focus on financial incentives that could be included to offset costs of various alternatives. Although “incentives” often connotes tax breaks to a company, incentives can take many forms. Common incentive proposals include cash grants, workforce development programs (with or without a requirement that a minimum number of jobs be created), or fast-track permitting or relaxation of other regulatory barriers to local development.
After reviewing the proposals and visiting many communities, Amazon shortlisted 20 locations. Negotiations and additional site visits likely occurred, and a few locations rose to the top of the list.
SITE CAPTURE AND DOCUMENTATION
Once the final location has been decided and all negotiations are completed, the final documentation is completed. Documentation normally involves a non-binding memorandum of understanding (MOU), among other legal agreements. The MOU will form the basis of many other legal documents that will vary depending upon the deal structure, and could include real estate purchase agreements, leases, easement and access rights, and documentation of financing arrangements among the company and various public and private financing sources. The company will also close—or at least sign a definitive agreement to close—on the property during this final stage, which ultimately culminates in a public announcement.
Graphics courtesy of The Amazon blog Day One.
Amazon in New York City is in the Long Island City neighborhood in Queens.
Amazon in Northern Virginia is in National Landing in Arlington.
Amazon Operations Center of Excellence is north of the Gulch in downtown Nashville.
Now that Amazon has selected its winning locations, the hard work of building the physical facilities as well as staffing the positions begins. It will be interesting to watch and study the transformation of these two locations as Amazon moves in and ramps up the project over the next 15 to 20 years.
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Lindsey Cannon is a director with Quest Site Solutions which provides site selection services and economic development consulting to companies and organizations worldwide. With more than 10 years of experience in site selection and economic development, Cannon provides specialized skills and services to clients in the areas of detailed site evaluations including sites, infrastructure, transportation, labor and demographics, state and local taxes, and incentives. She is Immediate Past President of CREW Upstate South Carolina and a member of the 2018 CREW Network Communication and Editorial Committee.