Amazon's 2nd Headquarters Presents a Quandary for Hopeful Cities

Metropolitan areas across the country are putting together their proposals to become the winning location of Amazon.com's (AMZN -1.11%) second headquarters. The e-commerce giant announced earlier this month its goal to open an "HQ2", setting off a frenzy of speculation as to which city best meets the company's major criteria.

On this segment from Industry Focus: Consumer Goods, the cast discusses some of the benefits -- and potential pitfalls -- for the city that wins the bid.

A full transcript follows the video.

This video was recorded on Sept. 12, 2017.

Vincent Shen: A lot of Fools here at HQ have been chatting and debating over our first story, and I wanted to very quickly get your thoughts on it. Amazon has announced that the company is looking to open a second headquarters outside of its home base in Seattle. The founder and CEO Jeff Bezos started the company there 20 some years ago, but Amazon is outgrowing its campus there in the city. I read that they already have an estimated 33 buildings and 10% of all the commercial real estate downtown in Seattle. So beyond space constraints, there's also the challenge of competing for labor and the thousands of developers and engineers to sustain the growth at the company. So Asit, what do you think? I've heard a few people actually point to your area, Raleigh-Durham and the Research Triangle there as a great candidate for the new headquarters. That would be right in your neck of the woods.

Asit Sharma: Yours too, Vince, actually, Washington DC, the Northern Alexandria, northern Virginia area is also top of list. I think Amazon is going to have an enormous impact on any area it comes to. They're looking to hire about 50,000 workers over the next couple decades, and they're going to spend $5.5 billion, their presence in the new market. On their Seattle campus, they have 40,000 employees, and by their estimates, they have added $38 billion to Seattle's economy between 2010 and 2016.

Shen: Wow.

Sharma: So Seattle is a huge city to begin with relative to some smaller metropolitan areas. You take that impact and put it on, let's say a Raleigh-Durham or a Nashville or a Northern Virginia, it has a very long-term impact and changes the nature of how a city of that size will do business. There's lots of infrastructure that will have to be built. They have taking up 8 million square feet of space in Seattle alone, as you mentioned. So Amazon has already provoked, and I think it's going to provoke a frenzy of competition among hungry cities. I think it's a great benefit for any city that can win their business. But there are downsides, too. Here in Raleigh-Durham, we've got a very laid-back environment. We have Research Triangle Park, great universities, the coast, the mountains. And you can see how while Amazon's money would be beneficial and would certainly help our economic growth, it would also, we have to absorb thousands of new workers, traffic patterns would change, which is always a concern. So there are upsides and downsides to Amazon landing in any one city. My last point on this, New York Times, they put their quasi-study out starting with 25 metro areas and have whittled it down to Denver, saying that's really the only place that would fit all of Amazon's criteria, including the need for ready transportation in the city. There's only one city in the country that perfectly fits every criteria, and that happens to be Denver. So the East Coast would lose out in that case.

Shen: I'm surprised. I feel like, in terms of location, there are the criteria that Amazon mentioned, and those include, by the way, it being a metropolitan region with about a million people, it's a walkable area, close to major universities with a qualified workforce, and within 45 minutes of an international airport. But just in terms of the location, a closer to the East Coast location would allow the company to straddle the U.S. with the two headquarters, whereas between Seattle and Denver they would still be pretty close and concentrated in that area. But there's also been comments from some of the public officials even in Seattle saying that the growth that they've seen driven by companies like Amazon has been great, but at the same time it's really put their infrastructure to the test. Even for a larger city, any area, 50,000 employees and this kind of development will definitely put some pressure on the local governments. But they're fighting for this opportunity because of the $5 billion of investment that Amazon will put into the region over a period of about 15 years. These cities are likely to offer pretty significant property income tax breaks and other incentives as part of their proposals.

So the proposals to Amazon are due Oct. 19th, and the company is expected to make a decision maybe next year. So the first phase of the build-out for up to about 1 million square feet of office space in this new location will be finished as early as 2019. So we'll definitely come back to this story once the decision is finalized, and we have more details. But if you have thoughts on where the next location for the Amazon headquarters will be, we would love to hear from you. You can shoot us an email at [email protected].