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Amazon Plans to Split HQ2 Evenly Between Two Cities

The Wall Street Journal. logo The Wall Street Journal. 11/5/2018

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 two communities.

The driving force behind the decision to build two equal offices for “HQ2”—in addition to the company’s headquarters in Seattle—is recruiting enough 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 25,000 employees in each city, 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 on Sunday reported that Amazon was in late-stage discussions with Crystal City in Virginia, Dallas and New York City.

A decision and announcement could come as soon as this week, according to people familiar with the matter.

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When Amazon initially announced its plans for HQ2 more than a year ago, it planned for one location, the person familiar with the plans said. But Amazon’s thinking shifted throughout the process as the company concluded that splitting its offices would allow it access to more tech talent than in just one location, this person said.

Amazon has been hiring aggressively across many of its businesses, including for its profit-driving cloud-computing division and for its artificial-intelligence assistant, Alexa. The competition for software engineers, computer programmers and AI experts is fierce across the nation not only from cash-rich tech giants like Amazon but also automotive, banking and retail companies.

Amazon’s shift means the company will essentially be creating two offices that are smaller than its Seattle headquarters, which holds 45,000 workers.

The decision to split its long-awaited economic-development project into two follows a more than yearlong search process launched in September 2017, in which Amazon said it was looking for a full, equal headquarters to its Seattle home. The company said it would bring as many as 50,000 employees and more than $5 billion in investments to the new location over nearly 20 years.

More than 200 cities and areas sent in proposals, after which Amazon narrowed down the list to 20 finalists. Earlier this year, it conducted whirlwind site visits and requested reams of data from the finalists to help it make its decision.

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.

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 publicly traded 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 that Amazon could use. The area has good access to tech talent and transportation, two factors that rank high on Amazon’s wish list.

Oddsmakers on 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.

In New York, one neighborhood Amazon has explored is Long Island City, in Queens, the Journal previously reported. The residential neighborhood 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.”

Related video: Is Amazon going to rule the world?

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Write to Laura Stevens at laura.stevens@wsj.com

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