One year ago, Amazon announced that it intended to build a second headquarters, dubbed HQ2. But Amazon didn’t have a specific destination in mind to build its headquarters — instead, it invited any metropolitan area in North America with at least 1 million people to pitch Amazon on why they should be chosen.
Most corporate expansion announcements are relegated to a paragraph or two in the local newspaper. But Amazon’s announcement — that a hot tech company with one of the highest market capitalizations in the U.S. was looking for a city to add up to 50,000 well-paying jobs — set off a feeding frenzy.
Governors and mayors tripped over one another to talk about how their city with a lower cost of living than Seattle was better than all of the other cities than a lower cost of living than Seattle. If you live in one of the 20 cities that’s still in the running to land HQ2, it’s likely that you haven’t gone a week without talking about Amazon in the past year.
That’s because what’s at stake with winning Amazon’s second headquarters is not just a chance to land tens of thousands of jobs, but to become one of the first cities to capitalize on the tech industry’s inevitable exodus from cities like Seattle and San Francisco as the cost of living there continues to rise with no end in sight.
Most of the other major tech companies have joined Amazon in saying that they too, are interested in adding more jobs outside of Seattle and Silicon Valley. Mark Zuckerberg went on a tour of the U.S. for — ostensibly — personal reasons, though he certainly used the opportunity to talk about the ways Facebook could be a force for good. Google said it plans to add or expand to offices in 9 states this year.
Apple, meanwhile also announced at the beginning of 2018 that it would be opening another campus somewhere in the U.S , and is still in the process of selecting the location. And just this week, Twitter CEO Jack Dorsey said in a hearing in front of the U.S. House Commerce and Energy Committee that the company was looking to distribute more of its workforce outside of San Francisco, because “not everyone wants to be in San Francisco.”
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Though Amazon still hasn’t revealed its choice for its second headquarters, there’s no question that the past year has had a profound impact on the question of when we can expect tech companies to decentralize their workforces, and how they will go about doing so.
For starters, no other company seems like it will follow Amazon’s beauty pageant-like approach. Many of the cities looking to land HQ2 have offered the city billions of dollars in subsidies — and those that haven’t are fighting public records requests to reveal what they have offered Amazon, claiming that doing so might give the competition an edge. As a result, Amazon’s process has been criticized by government watchdog groups, residents of potential HQ2 cities, and even other tech executives like Tim Cook.
However, that doesn’t mean other tech companies will be running radically transparent searches for their new offices either.
Earlier this year, it became evident that Raleigh, North Carolina, is one of the leading contenders for Apple’s campus. Residents of Raleigh were tipped off to this by the fact that the state legislature is looking to make some changes to the laws dictating what incentives can be offered to large companies.
Additionally, some local state legislators spoke anonymously to the local paper, proclaiming that the Apple campus was almost a “done deal” — basically sending out a bat signal to their fellow legislators that more incentives needed to pass in order to land the Apple campus.
Apple’s campus search is more indicative of how tech companies will go about choosing their new Heartland offices — selecting a few cities they’d like to expand to and then doing some behind-the-scenes negotiating to squeeze as many incentives out of them as possible — but Amazon’s has shown the kind of money that is at stake.
If a state like New Jersey is willing to offer Amazon $7 billion in incentives for 50,000 jobs, then how much would it offer a company like Facebook or Twitter for, say, 5,000 jobs? Unless Amazon incurs a huge backlash by failing to deliver on HQ2, its process has set the bar for the kind of money that cities will have to throw around to attract tech companies in the coming years.
Another takeaway from the past year is just how long it’s going to take in order to see a more equitable distribution of tech jobs across the United States. Tech companies have just barely started the process of figuring out where they want to expand to, and even when they pick a city, it takes quite a while for them to negotiate with the city on tax breaks before they even break ground on a new office.
I’m often asked if Silicon Valley is actually starting to see its influence wane. My answer: I’ve never seen a higher level of interest expressed by companies or tech workers in moving away from some of the top tech hubs — and Amazon’s HQ2 announcement is the biggest piece of evidence supporting that. But wanting to leave a place and actually leaving it are two very different things.
It will still take years before we see a noticeable increase in the number of tech jobs outside of San Francisco, San Jose, and Seattle. And it will take an even longer time to see a noticeable change in some of the other metrics that define a “successful tech hub” — more tech startups in other cities receiving venture capital, and more of those tech startups being acquired for hundreds of millions of dollars or going public.
Buckle up, because HQ2 is only the beginning of tech’s exodus.