What If Amazon Picks Austin For Its Second Headquarters?

Sep 20, 2017

Let’s get this out of the way: Amazon’s second headquarters is not coming here – yet. But the prospect of the e-commerce giant's "HQ2" coming to Austin has invited more than enough speculation.

Still, it’s fairly rare when one of the most valuable companies in the world decides to set up shop – or in this case, a second shop – somewhere, promising as many as 50,000 jobs over 15 years.

“Without question, the competition is going to be fierce,” said Mike Berman with the Austin Chamber of Commerce. He could be talking about the bidding process to lure Amazon, but he's not. In fact, he won’t. Instead he’s talking about the competition to get you to read this story.

Credit Claudio Toledo

“We did an initial media search," he said, "and within five days, we saw 1,600 stories in the media representing a potential reach of about 1.2 billion, and that was just in five days."

So, yeah, a lot of people are thinking the same thing: What if Amazon came here?

“Amazon, if we win this in Austin, Amazon could be responsible alone for about half the growth in the tech sector itself – quite apart from all of the other employment effects that such a move would have," said Bruce Kellison, director of the Bureau of Business Research at the IC2 Institute at UT Austin. "It would really be a big deal for Austin.”  

The growth he’s talking about is job growth. Right now, the Austin area has about 200,000 tech workers, making up roughly a fifth of the city's workforce.

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Conservatively, Kellison said, Amazon could bring in about 3,300 employees a year as it ramps up a second headquarters. That means one company would be creating the same number of technology jobs for the area as all of the city’s other tech employers combined.

"Austin is a technology hub anyway," he said. "We’re already a tech center in the United States. We rank with the most actively growing tech centers in the country. We’re already growing the tech sector at about 2 percent a year in the labor force.”

It’s Austin’s technology core that gives the city a viable shot at landing Amazon’s so-called HQ2. After all, two of Amazon’s criteria are strong job growth and the right labor pool. As it happens, Austin’s talent pool is nearly tailor-made for Amazon’s software engineering needs.

“If you look at the data we’ve developed at IC2 since 2010, software is leading the pack in tech employment," Kellison said. "So, we’d be building on strength. Austin’s strength right now is in software.”

And if all those jobs were to come, they would inevitably create more jobs for Austin — stretching far beyond technology.

“We know that tech jobs attract a large number of supporting jobs in professional and business services," Kellison said. "So, somebody coming in at that salary level is going to be spending a lot of disposable income in the area on entertainment and the other amenities that Austin offers.” (The company says annual average salaries will exceed $100,000.)

Amazon employees will also need doctors; they'll be buying homes and groceries.

If its second headquarters is built here, Amazon would become the biggest private employer in the city, perhaps – again, speculating – employing three times as many workers as its closest competitor, HEB. Amazon already employs more than 6,000 workers in the Austin area — between its service center in San Marcos and Whole Foods, which it bought last month. Only the State of Texas would employ more Austin area-residents.

The city also scores well in other criteria that Amazon is considering, like quality of life.

“We have a lot of sunshine and lakes and easy access to parks and biking. It’s a very active community,” Berman said. “You’ve just got a big concentration of highly educated and wonderful, talented people that is very attractive to companies.”

And, even though you might disagree if you live here already, Austin is still seen as very affordable.

“You have a very strong economy here in the Austin area and in the entire region," he said. "And I think that’s a big driver. Part of that, also, is in terms of the cost structure compared to Seattle or Silicon Valley or the East Coast, Austin still has a cost advantage in terms of housing prices and other business costs, in having less corporate tax and no income tax.”

But, what exactly would it take to get Amazon to come here? One criteria that was not included on Amazon's list of priorities might have a pivotal role in where the company ends up: economic incentives.

"You've just got a big concentration of highly educated and wonderful, talented people that is very attractive to companies."

Think of economic incentives as the steroids for competition between metropolitan areas. They come in many forms: state and city tax breaks or rebates in return for bringing a certain amount of jobs or economic activity.

Since the competition is fierce between cities, Berman said,  in deals like this one – but not this specific one, because he’s not talking about this specific one – incentives are required. But, he said, Austin really hasn’t had to sweeten the pot too much for companies in the past.

“The City of Austin in the last 10 to 12 years has really only done 21 incentive deals," he said. "There might be a perception that Austin does a lot of these deals, but in reality, there’s, again, 21 incentive deals in the last 10 to 12 years. So, it’s really not that many. Other communities around the state have done significantly more.”

And while he wouldn’t elaborate specifically on what Austin is doing, Berman did say this very general noncommittal statement about Amazon: “This is getting a lot of attention and a lot of communities have already publicly said they’re going to put their best foot forward and, absolutely, the competition will be very intense for this."

See you at the ribbon cutting — maybe?

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