Amazon is downplaying the latest report that it plans to shift Seattle employees to the suburbs, but business leaders and economic experts warn that, with the pandemic, expensive cities like Seattle face an increasing risk of a corporate exodus.
On Thursday, Bloomberg reported that Amazon had offered its Seattle-based employees the choice of working in five outlying communities: Bothell/Woodinville, Renton, Tacoma, Redmond, or Issaquah.
The report, which cited an internal Amazon message that was briefly posted on Reddit, suggested that “the Covid-19 outbreak and a new local employers tax have pushed the e-commerce giant to consider alternatives to its hometown.”
On Friday, Amazon tamped down the idea. The Seattle-based online retailer, which normally has around 50,000 employees in Seattle, declined to comment publicly on the Bloomberg reports, but a source familiar with the matter said Amazon workers simply were queried as part of a routine survey. Their responses would help “inform decisions about our long-term growth, especially as COVID-19 is creating new opportunities for workplace options for our corporate employees.”
The source also supplied a screen shot showing that the survey had expressly included Seattle in that long-term growth and emphasized that, whatever the outcome, any plans were “just ideas at this point.”
But those clarifications will hardly be reassuring for the city’s business community. Amazon, which in 2018 helped kill an earlier “head” tax on large employers by threatening to pare its Seattle presence, now faces the new “JumpStart” tax, which the City Council enacted July 1 to help fund housing, business assistance and community development.
The graduated tax, which targets companies with at least $7 million in annual payrolls, will require companies such as Amazon with at least $1 billion in annual payroll to pay a 2.4% rate on salaries of $400,000 or more and is expected to raise a total of more than $200 million.
Business leaders have warned that the tax could drive off companies already unhappy with the expense, crime, and other downsides of Seattle’s downtown.
“The city of Seattle does not need to give employers another reason not to locate in our urban core,” Jon Sholes, president of the Downtown Seattle Association, said in an interview Friday in response to the Bloomberg story. “Our fear is that other companies will consider relocation … given that [Seattle’s new] tax does not apply to other areas within the Puget Sound region,” added Scholes, who sent a formal complaint about the tax to the City Council.
If anything, COVID-19 has underscored how an employer tax is but one of many factors weighing on employers’ location decisions. Although taxes have largely defined recent discussions between Seattle City Hall and big employers like Amazon, the pandemic is likely to change that conversation, said Margaret O’Mara , a University of Washington historian who has written extensively on the role of tech firms in cities.
With the success of work-from-home strategies during the pandemic, companies like Amazon “that had previously considered campuses and centralization to be a huge part of their value proposition” now realize their employees can work just about anywhere, O’Mara said.
At the same time, O’Mara said, many employees have come to realize that “I really like working at home or maybe I want to work in an office a couple days a week when this is all over, but I kind of like not having a commute.”
It’s not just tech firms, O’Mara says, pointing to the recent announcement that outdoor retailer REI will sell its never-used Bellevue campus and shift to satellite offices and other “remote” work. For many urban-based employers, “COVID has been this amazing, incredible experiment at scale” that has undercut previous assumptions about the necessity of large, costly corporate campuses in urban centers, O’Mara said.
Not everyone is ready to call work-from-home as the future of work. As recent reports in The Wall Street Journal and elsewhere have noted, that “experiment at scale” had also turned up a lot of problems with the work-from-home model. Some surveys say companies have had trouble in everything from lower productivity to slower hiring and problems mentoring younger workers.
And the huge amounts of capital Amazon and others have poured into downtown cores may not be so readily disposed of.
“I think people will come back to work downtown,” says restaurateur Rachel Marshall, whose Ginger Beer shop is a tenant in Amazon’s virtually empty building at Seventh Avenue and Lenora Street. “It will just be very difficult for any of us to hold on until they go back.”
But others wonder if COVID-19 could change how companies like Amazon look at all that expensive downtown real estate.
The pandemic has sharply illuminated the entire range of costs that big successful cities impose on companies — expensive offices, but also expensive houses and time-sucking congestion, says Jacob Vigdor, an economist at the University of Washington’s Evans School of Public Policy and Governance.
The pandemic has pushed companies to ask, “Is it a sound business strategy to maintain your operations in a city so congested, and so expensive, that you’ve got to offer premium pay in order to recruit people?” Vigdor says.
Vigdor says all successful cities represent an interplay of competing forces that alternately attract and repel workers and employers. Fordecades, Vigdor says, Seattle has been so good at attracting newcomers that the balance is changing.
“This may be the point where it starts swinging back,” he says. “Not because of city politics, but because of forces beyond the city’s control.”