Amazon.com will open a 1 million-square-foot distribution center that will employ 1,000 people at the site of the former General Motors plant in Southeast Baltimore, the company announced Tuesday.
The company plans to hire locally for jobs packing and shipping books, electronics and other goods, and says its jobs pay more than the typical retail position. The new distribution center, expected to open in 2014, would revive a 2.8 million-square-foot site where city and state officials have tried to lure a large employer for several years. In August, city officials said they were working with a large company that wanted to build on the site but declined to identify the firm.
City Council Vice President Edward Reisinger said the warehouse could help cut Baltimore's persistently high unemployment rate.
"It means jobs for Baltimore City," he said. "They'll purchase homes here and will pay personal income taxes. There are people laid off looking for work, and they'll be off the unemployment rolls."
A new warehouse will also mean that Maryland residents will start paying sales tax on Amazon purchases. Maryland businesses are required to collect a 6 percent sales tax on most goods, but online retailers that do not have a physical presence in the state do not have to collect it. Congress is considering legislation that would close that loophole nationwide.
The Seattle-based online distributor has gone on a recent building binge, opening eight new distribution centers — the company calls them fulfillment centers — across the country this year as it seeks to move closer to customers. In late July, the company announced plans to hire 5,000 full-time employees at distribution centers nationwide.
Amazon spokeswoman Kelly Cheeseman said the company picked the Southeast Baltimore site because of its proximity to a large customer base. Currently, the Amazon warehouse closest to Baltimore is more than 70 miles away in Middletown, Del. The closest distribution center to Washington is in Richmond, Va.
"We want to make sure a fulfillment center is placed as close to the customer as possible to ensure we can offer a great Prime service and good shipping speeds to customers," she said. "We expect to find great talent in abundance in Baltimore, and we're excited to be bringing great, full-time jobs to the residents."
The facility will ship to customers nationwide, Cheeseman said.
Duke Realty Corp., an Indiana-based commercial real estate company handling the building's development, submitted permit requests this summer describing the planned warehouse as a distribution center with 50-foot ceilings and nearly 2,000 parking spots. In the documents approved by the city, Duke said the facility could employ up to 2,600 people. Cheeseman said the company plans for about 1,000 full-time jobs, but that could expand in the future.
The Baltimore distribution center could be a key to the company's emerging strategy of reaching customers for same-day delivery.
In the past, Amazon has sought to place its facilities in places that did not require it to pay sales tax and that had cheap land and cheap labor, said Marc Wulfraat, a Montreal-based consultant and president of MWPVL International. As more states close the loophole that enabled Amazon to avoid sales taxes, the company is experimenting with a new strategy, same-day delivery, Wulfraat said.
Amazon's distribution center in Delaware is too far from the Baltimore-Washington region to reach those customers within a day, he said.
"You would have to position your fulfillment center somewhere within 50 to 60 miles within the population you're serving," Wulfraat said.
Amazon also offers an online grocery delivery service, called AmazonFresh, that it plans to expand in Los Angeles, San Francisco and New York City. For same-day delivery to work, trucks have to be packed with as many items as possible — books and groceries — to keep costs down, Wulfraat said.
Cheeseman said Amazon has no immediate plans to offer same-day delivery in the Baltimore-Washington area.
Wulfraat called the same-day delivery strategy "a gamble," with Amazon betting that customers will get hooked on the notion.
"Once you train people that you can get it now, that's going to become the new norm," he said. "Tomorrow's going to feel like forever."
However, Wulfraat said he thought more people would be interested in free shipping rather than same-day delivery.
Also on Tuesday, the online auction site eBay Inc. announced that it would expand same-day delivery to 25 metro areas by the end of 2014, buying courier service startup Shutl for an undisclosed amount to help the effort.
Earlier this year, Baltimore's City Council approved legislation making it cheaper to build large, tall warehouses here. GM, which once employed as many as 7,000 workers who assembled Chevrolet Impalas, Biscaynes and Monte Carlos and Pontiac Grand Prixs, pulled out of the assembly plant in 2005, eliminating 1,100 local jobs.
Duke bought the property, bordered by Broening Highway on the east, in 2006, converting it into the Chesapeake Commerce Center and demolishing GM's old facilities.
The property is located in the city's enterprise zone, which makes it eligible for a 10-year property tax credit and tax breaks for wages paid to new employees.
Mayor Stephanie Rawlings-Blake said she was excited about the new distribution center because of the jobs it will bring.
"The fulfillment center presents a unique industrial development opportunity due to its location to the port of Baltimore, as well as its access to the city and interstate highway system," she said. "I am proud of the city's efforts, working in partnership with the state, Duke Realty and Amazon to bring this fulfillment center and jobs to Baltimore City."
Council President Bernard C. "Jack" Young said the city will welcome Amazon with "open arms."
"I have focused diligently on job creation because I know that it has the ability to reverse decades of population loss and get our city growing," he said. "Today's announcement is proof that Baltimore is headed in the right direction."
Wulfraat said most of Amazon's distribution center jobs pay $11.50 to $12.50 an hour, while supervisors can earn more. The company said it offers benefits — stock awards, retirement plans and tuition for employees going back to school.
"We are proud to be bringing more than 1,000 full-time jobs with great wages and benefits to Baltimore," Mike Roth, Amazon's vice president of North America operations, said in a statement. "We are grateful to the state and local elected officials who supported Amazon coming to Maryland, and we look forward to being a part of the community."
Councilman Robert W. Curran, who voted in favor of legislation to lower construction costs for the site, said the warehouse will contribute to a "trickle-around" economic effect in Baltimore.
"It's good for that area. It's good for the city as a whole," he said. "It will boost the economy. If you have 1,000 people concentrated in one area, they want to get breakfast on their way to work. They want to have a drink in the tavern after work. They want to get gas at the gas station."