Why the "Amazon effect" on property prices in the selected HQ2 cities may be muted

Why the "Amazon effect" on property prices in the selected HQ2 cities may be muted

As with Amazon

AMZN, + 0.92%

With the choice of location for the second headquarters is over, experts say that property speculators proceed with caution.

The company is reported to be in late stages with communities in Crystal City, Virginia, near Washington DC and Long Island City, New York, to build its second headquarters, the Wall Street Journal reported Monday. The company's current headquarters are in Seattle, Washington (some reports say Dallas is still in the running.)

Amazon said that its second headquarters or HQ2 would bring more than 50,000 employees and create more than $ 5 billion in economic investment over 20 years, and potential HQ2 sites made great efforts to attract Amazon. (Amazon declined to comment on this story.)

Marc Cenedella, Chief Executive Officer of Ladders, a career site, said New York City and Northern Virginia are two of the best places for talent. Amazon employees generally fall into two categories: low-paid warehouse workers and "high-wage" knowledge workers. The jobs in these two HQ2 are expected to fall into the latter category.

"It took them 20 years to build what they built in Seattle, and trying to duplicate the size and scale of technological work will be hard to achieve in a city," he said. "Dividing up seems to be a rational decision."

Will these cities attract workers?

In a PayScale analysis, Northern Virginia and New York City were placed second and third best for concentration of qualified talent for HQ2, which was surpassed only by Boston. In the metropolitan areas of New York and Washington, there is already a growing technology area that provides Amazon's talent, said Aaron Terrazas, senior economist at Zillow

Z, + 1.46%

In one analysis, Northern Virginia and New York City were ranked as the second and third best locations for HQ2 for talented talents outperformed only by Boston.

Both are the home of big corporations. Mars Inc., capital one

COF, + 1.28%

and Northrop Grumman

NOC, + 1.18%

are among the many companies that call Northern Virginia home. JetBlue

JBLU, + 0.00%

It is now headquartered in Long Island City.

You also have plenty of vacancies for commercial real estate. Especially in Long Island City, a revitalization has been undergone in recent decades, in which large warehouses on the waterfront were converted into corporate office parks.

Citigroup earlier this year

C., -0.92%

One Court Square in Long Island City, the tallest skyscraper in New York City outside Manhattan, clears and opens 1 million square feet of office space. Crain reports in New York, citing sources, that Amazon is considering the building for its outpost in Long Island City.

The move is likely to attract hundreds of thousands of workers to the selected cities, including those who may not be working with Amazon but may be working with subcontractors and start-ups near Amazon, said Katie Bardaro, vice president of data analytics at PayScale. a compensation data and software company.

Will house prices rise in HQ2 cities?

House prices and rents are likely to rise, especially near the new HQ2, experts say, but it will not be sudden and there should be no significant increase that some homeowners in Long Island City and Crystal City hope for. "A sudden influx of high-paid workers can be good, but it can also have a negative impact on the local economy," Bardaro said. "People who want to live close to where they live might be able to make those who already live there cheap."

The "Amazon effect" on property prices could be mitigated as the HQ2 is reportedly split between the two developed metropolitan areas.

However, the impact on house prices in New York and Washington, DC could be less severe than elsewhere. A study by real estate website Apartment List predicted that rents in these two cities would increase by less than 0.5% if they won the tendering war on Amazon HQ2.

Of course that's all relative. New York City home values ​​have already risen 42.5% over the past five years, while prices in Arlington County, Virginia have risen by 15.5%. Seattle home values ​​rose 73% during this period.

In New York, the recent spate of new luxury apartment complexes has resulted in lower housing rental rates in the upper part of the city due to more vacancies. However, Long Island City and Queens were outliers in this trend.

In addition, the "Amazon effect" could be even further reduced as the headquarters is split between the two cities.

What happens to rents near Amazon?

Rents are already rising in the two metropolises, which are said to choose Amazon. The northwestern region of Queens, which includes Long Island City, Astoria, Sunnyside and Woodside, has the highest average rent in the city at $ 3,095 per month, according to real estate firm Douglas Elliman. Rents rose 3.8% last year, compared to 1.8% in Manhattan and 0.2% in Brooklyn.

The two places are easy to reach for commuters. This makes it easier for HQ2 employees to decide somewhere.

A similar situation has developed in the greater Washington area. Arlington is a sought-after area with rental growth of nearly 3% last year. The median rent is $ 2,080 per month. Compared to the previous year, the average rent in the metropolitan area of ​​Washington increased by only 0.6% compared to the previous year, below the national average of 1.1% (Apartment List).

The two sites are both easily accessible to commuters. This makes it easier for Amazon HQ2 employees to choose somewhere. (Compared to Seattle's lack of transportation infrastructure, life near Amazon's current Southlake Union headquarters was more important and therefore more expensive, Terrazas said.)

Crystal City is served by the Blue and Yellow lines of the Washington Metro and Metroway Bus Rapid Transit. Long Island City is served by eight different subway lines that allow drivers to travel to Pennsylvania Station and Grand Central Station, two major hubs. The Queens area is also accessible by S-Bahn and ferries. Both cities are also near highways.

"They are just outside the city center," said Terrazas. "It makes these places even more accessible to young urbanites and people who prefer to live in the suburbs."

In Seattle, regulations for infrastructure and housing were slowly eased, driving up rents and house prices.

Another advantage of these cities is the time. The success of Amazon has surprisingly surprised Seattle, argues Terrazas. As a result, the city slowed down the regulations for the construction of infrastructure and new housing slowly. The fierce competition for homes to buy or lease pushed home prices and rents to an all-time high.

New York City mayor Bill de Blasio announced last week that he would invest $ 180 million in infrastructure improvements in Long Island City. "D.C. and New York, even though there are only 25,000 new jobs, you know this is coming, "said Terrazas. "You can plan this and make sure the infrastructure exists before people look for a job."

Are New York and Crystal City obvious choices?

Amazon has allegedly received more than 200 deals from cities in the US that would host the new headquarters – many of them had economic incentives to sweeten the deal – that the company would probably only consider a handful of them, said Scott Galloway, CEO of New Business Intelligence company Gartner L2, based in York City.

"That was over before it started," he said. Galloway believes that Amazon has moved its headquarters to strengthen its hand to negotiate with a smaller number of preferred cities. Tax incentives of $ 7 billion were offered in Newark and New Jersey, and other cities spent thousands on marketing campaigns. (Amazon has not returned a request for comments on Galloway's comments.)

In fact, Galloway predicted that Bezos would vote for New York City or the Washington DC district, as the billionaire has apartments there. "If you're the richest man in the world, you can only buy immortality – you do not want to live far from headquarters," Galloway said. "These new locations will be within a 15-minute bike ride from the houses Bezos already owns."

,

Leave a comment

Send a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.