The 'Amazon Effect' on Real Estate in New HQ Cities
Amazon’s recent announcement of its selection of two sites for its second headquarters has fueled speculation about the effects on the real estate market in those areas—Long Island City in Queens, N.Y., and the Crystal City area of Arlington, Va. Amazon says it will invest $5 billion and create more than 50,000 jobs across the two new headquarters locations, with more than 25,000 employees each in New York City and Arlington. The average salary will be $150,000, Amazon reports.
The repercussions of Amazon’s announcement were immediate; brokerage Redfin reported that online views of homes currently for sale in the areas on Redfin.com skyrocketed. In a blog post on its site, Redfin reported that “the week ending on November 11, views of homes for sale in Long Island City were up 1049 percent compared to the same period a year ago. Views of listings in Crystal City were up 217 percent year over year.”
It will take several years to complete the campuses and updates to the surrounding areas for these new locations, and new home supply was already tight, said Mark Boud, chief economist with market intelligence firm Metrostudy. Boud predicts more than 15,000 new homes will need to be added in each community.
“Housing supply will be gradual to adjust in these urban areas, but our feeling is that Amazon has already received commitments from both cities in terms of infrastructural improvements and housing supply,” said Boud. “Still, the short-term ramifications in terms of rising wage pressures, rising rent and home prices and more pressures on existing infrastructure will be significant.”
Quita Syhapanya, regional director of the Northeast region for Metrostudy, says he expects rents to rise and home prices to follow suit with each rising at different rates depending on the area. “The closer these housing units are to the HQ; the faster you will see rents and home prices rise,” he says. “The further out you go outside of the HQ; the slower the growth rate, but the rate will grow.”
However, not everyone is thrilled with the development.
“Displacement is not community development,” tweeted Alexandria Ocasio-Cortez, newly elected U.S. representative for the district that includes Queens. “Investing in luxury condos is not the same thing as investing in people and families.”
That said, the announcement was welcome news to investors and developers who had capital tied up in multi-family housing, said Syhapanya. “Now there will be an influx of capital looking to take advantage of any land or redevelopment opportunities in and around Long Island City for a variety of real estate development.”
For would-be investors, ATTOM Data Solutions, a national property database, is offering an analysis of “Opportunity Zones” created by tax reform legislation passed in December 2017. The legislation provides real estate investors with prime, tax-incentivized investing opportunities, particularly in “zones that are in the path of progress,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “The newly announced Amazon HQ2 markets certainly qualify as being in the path of progress.”