Often referred to as “HQ2” it is common knowledge that Amazon is looking for a second headquarters outside of Seattle. If you look at the impact Amazon had on the Seattle real estate market, it gives us a good understanding of why so many cities and suburbs are bending over backwards for the retail giant. Official data confirms that house prices in the South Union neighbourhood of Seattle have increased in value by 83% during the seven years since Amazon set up shop, with rents up by 47%.
Operation charm offensive
We know that there are at least a dozen cities and metropolitan areas very interested in accommodating Amazon’s next head office. To give you an idea of what impact this may have on the local economy we have the Manhattan authorities promising to light-up the Empire State building in Amazon orange while the New Jersey authorities have promised a $7 billion tax incentive package. The mayor of Chicago has also confirmed the creation of a board of no less than 600 people to support the city’s bid to become Amazon’s next port of call.
In some ways this pandering to Amazon looks way over the top especially when you bear in mind a potential $7 billion package of tax incentives. However, when you consider Amazon will bring with it an estimated 50,000 high-paying tech jobs, everything starts to drop into place.
While the 50,000 jobs which Amazon will bring to the chosen location will have a significant impact upon local residential property, not all 50,000 positions will be filled by those out of the area. There will obviously be a significant number of employees chosen from the local population pool although they would need the relevant qualifications and experience. However, an influx of tens of thousands of people to Amazon’s chosen location will push up house price values and rents.
It is also worth noting that the commercial real estate market has also been heavily impacted in Seattle. In just three years Amazon has gone from owning 9% of office space to a staggering 19% and, while headquarters number two is in the pipeline, the company is still committed to expanding office space in Seattle. We can only imagine the smile on the faces of the property relators who will be bending over backwards to help the online giant. That is before we even begin to look at the impact on the local economy, directly and indirectly.
The obvious downside is that individuals who have lived in the area, wherever that may be, for many years could be forced out. As rents increase this will place pressure on the local workforce and, as we saw in Seattle where average house prices in some of the suburbs hit an average of $1 million, many will be priced out when looking to acquire a home. Those who work in non-Amazon related industries could end up with a significantly greater commute to their local workplace which is often the forgotten side of expansion.
In is estimated that every dollar spent by Amazon on construction and operations would bring an additional $2.72 to the immediate region. Then again, is it sensible to be over dependent on one company? Could other cities offer greater tax incentives to relocate in years to come?