Ripple Effects from Amazon's HQ2 Decision
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Amazon's decision to select New York City and Arlington, Va. for its new headquarters properties will affect more than just those areas' office sectors, analysts say.
The e-retail giant announced Tuesday 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 Long Island City, Queens, and Crystal City, Arlington. The new locations will join Seattle as the company's three headquarters in North America.
Amazon also selected Nashville, Tenn. for a large new operations center to handle the company's customer fulfillment, transportation and supply chain activities. That center is expected to create 5,000-plus jobs. The firm currently employs nearly 2,500 people in four Nashville-area distribution centers.
Amazon Founder and CEO Jeff Bezos said opening two new headquarters locations will allow the firm to attract sufficient skilled talent from both markets. He said he expects the new offices "to be a full equal to our Seattle headquarters."
Senator Mark Warner, D-Va., said Amazon's decision to locate a headquarters in northern Virginia could benefit the entire capital region. "We've seen that major investments like these can bring not only thousands of direct jobs but also lead to job growth in other industries," he said. Warner is a former technology executive who co-founded Nextel Communications before entering politics.
"While the selection of the two East Coast cities may have surprised many, the criteria laid out in [Amazon's] original request for proposals last September clearly indicated what it was looking for: a large cosmopolitan city where it could scale up operations in a short period," said Barbara Byrne Denham, Senior Economist with Reis, New York. She noted the Queens and Arlington locations have the three main requirements for scaling up operations: access to labor, access to public transportation and space. "Yes, space, as in developable space in Long Island City as well as other sites including Hudson Yards [Manhattan] and a number of Midtown [Manhattan] sites that have been razed in the last two years," she said. "New York City and suburban Virginia also have the two qualitative features listed in the request for proposals: cultural amenities and access to higher education."
Fitch Ratings, New York, predicted Amazon's new offices will likely have a "muted impact" on the economies and credit quality of Virginia's Arlington County and New York City.
"The additional economic activity could positively affect two of the four local government key rating drivers Fitch assigns--revenue framework and long-term liability burden--over the long term," Fitch said. "We do not expect much change in home prices in either location as healthy economic dynamics are already pushing up prices and supply should be sufficient to absorb the needs. The Washington, D.C. area is more likely to benefit than New York City as it has slower growth in rents and home prices."
Similarly, the new headquarters will likely not have a large effect on employment, Fitch predicted. It noted the full impact of both new headquarters would represent a "modest" 1.5 percent of the labor force in the Washington, D.C. area and only 0.5 percent in the New York City metro, and both metros already have low unemployment rates. "[But] the impact could be more significant if the new facilities attract substantial numbers of related jobs," Fitch noted.
Redfin Realty, Seattle, reported online views of available Crystal City and Long Island City homes on Redfin.com have "skyrocketed" since Amazon rumors surfaced in the news. Home views in Long Island City jumped 794 percent compared to a year ago and Crystal City house views increased more than four-fold.
"I believe there is a lot of interest from investors who want a property they can rent out to a future Amazon employee or possibly use for corporate housing," Redfin agent Mara Gemond said. "Investors are betting that prices will rise quickly and they'll be able to rent or sell for a nice profit once Amazon comes to town."
Amazon employees moving to the two areas will find the following housing market conditions near the new headquarters properties, reported CoreLogic, Irvine, Calif:
--House prices have increased 1.7 percent in New York City and 3.2 percent in metro Washington, D.C. areas over the past year.
--Single-family rent prices have increased 2.5 percent in New York and 2.3 percent in the Washington area over the past year.
--A median home prices of $470,000 in the New York metro area and $410,000 in the Washington, D.C. metro, about double the $225,000 national median home price.
The influx of new Amazon employees is bound to change Queens, Arlington and neighboring cities, CoreLogic said. "Infrastructure will most definitely be impacted and other socioeconomic fluctuations may occur," the report said.
Hiring at the new locations will begin in 2019.