Amazon just announced its plan to establish a second headquarters in a new city, and that means big things for real estate. The new headquarters will come with 50,000 new Amazon jobs with an average annual compensation over $100,000. Amazon will also spend more than $5 billion on capitol to physically create everything its new headquarters needs.
Before we delve into the real estate impacts, let’s put that new HQ into perspective. Currently, Amazon employs about 40,000 full-time employees here in Seattle. It estimates that the $27 billion it invested into Seattle between 2010 and 2016 has generated $38 billion in the city’s economy ($1.40 for every Amazon dollar).
Amazon says this new headquarters won’t diminish its Seattle presence. Amazon has already committed to occupying 12 million square feet of office space in Seattle by 2022, and so far, it’s only two-thirds of the way there. Much construction remains—and the company hasn’t even started building some of the planned new offices, apartments, and shops. That’s 4 million square feet of office space that will still be coming to Seattle in the near future, along with all the jobs needed to fill that space.
So, on the real estate side, that means not much will change in the short term. There’s still a huge influx of highly paid Amazon employees looking for housing. This hot, competitive, low-inventory housing market won’t change any time soon.
But longer term, we will likely see a reduction in both bidding wars and the inundation of newcomers driving up rent prices—if Amazon’s Seattle presence plateaus after it fills those 12 million square feet. Amazon employees account for roughly 10 to 20 percent of Seattle homebuyers, and an even larger percentage of Seattle renters.
“This is probably welcome news for the housing market in Seattle, both on the for-sale side and the rental side,” said Zillow’s chief economist, Svenja Gudell. “Not to say that Amazon is a full driver to those [housing price] increases, but they’re certainly contributing.” She added, though: “This is not writing on the wall that Seattle’s growth is over.”
Once Amazon reaches its full Seattle size, home prices still aren’t likely to drop. The city will still be growing, just not as fast. We’ve become a major tech hub, and although Amazon is easily the city’s largest employer (on an unprecedented scale), there are other major employers. Similarly, housing prices will simply rise at a slower rate than they have been in recent years. This city has a massive inventory shortage that won’t recover overnight. There just isn’t enough space.
A bigger impact will affect development. Once Amazon’s growth stops, there’s no similarly-sized competitor to step in and fill its shoes. All those cranes we’re so used to seeing will become much less common. In a city that’s already stretching at the seams of its infrastructure, a city whose traffic woes keep worsening and whose light rail plan is still 20 years distant, a slowdown in growth is a good thing.
Additionally, Amazon’s new HQ will likely cause a luxury-apartment bubble. Those high-end rental units need a constant influx of well-paid newcomers, and once Amazon tops out, supply will likely outpace demand.
As for whatever new city Amazon picks, its local real estate market has a wild ride ahead. Median home values in Seattle have doubled since 2012, due in large part to Amazon. In 2012, the median home price was $355,000; it’s projected to hit $700,000 this month. The median rent jumped from $1,500 in 2012 to $2,650 today. For even more impacts on the new HQ2 city, check out a great analysis by The Urbanist.
