Amazon HQ2 Announcement & Seattle Real Estate Market (Prediction)
Amazon finally announced it’s HQ2 decision! How will this impact the Seattle real estate market?
Many in the Seattle area have been fearful of Amazon’s decision to build HQ2. What if Amazon takes many of their employees and high-paying jobs elsewhere? How will this impact the local economy and housing market?
Amazon’s HQ2 announcement should assuage any fears that Amazon plans to abandon Seattle. Heck, they even plan to build the equivalent of another HQ2 in Seattle.
I dive into the reasons behind Amazon’s HQ choices of Long Island, NY and Arlington, VA and why Seattle and the real estate market won’t suffer as a result.
Watch my November 2018 Market Update to hear my latest thoughts on the Seattle real estate market.
Articles I reference and draw from in this video:
Will Amazon’s HQ2 sink Seattle’s housing market?
What’s next for Seattle after HQ2? Amazon plans suggest expansion, then big hiring slowdown
For Amazon, HQ2 location decision was about talent, talent, talent
New York’s Amazon Deal Is a Bad Bargain
[Video transcript]
Hey all, it’s Zach McDonald, your real estate agent with Real Property Associates in Seattle, and in today’s video, we’re going to discuss Amazon’s HQ2 choices and how they will or won’t affect the Seattle housing market.
So just starting off this video, first of all, I just want to say that I am incredibly indebted to and heavily relying on a couple of different articles that were written by and I’m gonna make sure that I get these right, Mike Rosenberg and also Matt Day from the Seattle Times. They’ve reported on the HQ2 choices as well as how Amazon has impacted the real estate market and local economy. So I’m super thankful for them. I think they wrote great articles and I’ll make sure to link those up in the description. But to avoid quoting them every single time I say something, just know that a lot of this content comes from their articles and blogs.
So let’s just start off with what’s going on. So Amazon started a 2017, a little over a year ago, a search and what their search was entailing was essentially they’re looking for another place to be headquartered. Not as a replacement to Seattle, but in addition to Seattle. A lot of people were afraid that this was because of Seattle’s politics and the pressure they were getting with increased taxes and things like that to essentially get more tax revenue from Amazon and they felt like, okay, well their response is HQ2, search freak out. And I don’t think that will as we go through this, I don’t think Amazon’s intent is to leave Seattle or decimate Seattle’s economy. As we look through this will kind of get into that more. But I do think it’s interesting and we’ll kind of see why and why I believe Seattle or Amazon, excuse me, was and is going to be having a new headquarters in addition to Seattle.
So the just the Amazon situation in Seattle over the last eight years or so, since 2010, Amazon’s added over 40,000 employees to the city of Seattle and most of these jobs are fairly high paying. And so what’s that’s done is it stimulated our economy here and also our real estate market. Mike Rosenberg has done multiple articles talking about how Amazon has dramatically impacted the Seattle real estate market and other tech companies have also moved here like Facebook and Google, but Amazon has played a big role in bringing higher paying tech jobs to Seattle. Which is in, in turn, kind of jump-started or fueled our real estate growth over the last few years. And so the fear is that Amazon moving or getting a new headquarters could dramatically impact the Seattle real estate market in a negative way just like it has in a positive way. And let’s kind of hear maybe what Amazon has had to say.
And so Jay Carney, he’s the vice president for Amazon and he was quoted in these articles by both Mike and Matt. He’s quoted as saying, we continue to have a strong and lasting presence in Seattle and that’s not going to change. He’s also quoted as saying Seattle is and will be a focus for a long time. And he also stated recently that this search is about the future growth of the company. It’s not about moving existing employees.
And as we go through this, I think you’ll agree with me because, and with him because he were, they chose and surprise, surprise, Amazon shows Arlington, Virginia and Long Island, New York as their new headquarters. And they originally said they were going to choose one headquarters, but last minute they announced a split where they were going to do two different smaller headquarters. And I think we’ll see you why here in a minute.
So the interesting thing about Arlington and Long Island, just to start off with, is that they’re two of the more expensive housing markets in the country aside from Seattle. And so there’s not really a cost savings for employees moving or an incentive for employees to move to one of these places, at least on a cost basis. The housing stats, and these are from Zillow, Arlington is about $664,000 for the average house, Seattle $740,000 and Long Island City $846,000. So they’re all more expensive places to live. Rents are actually pretty similar according to Zillow data as well. I think Mike put it really well. He said, priced out Seattleites is how he starts off as article priced out. SEATTLEITES hoping for a housing market crash with Amazon expanding to two new headquarters locations might be disappointed and I do agree with him.
I don’t think there’s going to be a big impact on the Seattle housing market at all. If there even is one to speak of. I’ll explain a little bit more about that towards the end. But I think the biggest reason Amazon did this whole search was less about affordability for employees where they’re living or attracting people to cheaper areas. It was really about going to where the talent is. And the New York Times editorial board published an article on the 14th, so yesterday it’s called New York’s Amazon deal is a Bad Bargain. Also linked that up in the description and they’re essentially summary of this whole article is the city has what the company wants. Talking about Long Island talent, we pay, why pay 1.5 billion for them to come and Virginia is also going to be offering some pretty hefty incentives as well to the tune of about $750 million. But the interesting thing here is that they also draw from, and this this New York Times article draws from another article on bookings.edu. It’s essentially they’re doing research on tech and they.
They have an article here can of showing the different tech hubs and where the tech talent is located in New York, number one has over 320,000 tech workers as of 2017, Washington DC 263,000 and then California and some of the California cities are lagging pretty far behind that and in Seattle is number seven on this list. So Amazon’s already in Seattle, which is one of the top 10 tech hubs, which is also why companies like Google and Facebook have moved up to Seattle because it is cheaper for their employees. There is an incentive for them to move up to the Seattle area, but it’s also a great tech hub. And so what I think Amazon’s doing is they’re just going for the juggler. They’re going to go across to the east east coast and they’re going to tap into two of the largest tech hubs in the whole US and they are brilliant and the New York Times is pointing this out.
They did this whole search for a place to go, but you’ve got to think they really wanted to end up in New York or Washington DC area and that’s exactly what they did. And the incentives probably don’t hurt at all.
And this article on booking, they are also quoted saying, their big “highlight” of this whole article is the critical importance of readily available talent to Amazon is evidenced by the company’s decision to split the headquarters between two different sites. Which is interesting because they didn’t just choose one. They decided, well heck, if we can get into New York and also Virginia, we might as well do both and they could always expand more. What they’re proposing is about four million square feet of office space in both Long Island and also Crystal City, Arlington, Virginia, and the expansion could be more. Some of these articles we’re talking about up to eight million square feet of office space and just for perspective, Seattle has about 10 million square feet of office space and Amazon is talking about adding another 4 million square feet of office space there.
It’s already locked up and in process. hey also have some new offices opening up in Bellevue, so it doesn’t seem like Amazon’s planning to stop investing in Seattle. Well, according to this, it’s going to be about the same investment continually in Seattle as it will be in these new areas. But it does really appear that they’re going to be investing in their future and pulling out in talent from a new place
So just kind of in a big summary, it doesn’t, to me, appear that there’s any incentive or plan to just leave Seattle or even take employees from Seattle, which will happen there. There’ll be people that’ll relocate. but the big draw here is to attract talent in new places like New York and Virginia and you might attract different people to those locations, people that don’t necessarily want to move to Seattle, but they would live in, in Queens or live in Crystal City as opposed to moving all the way across the country. And the same is true for people in Seattle. There’s not going to be a million employees lining up at the door, which they don’t have a million employees, but there are going to be that many employees lining up the door like, hey, ship me off to New York.
And so I don’t think in summary that there’s going to be a dramatic impact on the Seattle real estate market if at all because of this move. It does seem though that Amazon here is trying to continue growing, which is a smart thing. I think in terms of business it might also help these other real estate markets where they’re moving to, but I don’t see any negative impact on Seattle’s real estate market.
