How Much Would Winning Amazon HQ2 Drive Up Rents In Your City?
Last month, when Amazon announced plans to open a second corporate headquarters, it invited city and state governments to compete for selection, unleashing provincial rivalries typically reserved for major sporting events.
Thursday marks the deadline to submit bids, and–if you go by local press–nearly every big city in America is contending for it, some offering huge tax breaks.
It’s easy to see the appeal. Over the next 10 to 15 years Amazon plans to hire up to 50,000 full-time employees at HQ2, paying each an average of $100,000 a year.
The company expects capital investment in the 8 million square foot project to exceed $5 billion. Moreover, it estimates that every dollar it invests in Seattle–its current home–generates an additional $1.40 for the city’s economy.
But it’s not all smiles. Seattle has led the nation in home-price growth for 10 consecutive months and rents there are among the fastest growing in the nation. Many blame Amazon and the tech ecosystem that has grown up around it. This led rental search site Apartment List to ask, how much would HQ2 add to rents in the metro it lands in?
The impact, it turns out, would vary widely from city to city.
At one end of the spectrum is Raleigh, N.C., where Apartment List estimates winning HQ2 could add as much as 2% to rent growth annually, costing renters up to $15,000 over a decade. Conversely, in Dallas, the impact could be as little as 0.2%, inflating rents by $2,000 in 10 years.
Apartment List looked at 15 metropolitan areas reportedly vying for the project, analyzing Census and Bureau of Labor Statistics data to determine the propensity and room to build new housing, market slack and the impact of an influx of high-earning residents.
For example, building permits are already a hot commodity in San Jose, Calif. Just one has been issued for every 3.2 jobs created in the last 10 years. The ratio could jump to 4.7 jobs per permit if Amazon moves there. Plus the capital of Silicon Valley already has the lowest vacancy rate of the cities analyzed.
As a result rents there could rise an additional 1% to 1.6%. But at $58,900, San Jose has the highest median income of the group. While cities like Baltimore or Pittsburgh are more able to build, a large number of workers earning more than the area median could lead to a more conspicuous price impact.
“Rents are already rising rapidly nation wide and half of renters are cost-burdened,” notes the report. “The fact that one company can have such noticeable impacts on the rental market, especially in metros with a constrained housing supply, is astounding.”
Check out the stats for all 15 metros:
Raleigh, N.C.
Median rent: $1,113
Vacancy rate: 8%
Median income: $36,320
Annual rent growth 2005-15: 3.2%
Estimated added rent growth: 1.5% to 2%
Pittsburgh
Median rent: $837
Vacancy: 11%
Median income: $36,210
Annual rent growth 2005-15: 3%
Estimated added rent growth: 1.2% to 1.6%
San Jose, Calif.
Median rent: $2,691
Vacancy: 4%
Median income: $58,900
Annual rent growth 2005-15: 5.1%
Estimated added rent growth: 1% to 1.6%
Baltimore
Median rent: $1,406
Vacancy: 10%
Median income: $41,560
Annual rent growth 2005-15: 4.2%
Estimated added rent growth: 1% to 1.3%
Detroit
Median rent: $998
Vacancy: 11%
Median income: $37,830
Annual rent growth 2005-15: 2.2%
Estimated added rent growth: 0.8% to 1.2%
Denver
Median rent: $1,480
Vacancy: 5%
Median income: $41,250
Annual rent growth 2005-15: 4.8%
Estimated added rent growth: 0.8% to 1.1%
Austin, Texas
Median rent: $1,386
Vacancy: 8%
Median income: $37,330
Annual rent growth 2005-15: 4.7%
Estimated added rent growth: 0.8% to 1%
Minneapolis
Median rent: $1,217
Vacancy: 5%
Median income: $41,880
Annual rent growth 2005-15: 2.8%
Estimated added rent growth: 0.7% to 1%
Philadelphia
Median rent: $1,253
Vacancy: 9%
Median income: $39,720
Annual rent growth 2005-15: 3.1%
Estimated added rent growth: 0.6% to 0.8%
Boston
Median rent: $1,969
Vacancy: 7%
Median income: $48,020
Annual rent growth 2005-15: 2.8%
Estimated added rent growth: 0.5% to 0.8%
Atlanta
Median rent: $1,160
Vacancy: 9%
Median income: $36,340
Annual rent growth 2005-15: 2.5%
Estimated added rent growth: 0.5% to 0.7%
Chicago
Median rent: $1,249
Vacancy: 9%
Median income: $38,250
Annual rent growth 2005-15: 2.6%
Estimated added rent growth: 0.4% to 0.6%
Los Angeles
Median rent: $1,807
Vacancy: 6%
Median income: $38,700
Annual rent growth 2005-15: 3.7%
Estimated added rent growth: 0.3% to 0.5%
Washington, DC
Median rent: $1,753
Vacancy: 6%
Median income: $50,690
Annual rent growth 2005-15: 4.2%
Estimated added rent growth: 0.3% to 0.5%
Dallas
Median rent: $1,202
Vacancy: 7%
Median income: $36,450
Annual rent growth 2005-15: 3.3%
Estimated added rent growth: 0.2% to 0.4%
Source: forbes.com