After a long year of anticipation and speculation, Amazon finally picked not just one, but two locations for their next headquarters.
On November 13th, Jeff Bezos announced the two new locations they will be expanding everyone’s favorite online distributor to. They have selected Long Island City, New York as well as Arlington, Virginia.
Both New York and Virginia have offered many different incentives to Amazon in order for the company to call their city home. New York’s incentive package has scaled close to $3 billion. Both offered millions of dollars worth in tax credits and grants.
There has already been a lot of debate on whether or not the winning cities are truly winners. What will the true impact be on each location and overall will it be a positive impact or a negative one?
Positives
With the new headquarters, Amazon is expected to bring roughly 25,000 jobs to each location. Now that they won Amazon, what else will come along with those 25,000 new employees?
After the world found out where Amazon decided to build HQ2, the two cities have suddenly become white-hot real estate markets! Since last September, when Amazon announced the HQ2 idea, each of the cities that were named as potential locations experienced a rise in property purchases. Cities like Pittsburgh, Columbus, and Indianapolis saw a rise in prices and a shrink in inventory as things started to heat up.
According to Redfin, this week alone online searches for homes in Arlington have already increased by 84% and 248% for Long Island. Over the past year, real estate investors have been purchasing up property in the possible HQ2 cities. They all had hopes that Amazon would be coming to their location so they could benefit from the price increases. Those investors, and homeowners, who have real estate around Long Island or Arlington are in for a nice boost in their rental income and equity.
CBS says that real estate agents have been hearing from investors from across the country who’d like to become landlords. A lot of sellers have decided to take their homes off the market for a year and wait to put them back up once their prices have increased.
Amazon has promised to work with each of the winning cities to help mitigate traffic and other potential issues. Their goal is to be a positive force rather than a burden. In New York, Amazon agreed to donate a site for a new primary or secondary school, and fund infrastructure improvements and green space.
Negatives
The two new HQ2s will bring much more than an economic surge… Thousands of people will be moving to these cities looking for a chance to become one of Amazon’s new employees. Along with the employees and their families will be more traffic and rising rent.
While the rising real estate prices may benefit those who already own property, the effect on many others will be quite the opposite. The cost of living in both locations is already tough on the locals as it is. But with Amazon coming to town, prices are bound to skyrocket and cause a good deal of long-term residents to move
As many have commented on over the years, the effect that Amazon has had on Seattle has not been so favorable. A great number of locals feel that Amazon, and other tech giants, are the reason they have such a large homeless population. The Seattle City Council wanted to impose a tax on large companies in order to battle the homelessness crisis. Amazon, however, fought against it. Who’s to say this won’t be the case for Arlington or New York?
What Officials Have To Say
New York City mayor, Bill de Blasio and Governor Andrew Cuomo have shown great support throughout Amazon’s campaign. On Tuesday Mayor de Blasio tweeted “New York City is about to get tens of thousands of new, and good-paying jobs and Amazon is about to meet the most talented workforce in the world in one of the most diverse places on the planet.”
Though many officials are excited for the economic boom they are about to experience, there are still some that are less than thrilled for Amazon’s appearance. Alexandria Ocasio-Cortez, an incoming congresswoman, is among several local leaders questioning the deal. She had tweeted: “Amazon is a billion-dollar company. The idea that it will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need MORE investment, not less, is extremely concerning to residents here.”
In New York, many are concerned about the impact on the cost of living and have questioned why a company run by Bezos – the world’s wealthiest person – needed any public funds at all.
Governor Cuomo assured residents that, “The revenue-to-incentive ratio is 9-to-1. That is the highest rate of return for an economic incentive program that the state has ever offered.”
Two Instead of One
It does help that Amazon decided to pick two locations instead of one for their HQ2. The original plan was to pick one city and bring 50,000 new jobs there. The local impact would have been even greater than the 25,000 new jobs. In this case, it is somewhat helpful that they didn’t choose just one location. It takes some of the pressure off of the winning cities.
Some speculate that Amazon decided on two locations because they weren’t sure they could fill all 50,000 jobs in just one location. Bezos even said that the two locations will allow them to attract world-class talent. The two locations will hopefully help them optimize that tech talent and even give new employees more of an option as to where they live.
Time Will Tell
From an economic standpoint, Amazon will most likely do wonders. But what about from a quality of life standpoint? What will the rising rents to do locals? What about traffic and commute times? Will the quality of education dwindle with the inflow of children to the schools?
Though at first glance it may seem like a big victory for each of these cities, it will not be all rainbows and butterflies. With the tech giant moving to town, each city will feel the growing pains. There will be plenty of new jobs and a stronger economy for each city, but time will tell what the full implications of the move will be.
That’s so interesting. It makes sense that savvy investors would purchase homes in these locations after the announcement but I never thought I’d that. Thanks for sharing. How do you pick wheee to invest in?
That is a great question. Every real estate investor would probably have a different response to that question. In reality, it is up to the individual to pick the criteria of where they invest. But in general, a lot of people will look for opportunities like big businesses coming to town. They will look at population growth and unemployment rates. And a big one is looking at the rental rates compared to the value of the homes.