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Why the “Amazon effect” on house prices can be subdued in the selected HQ2 cities

Like Amazon AMZN, + 0.92% shuts in at the location of their second headquarters, experts say that speculators are tracking…

Like Amazon

AMZN, + 0.92%

shuts in at the location of their second headquarters, experts say that speculators are tracking carefully.

The company is reportedly in late discussions with the communities in Crystal City, Va., Just outside Washington, DC and Long Island City, NY to build their second headquarters, The Wall Street Journal reported Monday. The company’s current head office is in Seattle, Wash. (Some reports have said Dallas is still in operation.)

Amazon has said that its other headquarters or HQ2 would involve more than 50,000 employees and generate more than $ 5 billion in financial investments over 20 years, and potential HQ2- places went largely to woo Amazon. (Amazon refused to comment on this story.)

Marc Cenedella, Chief Executive Officer of Ladders, a career website, said that New York City and Northern Virginia are two of the best places for talent. Amazon employees usually fall into two categories: Low-wage players and high-paid “knowledge workers”. Jobs on these two HQ2s are expected to fall into the latter category.

“What they’ve built in Seattle has taken 20 years, and try to copy that size and the scale of the technical workforce will be hard to do in a city,” he said. “Splitting it seems like a rational decision.”

Will these cities attract workers?

A PayScale analysis placed northern Virginia and New York City as the second and third best place for HQ2 in terms of concentration of skilled talent, surpassed only by boston. Both New York and Washington metropolitan areas already have emerging technology sectors, which gives Amazon a pool of talent to rent from, says Aaron Terrazas, senior economist at Zillow

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An analysis placed northern Virginia and New York as second and third best places for HQ2 for talented talent, surpassed only by Boston.

Both are home to large companies. Mars Inc., Capital One

COF, + 1.28%

and Northrop Grumman

NOC, + 1.18%

is among the many companies that call Northern Virginia homes. JetBlue

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meanwhile has its headquarters in Long Island City.

They are also in commercial real estate. In particular, Long Island City has undergone a resurgence in recent decades that have seen large layers of its water rebuilt into the company’s office parks.

Earlier this year, Citigroup has

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available One Court Square in Long Island City, the tallest skyscraper in New York City outside Manhattan, and opened 1 million square feet of office space. Citing sources, Crains New York reported that Amazon is considering building for its outpost in Long Island City.

The relocation is likely to attract hundreds of thousands of workers to the selected cities, including people who do not work with Amazon, but work at associated companies and startups that pop up around Amazon, says Katie Bardaro, Vice President of Data Analysis on PayScale, a Compensation Information and software companies.

Will house prices go up in HQ2 cities?

House prices and rents are likely to rise, especially near the new HQ2s, experts say, but it will not be sudden and there is no significant increase that some homeowners in Long Island City and Crystal City are hoping for. “A sudden influx of highly paid workers can be good but can also have negative effects on local economies,” says Bardaro. “People who want to live near their workplace could price those who already live there.”

The Amazon effect on house prices could be mitigated, as HQ2 is reported to be split between the two developed metropolitan areas.

But the effects on housing prices may be less severe in New York and Washington, D.C., than it would have been elsewhere. A study from the Real Estate website Apartment List predicted that rents would increase by less than 0.5% in the two cities if they were to win the bargain for the Amazon HQ2.

Obviously everything is relative. Home values ​​in New York City have already risen 42.5% over the last five years, while prices in Arlington County, Va, have risen 15.5%. Home values ​​in Seattle increased by 73% during that time.

In New York, a new part of new luxury resort complexes has caused the top of the city’s rental market to see prices soft due to the large number of vacancies. However, Long Island City and Queens were outliers in that trend.

In addition, the “Amazon effect” may be even smaller, as the headquarters are reported to be split between the two cities.

What happens to rents near Amazon?

The rents already rise in two metropolitan areas are rumored to be Amazon’s choice. The northwestern region of Queens, comprising Long Island City, Astoria, Sunnyside and Woodside, has the highest average rent in the city of $ 3,095 per month, according to data from the property company Douglas Elliman. Rents there increased by 3.8% over the past year, compared to 1.8% for Manhattan and 0.2% for Brooklyn.

The two places treated are easily accessible by commuters. This makes it easier for HQ2 employees to consider living somewhere.

A similar situation has appeared in the Washington subway. Arlington is a desirable area and has experienced almost 3% rental development over the past year. The median rent is $ 2,080 per month. In comparable terms, the median rent has only increased by 0.6% compared with the year before in the metropolitan area of ​​Washington, below the average of 1.1% according to Apartment List.

The two places that are treated are both readily available by commuters. It makes it easier for Amazon HQ2 employees to consider living somewhere. (Satisfactory, Seattle lacked transport infrastructure lived closer to Amazon’s current Southlake Union headquarters more priority and therefore more expensive, Terrazas said.)

Crystal City is served by the blue and yellow lines of the Washington Metro and Metroway Bus Express Transit Line. Long Island City is served by eight different subway lines that can take riders to Pennsylvania Station and Grand Central Station, two major hubs. Queens district is further accessible by commuter and ferries. Both cities are also close to major highways.

“They are just outside the city center,” said Terrazas. “It makes these places even more accessible to young neighborhoods and people who prefer to live in the suburbs.”

Seattle was slow to facilitate the rules for infrastructure and housing construction, which led up rents and house prices.

Another advantage that these cities have is time. Amazon’s success took Seattle surprisingly, meaning Terrazas. As a result, the city was slow to facilitate the rules for the construction of infrastructure and new housing. The difficult competition for housing to buy or rent subsequently drove home and rental costs to full time.

Last week, Mayor Bill de Blasio announced in New York City plans to invest $ 180 million in infrastructure improvements to Long Island City. “LIKSTRÖM. And New York, even if there are only 25,000 new jobs, know that this is coming,” said Terrazas. “They can plan for it and make sure the infrastructure is in place before employees seek work.”

Is New York and Crystal City an obvious choice?

While Amazon reported receiving more than 200 proposals from cities across the United States, offering host to the new headquarters – which many threw in financial incentives to sweeten the deal – it’s likely that the company only ever considered a handful of these, “said Scott Galloway, CEO of New York City-based business intelligence agency Gartner L2.

“It was over before it started,” he said. Galloway believes Amazon bought the headquarters around to strengthen its hand to bargain with a smaller number of preferred cities. Newark and New Jersey offered as much as $ 7 billion in tax incentives and other cities spent thousands on marketing campaigns. (Amazon did not return a request for comment on Galloway’s remarks.)

In fact, Galloway predicted that Bezos would choose New York or Washington, D.C., as the billionaire owns these places. “When you are the richest man in the world, only you can not buy immortality – you do not want to live far from the headquarters,” said Galloway. “These new places are within a 15-minute bike ride from housing that Bezos already owns.”

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