Is Our Apartment Market Ready if Amazon Chooses D.C. for HQ2?
In case you have not heard, Amazon is expected to soon choose the site for its second headquarters, known as HQ2. Amazon has shortlisted 20 cities as potential sites of their HQ2, and three of those sites are in the D.C. Metro— including Washington D.C. itself.
As we have previously explored, Amazon’s HQ2 landing in D.C. would produce a dramatic impact on our local population and economy. The new headquarters would directly add 50,000 new high-paying employees to our region, as well as the tens of thousands of individuals required to both support those new employees (and to build the headquarters themselves).
Today, let’s take a quick look at whether or not our housing market would be ready for this influx of new residents. Specifically, let’s discuss the impact Amazon’s HQ 2 would have on our apartment market, by exploring two pieces of recent data.
Amazon HQ2’s Impact on Rent Prices
Recent data from Zillow suggests our apartment market is well-poised to handle the new renters. According to Zillow, even though renters are currently leasing apartments as soon as they come online, developers are providing plenty of new inventory to meet this demand.
Over the next 2-3 years, we’re expected to see an additional 37,000 new apartments to come online. For this reason, Zillow projects that Amazon’s HQ2 landing in D.C. would only increase rents by about $138 per month. By contrast, they project that other shortlisted cities with less elastic rental markets would see rents increase by approximately $400 per month.
Amazon HQ2’s Impact on Apartment Development
New data from HotPads agrees that D.C.’s rental market is much better positioned to handle Amazon HQ 2’s influx of new residents than most other shortlisted cities.
HotPads ran the numbers and found that, in order to accommodate the new residents, the HQ2’s host city will need to add 2,600 more apartments per year than they are currently adding. HotPads then looked at how many new apartments each shortlisted city is currently putting online per year, to determine how much strain adding 2,600 more apartments per year would place on that city’s apartment development market. The more apartments the city currently develops, the less of an impact adding 2,600 more per year would produce, and vice versa.
The results of HotPads’ calculation are interesting. They found that Raleigh, North Carolina would see the biggest impact on their rental market to accommodate the HQ2. Raleigh would need to increase the number of apartments they put online each year by a huge 23.3%. By contrast, D.C. would only have to produce 4.2% more apartments online each year to meet the new Amazon-driven demand for rentals. Of the cities HotPads crunched the numbers for, only Boston, Dallas, L.A., Chicago, Miami, and New York would have an easier time accommodating the new residents than D.C.
Both Zillow and HotPads make it clear that D.C.’s apartment market is relatively well-positioned to house Amazon HQ2’s new renters, and that we would see a relatively small impact due to these new residents.
Amazon HQ2’s Impact on Housing
However, it’s critical to recognize that these analysis only extend to D.C.’s apartment market. According to HotPads, only about 39% of the new Amazon HQ2 employees would be renters. That means 61% of the 50,000+ new high-paid employees potentially coming to our city would be home buyers. Yes, we may be able to comfortably accommodate an additional 20,000 new renters over the next 10 years, at current levels of apartment unit development. But can we comfortably accommodate an additional 30,000 new home buyers over the next decade, at current levels of housing development?
You already know the answer to this. While our apartment market’s supply and demand is pretty well balanced right now—primarily due to the volume of new units coming online over the next 2-3 years—our housing market is not. While our housing market is not quite as hot this year as it was last year, we continue to see constrained supply that is unable to meet increasing demand, and prices continue to hit new records.
Considering our current inability to meet existing demand for housing in and around D.C., it is likely we would see a much more substantial impact on our housing market than we would see on our rental market if Amazon’s HQ2 does in fact land here.
But where there is great demand, there is great opportunity to meet it. Contact us today to learn how you might position yourself to derive the greatest benefit if Amazon does place their HQ2 in or around D.C. Call us at (202) 713-9072 or email us at email@example.com to discuss your options for this and other emerging opportunities.