Amazon’s new headquarters that are to be built in Long Island City, New York, and Crystal City, Virginia (just across the Potomac River from Washington, DC) will bring tens of thousands of jobs, and untold new business opportunities, to these two cities.

The economic impact of these new headquarters will extend well beyond the initial office jobs that Amazon plans to bring to these cities. The new workers will need a place to live, they will go shopping in stores and malls, and there will be business travelers coming from out of town to meet with Amazon who will need hotel rooms. There’s also a potential spillover effect from businesses who may either re-locate or start-up in each area to be in proximity of the retail giant. In short, there will be greater demand for nearly every type of commercial real estate as the new headquarters become fully operational.

The “Amazon effect”, and effects from growth in tech overall, can be seen through Seattle’s transformation over the prior seven years. Prices for Seattle office properties increased by 83.2 percent from 2010 to 2017, almost double the national average. Rents and office absorption rapidly rose as well putting the city in the top five when compared to other major metro areas [1], only falling behind places like San Jose and Austin which have also seen an explosion of tech-based jobs. Added jobs also has implications for housing, and Seattle’s apartment market has seen equally explosive growth. Rents for apartments have increased by 32.6 percent from 2010 to 2017, significantly above the national average of 20.9 percent. Crystal City and Long Island city may not see quite the same growth over the next ten years, due to having the second headquarters split between two cities, but there are still plenty of potential benefits to owners of commercial real estate in both areas.

REITs have a strong presence in the office, apartment and hotel markets in both surrounding areas of Amazon’s new headquarters and will be important players in the next phase of development of these cities. JBG Smith, in particular, has been making headlines recently as one of the major owners of office buildings in Crystal City. There are many other REITs, however, that will also benefit from increased demand for office, apartment, hotel and other commercial sector space.

Here are some details about REIT’s economic footprint in and around the new HQ locations:

  • REITs own over $41 billion of office space in the areas combined around both new headquarters, representing 8.6 percent of the total markets [2]. Amazon’s new headquarters will likely generate additional office jobs at companies doing business with Amazon, and these firms will add to the increased demand for space. REITs will likely have a substantial role in the new office environment around the Amazon headquarters.
  • Apartment REITs are also very present in the Crystal City/Washington DC area, owning more than $9 billion of real estate. This represents over 13 percent of the overall market (in comparison, apartment REITs only make up around 5.3 percent of the national apartment stock). More jobs means more people who need housing, and if Amazon’s workforce remains on the younger side, then housing demand will largely feed into rentals.
  • Hotels also stand to benefit from Amazon’s HQ2 due to more professionals taking business trips for meetings with Amazon. Lodging/Resort REITs will benefit in particular as they represent between 15-20 percent of both the local markets.

REITs also have a strong presence in Seattle, with above average penetration into the metro area. Apartment and retail REITs make up 21.5 percent and 18.1 percent respectively of the total Seattle market. This has allowed REITs to benefit from the strong fundamentals driven by the growth of Amazon and tech, allowing for higher rent growth compared to other REIT-owned properties in other cities, and bode well for the REITs located in the Crystal City and Long Island City areas.

Further details around the new headquarters and the economic and real estate environment around them are yet to be known, but it is likely we will see REITs playing a significant role in these projects and will be the beneficiaries of added demand.


[1] Seattle was compared to CoStar’s top 54 metros.

[2] Arlington county, Alexandria county, and Washington DC were studied in relation to HQ2 in Crystal City. Kings county, Queens, and Manhattan were studied in relation to the Long Island City headquarters.

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