My nephew has a desire to work at Apple or Amazon. He is studying artificial intelligence now and hopes to be one of the many that gets hired straight out of college. He has high aspirations. The company he chooses will influence where he is going to live, work & spend his leisure time. Daunting, isn’t it?! How he will afford the housing costs in order to live close by his work will be a consideration as well. In many ways the tech giants on his short list will be influencing his life style, from shopping, schooling and housing. Big companies can have a major impact in the real estate values of a community when employing thousands of new people, increasing demand for housing and thus decreasing the affordability. We saw this happen in Thousand Oaks with the growth of Amgen over the past 25 years.
The decision by Amazon to split its second headquarters between Crystal City, Virginia, and Long Island City (LIC) in New York will have long lasting impacts on the real estate landscape in those cities.
The Washington D.C. and Northern Virginia areas handle 70% of the world’s internet traffic and the convenient transportation hubs will give easy access to downtown and the National Airport. In increasing numbers, recent graduates and young tech employees are finding that living in busy urban environments afford them the lifestyle they desire. They want access to transportation, the community, shopping and cultural events.
Amazon’s move to Crystal City makes sense on a logistic level because it satisfies many of these needs. Also, the Virginia metro area has the highest number of computer science graduates in the U.S., providing an abundant pool of young tech employees for the company.
The Challenge for Housing
Housing for the thousands of new employees there will create a challenge in the short term. The tight housing stock cannot currently handle the growth. The good new is that there are 4,000 units already planned for the near future within walking distance of the new Amazon campus and more development is expected.
Demand for homes is high as Realtors have seen a spike of online buyer inquiries of over 200% in recent weeks, year-over-year. Open house traffic is three and four times normal and multiple offers, although declining in most markets, is up as well.
In New York City, Google is investing over $1 billion in capital improvements hoping to add over 7,000 new jobs to the area. Unfortunately, this growth is contributing to the already limited housing.
In LIC, where Amazon’s HQ2 plans on a potential 25,000 job expansion, there is already a spike in housing prices due to the demand. Major high-rise developments across the street are reporting record buyer inquiries and some are already planning infrastructure improvements to accommodate the growth. Internet traffic for current home listings is up in Long Island City – an increase of 1,049 percent over last year at this time.
Between Google and Amazon, there are an anticipated 35,000 potential new jobs being added to the area. Neighborhoods that are relatively affordable now will soon find that many residents will be priced out of the area. The days of low and moderately priced rentals are a thing of the past.
Having a major new employer move into the area can have a dramatic affect on housing and decrease the ability to keep reasonably affordable housing costs sustainable. In Seattle, home prices have increased dramatically in line with the growth of Amazon there. Median home prices increased by 73 percent over the last 5 years, to approximately $739,000.
Both Washington D.C. and New York City have already seen yearly price increases of 3.2 percent and 1.7 percent, respectively. Single family rents have increased in both areas as well. Will that change dramatically once the new facilities are filling their cubicles? I would say so.
Apple is building a new massive campus in Austin with over a $1 billion investment for a new high tech facility that will be next to their existing campus. They expect to accommodate the 5,000 new employees upon completion with up to 15,000 employees expected over time. This will make Apple the largest single employer in the Austin area. The company is planning more expansions across the country over the next few years.
There are new-home communities and apartments being built every day in Austin and it is expected that this fast growing area will be able to handle the housing demands. No doubt it will change the look and feel of Austin forever.
While many in the younger workforce are flocking to the big cities for jobs this will put a strain on transportation, housing inventory and affordability. The high occupancy rate of 98.2 percent in Long Island City does not bode well for the influx of new Amazon staffers planning their move to the area. But there are presently 15,400 new units being built there. An interesting statistic; LIC added the most new apartments of any U.S. city after the recession – 12,533 units total. Could it be one of the reasons Amazon chose to locate there?
So what’s in store for the budding Steve Jobs’ or Bill Gates’ of the future? Living in any of these growing areas is sure to cost more, and not just for the new tech employees. The young entrepreneur must take into account these expenses before they pack their laptop and hop on the plane to the future.