Amazon announced they are opening major new offices in Arlington, Virginia and New York City. Each site will hold 25,000 new Amazon employees at an average salary above $150,000. Getting to that level with take many years, next year under 1,000 employees will be at each site.
I lived in Arlington for many years and own rental property there. The Amazon decision is likely to catalyze a much more rapid ascent of the technology sector in the DC area. The DC area has a strong foundation of internet technology to build upon, though many people are not aware of this. The Amazon move will likely help shift the perception of the DC area as government driven and the growth of internet technology activity in the area is likely to grow rapidly.
The 25,000 jobs (even with a greater than average salary of $150,000) isn’t the main impact of the announcement. The big news is the likelihood of Amazon’s highly visible efforts catalyzing more tech businesses (especially 5-7 years down the road when some of the Amazon people start creating their own startups). It isn’t that Amazon is moving into a barren tech landscape, there is already a strong base from which to launch a long term tech boost to the DC area economy.
The direct impact of Amazon’s employees renting and buying in and around Arlington is not going to be very strong for a couple years. Amazon plans to add 500 people to Arlington in 2019; 1,000 more in 2020 and 2,000 more in 2021. But investors already can plan for a strong future demand from Amazon and all the activity that Amazon’s growing presence will contribute to.
I am actually selling my house in Arlington (in this photo), with a very nice yard (explanation below).
The increase in housing prices in 2019 and 2020 will be primarily investor driven. In 2020, 2021 and going forward the impact of Amazon employees directly and all the extra activity spurred on will start to have an impact. Unlike the stock market where such a predicable strong investment future would drive prices up say 30-50% immediately, in real estate it is much more likely for the gains to be spread out over the long term.
If prices in housing increase in Arlington it is more likely they would increase say 10% in the first year and then an extra 3% (above what the increase would have been without Amazon’s move) each of the next 10 years. From a long term investors perspective this provides a great possibility for buying now (even after the news) and not having to pay a huge premium.
Rental housing prices are not likely to go up much immediately. And they will take longer to show up in the market, they will be much more closely tied to new job additions (from Amazon and others). So investors have to pay a higher price today (say 5-10% higher) and in the first 1 or 2 years probably see no higher rents than they would have otherwise. And even after 2021 those rents are likely to go up more slowly than prices of real estate.