The Amazon Effect on Northern Virginia Commercial Real Estate
July 2019 – Much has been made of the potential Amazon Effect on Northern Virginia commercial real estate and the region when Amazon HQ2 arrives. Will it be like Seattle? Will home prices skyrocket? Will empty office buildings in the region suddenly fill up? Will roads become clogged with all the new Amazon workers?
Here are a few facts to consider as we imagine what is ahead for the Arlington-Alexandria area now referred to as National Landing: When Amazon has fully moved in with all of its employees in 2034, the total number of “feet on the street” will be slightly greater than pre-BRAC Realignment levels in Crystal City in 2005. At that time, 3.1M square feet of office space were vacant.
- Initially Amazon will occupy 500,000 sf in two Crystal City buildings which are currently under renovation.
- Amazon will develop up to 4 million square feet of office and retail space by the year 2030.
- The main development site is located behind the Whole Foods and Commonwealth Joe’s in Pentagon City.
- Amazon plans to build a community around its workforce with a large portion of employees living within walking distance of work.
- The online retail giant will only provide dining and fitness opportunities for up to 20% of the workforce inside the facility obliging their employees to be out in the neighborhood, on the street thereby spurring retail growth needed to support workforce and residential development.
People ask us, “How much is my house going to be worth with so many people moving to the area?” Technically, the ramp-up of new employees will be gradual in the coming years and even if all of Amazon’s employees were to come from outside the area, the addition to the region’s workforce would likely be unnoticeable. But practically speaking, we respond by saying the easiest way to find out is to put a sign in your front yard and see what someone offers. (Or ask a residential agent because we don’t do houses.) In any case, here’s what we think of the new reality:
- Your house is worth more, but not a lot more—
- Lots of hype in the news following the Amazon announcement has created unrealistic seller expectations.
- There was, in fact, an immediate spike in listing prices post-announcement, but that quickly flattened out.
- 5-8 % annual price appreciation is generally expected in the National Landing area.
The other big question is, “What will the “spin-off” of new businesses coming to the area be and what economic impacts will that bring?” In the case of Seattle, many of the tech giants relocated or opened offices in the Seattle to join the Amazon ecosystem. We might hope that this pattern is repeated here: commercial growth in the local economy is what will pay for new roads, schools and salaries for teachers, fireman and police officers. So, what kind of ancillary growth might we expect?
- In addition to jobs created directly at Amazon, an estimated 50,000 new jobs related to the company’s move will be created
- Those related companies and their employees will need office space and houses
- New companies will move to Alexandria and Arlington
- Office space for lease in Arlington has already seen an increase in rental rates
- Alexandria commercial real estate for sale will increase in value
- Some will move to Arlington for proximity to Amazon
- Some will move out Arlington to Alexandria for lower rents
Tartan Properties Commercial is a leader in Northern Virginia commercial real estate sales and leasing since 1973. Call our office today for more information on properties that could be affected by the Amazon HQ2 in National Landing Arlington-Alexandria.