November 15, 2018

Executive Summary

  • Amazon’s long-awaited decision Tuesday to split its HQ2 location evenly between New York City and Arlington, VA is expected to create 25,000 jobs with an annual average salary of more than $150,000 in each city over the next 10 years. A multiplier effect will create even more jobs indirectly.
  • Nashville was awarded an Amazon operations hub that is expected to create 5,000 jobs.
  • Amazon will invest approximately $2.5 billion in each HQ2 city, and $230 million in Nashville.
  • Some 4 million sq. ft. of office absorption—with the potential to double to 8 million sq. ft.—is expected in the Greater New York and Washington, D.C. markets because of this deal. Nashville can expect office absorption of 1 million sq. ft.
  • Amazon has noted that sustainable, energy-efficient buildings are a priority.
  • Access to large pools of high-quality talent is available in each market, as well as a myriad of local amenities and good infrastructure.
  • Amazon’s move will materially impact real estate fundamentals across property types in each city.



The announcement that Amazon will split its second headquarters evenly between Long Island City in Queens, NY and the Crystal City area of Arlington just outside of Washington, D.C., in addition to locating an operations hub in Nashville, is a significant development for these markets and beyond. Increased real estate demand is expected to ripple out regionally, and this may also have implications on a broader level in the way that economic development is approached by businesses and government alike.

Effects on real estate will be determined by a variety of factors. Though the average salary that Amazon will pay exceeds $150,000, the exact composition of jobs created in each market will determine broader impacts through a multiplier effect. Beyond that, market factors such as local constraints, other corporate moves and reactions to Amazon’s presence in the market, and general economic conditions will also determine impacts.

Regarding specific property types, Amazon will absorb at least 4 million sq. ft. of office space in each headquarters location and 1 million sq. ft. in Nashville. As mentioned, there will also be indirect impacts that will influence broader demand dynamics in these office markets. Such implications will become clearer as additional details of operations in each city are announced.

Looking beyond office markets, the relationship between job growth and demand for other property types is well-established. Like office, there are various factors that aren’t fully understood or known at this point but will influence how each property type is affected. Looking at past performance can give some idea of potential impacts.

The most immediate effects outside of office will likely be in the housing market. Based on national data over the past five years, every 8.9 jobs created equals demand for one multifamily unit. Importantly, this ratio varies from city to city and it also varies over time as economic conditions change. Still, this ratio likely represents a relatively conservative estimate of additional demand based on historical performance.

There will also be implications for hotels. A basic calculation shows that 8.4 nights a year were generated (nationally) for each job created. As with apartments, this varies greatly from market to market and can be heavily influenced by leisure travel in certain areas.

Furthermore, additional high-paying jobs will support stronger demand for goods and services, requiring additional retail and industrial space. In this area, the size of the metro and structural changes in retail—also impacting industrial and logistics—come into play, complicating ratios. What can be said is that the effects of additional job growth are likely to manifest themselves differently for industrial and retail by market size. The implication of this is that Washington, D.C. and New York will likely see more nuanced effects on the market-wide level in terms of retail and industrial. The bottom line is that Amazon’s decision will be demand positive across property types for the affected metros.

Local Perspectives

Although Amazon selected cities of varying size, the scale of this decision will have notable and distinct impacts on each market:

New York City

  • Amazon’s presence will create a new corporate anchor for Long Island City and stimulate demand there by at least 4 million sq. ft.
  • There is enough existing office supply to accommodate elevated near-term demand, with plans for more supply in addition to Amazon’s planned waterfront location.
  • The market has recorded strong rent growth over the past 18 months, boosted by new, more expensive supply. A robust expansion of housing supply has also occurred and is expected to continue.


Arlington, VA

  • Amazon’s presence will be a notable addition to Northern Virginia.
  • Arlington County planning allows for significant development in the Crystal City area, with office projects of up to 300 feet in height allowed.
  • Existing supply can accommodate elevated near-term demand of 4 million sq. ft., but there currently is a very limited pipeline of new construction in the area.
  • Recent rent growth in the area has been generally subdued.



  • Amazon is the latest in several high-profile corporate moves to Nashville.
  • Amazon’s location will cause approximately 1 million sq. ft. of office absorption, with the ability for future expansion if needed.
  • A low downtown vacancy rate is fueling new Class A office development, with more than 4.5 million sq. ft. of new space slated for delivery by 2020.
  • New construction currently in the pipeline should meet market demand even beyond that of Amazon.


A blueprint for attracting corporations?

Amazon’s announcement is the culmination of a roughly year-long search for the location of its second headquarters. Key criteria outlined by the company at the start of the search included a preference for a metropolitan area with more than 1 million people, a stable and business-friendly environment, the potential to attract and retain talent, and the presence of creative communities. Specific site requirements included proximity to a population center, an international airport and to mass transit.

Amazon’s HQ2 competition could be a blueprint for other corporate location decisions in the future. Each market in the running highlighted its unique combination of amenities, creating a value proposition it hoped would ultimately win out.

In New York, the mixed-use community of Long Island City highlighted its intersection of the arts and industry, along with the diversity of its residents. The market excels with housing options, restaurants, bars, breweries, waterfront parks, hotels, academic institutions and high tech. Lastly, access to eight subway lines, 13 bus lines, commuter rail, bike-sharing, ferries and proximity to La Guardia and JFK airports scores Long Island City very high for connectivity.

The site in Arlington, VA maintains access to three metro stations, commuter rail and Reagan National Airport, as well as a strong supply of hotels, high-rise apartments, retail and commercial offices. Open space and sporting and cultural events also were highlighted.

Nashville offered urban residential options, retail, restaurants, entertainment, hospitality, green spaces and offices as top factors for a corporate location. Like other cities, Nashville highlighted its commuter rail system, its many bus routes and a short drive to Nashville International Airport.

Going Forward

Amazon’s announcement could be an inflection point of sorts for each city selected, due to the scale of its plans. The decision undoubtedly will impact local economic dynamics, real estate market fundamentals and the way that these cities are viewed over the long term. And with Amazon’s high profile, its selection of these cities will ensure that they will continue to attract the attention of other corporations and talent for some time.

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