Amazon's Impact May Not Be as Huge As You Think

A new look at what will happen to the rental market in the city selected for Amazon's second U.S. headquarters finds that impact on rents may not be as large as originally thought.

                                                                                     Photo Credit:   City and State NY

                                                                                    Photo Credit: City and State NY

Commercial real estate data analytics firm CoStar Group estimates that Amazon’s arrival could lead to an additional 1% of rent growth per year in the best case—and would have limited effect in large markets like New York or Los Angeles.

The analysis also found that the effect would be proportional to the size of the market and have the largest effect on the office market.

Austin, Texas; Nashville, Tenn.; and Raleigh, N.C., would see the largest Amazon effect across office, retail, and apartment sectors, while larger markets, including Los Angeles, New York, Washington, and Chicago, would feel very little impact from a potential Amazon arrival, according to CoStar. In Washington, D.C., Amazon’s effect per year is predicted to be a 0.25% rise in office rents, a 0.16% rise in apartment rents, and a 0.25% rise in retail rents.

This analysis is in line with other reports showing Amazon's impact on large markets to be small, because demand for housing would be more distributed.

“In a large market like New York, Amazon’s arrival could transform a submarket or neighborhood in the way that Google transformed Chelsea, but the overall market is just too large for a single occupier to move the needle,” says John Affleck, international economist at CoStar Group. “Many Amazon employees will likely buy a home rather than rent, lessening the stress an Amazon arrival would put on the rental market. Get ready for higher home prices, though."

Read more at Mutifamily Executive