Speculation about Amazon's HQ2 location has been a topic of conversation in cities across the country since the company announced in September of 2017 that it would be adding a second headquarters. Amazon's decision will have a profound impact on local real estate. The HQ2 location will create 50,000 new jobs, with an average annual compensation of more than $100,000.00. These employees will occupy up to 8.5 million square feet of office space. It appears that around half of this requirement will be satisfied in the DC metro area.
These impacts will be of enormous consequence, not only to those property owners directly affected, but to all of those in the region. In the less than 10 years since Amazon opened its Seattle headquarters, investment related to its Seattle HQ has resulted in:
- 40,000 direct and 53,000 indirect (non-Amazon) new jobs
- Construction of more than 300 multi-family apartment buildings
- An increase in office rents of approximately 31%
- $38 billion in investment in the local economy
- An increase in engineering/R&D Fortune 500 companies located in Seattle from 7 to 31
These numbers are certainly eye-popping, providing real estate professionals in the area with considerable opportunities to consider in the coming months and years. However, Amazon is not the only company looking to expand its presence in the DC region. Several large companies, including Northrup Grumman and Nestlé, have moved their headquarters to the area in recent years. So whether it is Amazon or someone else, wise real estate professionals should stay informed about what this type of corporate activity means for them and how to maximize opportunities as they arise.
Venable has one of the most comprehensive real estate practices in the United States, with a strong commitment to expertise and client bases in the DC region. Venable attorneys have experience with the full life cycle of real estate, including due diligence and acquisition, construction and permanent financing, land use and entitlement, leasing and operations, and disposition. Below we highlight some of the opportunities Amazon's HQ2 would provide the DC region. If you would like more information about any of these areas, please don't hesitate to contact us.
Development
The location of Amazon in the DC area will create a major upswing in demand for all product types. Other industry leaders and companies supporting Amazon will be seeking new office space to be in proximity to this global economic giant. The drop in office construction over the last decade means that there is a dearth of Class A trophy office space available for short-term delivery, creating a lucrative opportunity for potential office development.
The tens of thousands of new workers brought by Amazon and related companies will create a significant demand for housing. Even without Amazon, the DC region is projected to have a shortfall in housing units in the coming decades. The influx of well-paid, knowledge economy workers that will be generated by this move will necessitate the construction of thousands of new housing units just to keep pace.
Cross-country collaboration between East Coast and West Coast business units will be critical, which will drive increasing hotel demand. The need to house short-term visitors to the DC area will provide a boost to hotel demand. Given these demands, opportunities for development abound, and whether your company is replacing an obsolete building with class A space, developing a greenfield site, or undertaking a value-add rehabilitation, Venable has the contacts and experience needed to navigate the public processes quickly to maximize your return.
Purchase and Sale
With the location of HQ2, real estate values are likely to change drastically. These changes will create myriad opportunities for both buyers and sellers of real property – out-of-market investors will push to get in on the "ground floor" before prices hit their peak. Meanwhile, existing owners may find it necessary to shuffle or rebalance their portfolios. The likelihood of a material value increase and growing interest from out-of-market investment create fierce competition for sale sites.
Venable attorneys represent institutional investors in real estate who buy and sell properties across the nation every day, and are highly attuned to the daily, real-time changes in market norms. In doing so, we have handled some of the largest and most complex purchase and sale transactions in the country, and have the experience and capacity to ensure that these transactions operate and proceed to closing smoothly.
Leasing
Whether associated with Amazon or a related business provider, the need for leased office space will increase dramatically. Beyond directly related services, the huge influx of technology and knowledge economy workers will drive demand for real estate in all sectors, including retail and personal services. This move will advance the shift in DC area office space from a government-centric economy to one with significant private investment. The demands and requirements of these tenants will vary greatly, requiring thoughtful and time-sensitive responses from landlords.
From massive headquarters relocation (including giants such as Marriott and Fannie Mae) to small, boutique retail, Venable attorneys have seen and addressed every lease issue from both the landlord and tenant perspectives.