The Ever Growing Amazon

Amazon headquarters has offered one of the largest and fastest stimulations of city growth in recent history. Not only has Amazon shaped the business landscape of Seattle, it has fostered the growth of retail and other commercial and economic growth through an influx of high paying tech careers and jobs, leading to an increasingly wealthy population willing to contribute to the local economy.

This feeds into the commercial real estate industry in a few different ways. Multifamily growth, as the employees all need somewhere to live. Office growth, as Amazon continues to expand at a breakneck pace. And increasingly, and perhaps more surprisingly, through retail. Surprising because Amazon and the growth of e-commerce is a main driver for the recent stumble that much of the brick and mortar retail business has experienced. But with more people living and working in an area, they also still desire to frequent brick and mortar stores and have tactile shopping experiences.

The Fight for Amazon HQ2

Amazon HQ2 will be Amazon’s second headquarters in North America. Amazon is expected to invest over $5 billion in construction and grow the second headquarters to include as many as 50,000 high-paying jobs. In addition to Amazon’s direct hiring and investment, construction and ongoing operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and billions of dollars in additional investment in the surrounding community. 

Amazon is already hiring near the nation’s capital — and Boston. So far the three Washington D.C. area spots, along with Austin, Boston, and Atlanta, rank high among analysts speculating on the winners. The Conference Board, an economic think tank, analyzed job postings in the 20 metro area candidates and found that in terms of the kinds of jobs Amazon hires for in Seattle, the D.C. area, and Boston were the fastest growing. While there are many areas experiencing growth and continued employment due to Amazon, the particular focus on these metro areas has gathered a lot of interest.

One of the ‘front-runners’ D.C. is not only hot because of the 3 potential sites and a young growing pool of tech talent, but Bezos is very familiar with the area, owning a home and the Washington Post. The area also scores high on factors that management seeks in a host city – transportation, education, business, lifestyle, culture, and connectivity.

HQ2 is expected to be the ‘full equal’ to the Seattle campus. When considering how deeply this could change a community, we can look at the incredible influence that Amazon has had on the business and development landscape of Seattle.

Amazon’s Influence in Seattle

As all eyes are focused on the location of the second Amazon headquarters, the original HQ still continues to grow. Amazon offices throughout the country continue to expand, but Seattle has seen large growth over the past decade that has fundamentally changed the city.

The growth of Seattle over the last 20 years has led to expectations for the second headquarters. Amazon had five of the seven biggest leases signed in Seattle in 2017. Those deals added another 1.65 million to the company’s footprint. Amazon’s Seattle footprint of 8.1 million square feet is expected to soar to more than 12 million square feet within five years.

In all, the company has expanded by 2 million square feet just since last January. For perspective: No other company has 2 million square feet total in the city. Amazon’s extraordinary growth has turned Seattle into the biggest company town in America – occupying 19% of office space in Seattle. That is the largest for any employer in a major U.S. city. Most top employers in a city will hold less than 5% of the city’s office space. Altogether, Amazon occupies or plans to be in about three dozen office buildings in Seattle.

This breakneck pace of expansion would be difficult in a lot of other metro areas – so replicating it for HQ2 will take careful planning and execution.

Over the last decade, the South Lake Union area of Seattle has seen $668 million in infrastructure improvements, from a new electrical substation under construction to the revamped Mercer Street to a new streetcar line to upgraded parks. The company now employs about 40,000 employees in Seattle, up from 5,000 in 2010.

Other than office, and subsequently multifamily, in Seattle’s case the influx of Amazon jobs has been accompanied by a boom in local retail. Between 2010 and 2015, retail sales in downtown Seattle have grown more than 19 percent annually. 

The benefits of Amazon to the downtown area of Seattle are enormous. Not only have commercial sales and development continued to grow, the price for those developments has also steadily increased over the last two decades.

The development could not have happened so quickly without Amazon moving there and expanding at the rapid pace in which they have.  This makes Seattle much more prominent to attract talent from all over the world, transforming neighborhoods along the way.

Using Seattle as a model,  we can estimate what repercussions and benefits a city might see from the development of another main office. Below, we go over a couple of offices and cities that have seen recent growth due to Amazon’s ever expanding influence.

Pittsburgh

In February, Amazon announced it will hire 125 tech employees to work in an expanded facility in SouthSide Works in  Pittsburgh. To enable the expansion, Amazon is securing an additional 22,000 square feet of office space. In Pittsburgh, they’ll be growing their talent base for machine translation and speech science, two of the areas that power its popular Alexa product line.

While the growth is not an indication of what Amazon is considering for HQ2, it is a very strong indication that Amazon will continue to grow out in secondary markets regardless of HQ2. Not only is the East Coast seeing a lot of Amazon attention, it is building a countrywide network of expansion. Pittsburgh feels like it is taking steps toward becoming a more tech friendly city. With some of the fastest-growing career fields in the world, growth in career opportunity for predictive analytics, robotics, artificial intelligence due to Amazon facilitates other tech groups developing in Pittsburgh as well. Talent is following Amazon, and other tech companies are following talent.

Boston

The city of Boston approved $5 million in property-tax breaks for an Amazon office located at Seaport Square Block L4. The site is currently a surface parking lot. The Seaport Square offices are also not part of Amazon’s ongoing search for a second headquarters, the company has confirmed. However, Boston is still in the running and looking like a front runner for potential HQ2. Amazon has plans to hire an additional 900 employees at an office at 253 Summer St., about half a mile from the Seaport Square Block L4 office.

The seaport district offers more jobs than before, enabling what has the potential to increase the success of the Amazon sector in the area. By upgrading area and taking over an 18 floor building, offering 2,000 more jobs more and more professionals can flock to the area – an area that is already dominated by technologically focused campuses and young talent.

Vancouver

Another city experiencing Amazon growth, albeit not in the running for HQ2, is Vancouver. Amazon announced plans on April 30th for a new 416,000 square-foot office, with plans to employ an additional 3,000 people across fields like e-commerce, cloud computing, and machine learning. Amazon employs more than 6,000 people in Canada, and Toronto is the only Canadian city in the running for a potential HQ2.

Los Angeles

Even as Amazon considers Los Angeles as a possible site for its second North American headquarters, Amazon is already expanding its local footprint significantly in Culver City with plans to move Amazon Studios into the historic Culver Studios complex. Moving the entire production company of Amazon Studios, L.A. has the potential to continue to develop with Amazon.

In addition to Culver Studios, the tech giant has agreed to lease 75,000 square feet of office space in a new development, Culver Steps, across the street from the studios. Though not noted by analysts as a big front runner for HQ2, Los Angeles did make the top 20 list. The growth in the entertainment sector of Amazon makes this a valuable development for the company – but the lackluster tech scene and the proximity to the Seattle headquarters may deter the development of a larger campus.

In all, Amazon will continue to grow throughout many smaller markets, and any of those markets tend to have an uptick in tech development from other companies chasing the Amazon tail. We just have to wait and see where HQ2 will settle, and watch the rush of tech and CRE development that follows.

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