When Amazon announced they were looking to create a second headquarters, cities from all over North America scrabbled to put together an incentive package. “HQ2” will bring a $5-billion investment and create as many as 50,000 high paying jobs, both huge wins for any city.
Communities pulled some unorthodox stunts to attempt to land HQ2. Tucson, AZ sent a 21-foot cactus to Amazon Seattle headquarters, Ottawa, Canada, asked the fans at a hockey game to cheer for Amazon, while Stonecrest, GA offered to change the town name to Amazon. In all, Amazon received 238 proposals and recently released a list of 20 finalists.
So what does this mean for net lease investors who own properties in these cities? It is a good sign. Even if Amazon does not choose that city, being on the short list signals that the city is a premier spot for business. With so many eyes on Amazon's choice, the signal is reaching a large portion of individuals and businesses.
Owners of net lease properties in Amazon's winning locale can take this decision as great news. The expected increase in population and an influx of high wage earners will positively affect the value of properties nearby. There are secondary effects that will branch out from these changing demographics. More people means more traffic, more traffic means a higher traffic count, another positive effect for real estate owners near the new HQ2.
Indirect effects will occur in the surrounding communities. In the press release announcing the start of the search for HQ2, Amazon outlined a few indirect consequences of locating to downtown Seattle. Approximately 53,000 jobs were created in the city as a result of Amazon's direct investments. This means the city hiring more bus drivers to handle more commuters, restaurants hiring more cooks or wait staff to accommodate a larger lunch rush and schools needing more teachers to educate the children of Amazon employees. While 50,000 high paying jobs in a community is an exciting prospect for a city, the demand for so many other professions will increase as well.
Other companies may follow Amazon's move. The number of Fortune 500 companies with engineering/R&D centers in Seattle rose from seven in 2010 (the year Amazon moved its headquarters to downtown Seattle) to 31 in June of 2017. Similar growth can be expected in the city Amazon chooses for HQ2 as other companies try to cluster near Amazon. Higher populations and larger workforces will increase the value of all property near by the new HQ2 location.
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Jonathan Hipp
Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.
