When large corporations move in, real estate prices go up. Such relocations are taking place across the country as economic opportunities shift to a handful of big cities and job opportunities become scarcer in suburbs and smaller cities.
Big Business Headquarters’ Impact on Real Estate Market
Amazon in Seattle
Retail giants like Amazon boast more than 300,000 employees globally and have emerged as one of the world’s largest corporate powerhouses.
In 2010, it was announced that Amazon would move its headquarters to Seattle’s South Lake Union, a dynamic urban district that some would argue is the second most important technology hub in the West Coast behind Silicon Valley.
Microsoft co-founder Paul Allen spearheaded the megaproject via his real estate investment company, Vulcan, eventually acquiring 60 acres in the area that now houses Amazon’s multi-building campus.
Since then, Amazon has undergone several reformations, from its humble beginnings as a small mail-order bookstore in 1994, to a global organization generating $38 billion in revenue in 2017 alone.
Seattle has reaped immense benefits from Amazon's growth, with the company now occupying an astounding 19 percent of all prime office space in Seattle, becoming the fastest-growing big city in the U.S.
Currently, there’s a fierce rivalry brewing among several cities across the US as they compete to host Amazon’s second headquarters in North America– dubbed HQ2. Amazon announced the HQ2 initiative in September 2017, along with a request for proposals from various governments and economic development organizations. In January 2018, Amazon whittled down its pool of candidates from 238 to 20.
The finalists included obvious contenders like Los Angeles, CA; New York, NY; Miami, FL; and Austin, TX, as well as hidden gems like Denver, CO; Nashville, TN; and Indianapolis, IN. The lucky winner could receive up to 50,000 jobs averaging $100,000 and a staggering $5 billion investment.
However, Amy Liu, an urban policy expert at the Brookings Institute, warns that overspending may be a potential economic drawback, particularly since Seattle has already seen a sharp spike in housing costs and traffic congestion. In fact, after Amazon solidified its presence in Seattle indefinitely, home prices in the city have soared by 83% and rents by 47%, according to Zillow.
Tesla in Reno, NV
What Amazon is to e-commerce, Tesla is to automotive. Ever since their inception in 2003, Tesla’s innovations have transformed the auto industry, paving the way for electric vehicles to become more popularized in the marketplace.
And in 2014, the construction of Tesla’s Gigafactory in Reno, NV gave rise to a sizeable amount of additional economic activity.
The sheer size of the factory is causing the area to change at an exponential rate, thereby escalating the cost of living. From 2013-2014, when Tesla broke ground on the Gigafactory, the cost of multifamily properties increased by 43%.
Apple in Cupertino, CA
Apple definitely completes the trifecta of innovation. Based in Cupertino, CA, Apple’s commitment to simplicity, quality, and efficiency has definitely set it apart from other like-minded tech companies.
But, like its e-commerce and automotive counterparts, three years following Apple’s relocation saw a 3% faster increase in home values than the rest of the country.
Factors that Determine Real Estate’s Impact
The severity of impact on real estate that changes in a region's market conditions can be determined by the following factors:
- Existing Inventory: Most markets will increase in value due to the lack of inventory and the demand exceeding the supply.
- Price Performance: If the city lists modest prices and has plenty of inventory available, the outcome could be a 10-20% increase in value.
- Demand: The property needs to already be in a desirable urban place where millennials want to live and work.
- Space for Construction: There also needs to be plenty of regional space available for the development of warehouses, office spaces, and housing.
Similar Changes Happening in San Diego
The consistent job growth in emerging industries in a desirable living environment has made San Diego one of the most sought after places to live and work in the world. It’s only a matter of time before San Diego becomes virtually unrecognizable from a real estate perspective. Here are some of the biggest changes happening:
Downtown San Diego
These days, millennials prefer cities to suburbs. Their unique spending and living habits make them more suitable for places like downtown, as evident by the development of the yet-to-be-built I.D.E.A. District, an innovative urban initiative that combines creative office space, retail, restaurants, and housing.
SDSU West vs. Soccer City
In Mission Valley, two competing proposals regarding development and future use of the land have been presented. While both initiatives are very similar, SDSU West would transform the site of Qualcomm Stadium into a walkable campus complete with housing, classrooms, hotels, a stadium, and more than 90 acres of public open space.
Similarly, Soccer City aims to develop a sports-and-entertainment district and include both a river park a new stadium for Major League Soccer and Aztec football.
North County San Diego
Attracted by a business-friendly environment and several booming industry clusters, emerging startups are playing a leading role in the growth and prosperity of North San Diego County. Plus, it’s robust tech presence has contributed nearly 17 percent of the region’s total GDP with $12 billion in annual sales.
The emergence of several big businesses in San Diego combined with the ideal environment for Fortune 500 companies to relocate or build new headquarters here has made San Diego real estate what it is today—lucrative, exciting, and a beautiful place to work and live.