The RE Amazon Craze - Coming to Cleveland, Ohio

50 Replies

So, for all that do not know, Amazon is building nearly 2.4M sq. ft. distribution center(s) - specifically (2) new facilities within 20 miles of one another in NE Ohio - this is great news for the region and job creation. Just curious if any BP members have seen market conditions impacted in their hyperlocal space where Amazon has constructed large footprint distribution centers. Obviously, we are excited in the region, it's not HQ2 (yet) but it is certainly impressive - 

Steven Gesis, Developer
440-374-8403

I remember reading elsewhere was this is great if you had warehouse space but otherwise not much else changes. I think the general consensus was majority of jobs were lower paying warehouse jobs and not the high paying technical ones people typically associated with Amazon.

I agree with @Matt K. Most of the area that the distribution center (Warrensville) is a solid C range. I don't believe that one new company will make much of a difference. Though I do think that short-term leasing may see an impressive upswing in the area 

Originally posted by @Matt K. :

I remember reading elsewhere was this is great if you had warehouse space but otherwise not much else changes. I think the general consensus was majority of jobs were lower paying warehouse jobs and not the high paying technical ones people typically associated with Amazon.

 Matt, thanks for the input, interesting perspective, I agree the jobs will not be tech or require very high skill set, I think it will certainly help either lift or be the catalyst that can lift the surrounding area - at the end of the day its new jobs, specifically several thousand jobs. We will see :) 

Steven Gesis, Developer
440-374-8403
Originally posted by @Ian Kurela :

I agree with @Matt K. Most of the area that the distribution center (Warrensville) is a solid C range. I don't believe that one new company will make much of a difference. Though I do think that short-term leasing may see an impressive upswing in the area 

 Thanks for the note, I can appreciate your opinion, but jobs are jobs and for areas that are missing jobs, this is a major enhancement to the specific municipal economy. Ultimately, I am a believer in the trickle-down effect, you can call me an optimist, - new jobs always positive momentum - maybe it will not triple or double home values, but it can certainly at least help preserve what exists and mitigate deterioration - if not Amazon, who will be the major job supplier in the defined municipalities ?

Steven Gesis, Developer
440-374-8403

Now if HQ2 was to land here, that would be a game changer for the entire region.

Originally posted by @Steven Gesis :
Originally posted by @Matt K.:

I remember reading elsewhere was this is great if you had warehouse space but otherwise not much else changes. I think the general consensus was majority of jobs were lower paying warehouse jobs and not the high paying technical ones people typically associated with Amazon.

 Matt, thanks for the input, interesting perspective, I agree the jobs will not be tech or require very high skill set, I think it will certainly help either lift or be the catalyst that can lift the surrounding area - at the end of the day its new jobs, specifically several thousand jobs. We will see :) 

 Agreed, but I think one needs to manage expectations. These are going to be mostly min wage jobs and then probably be augmented w/ a army of contract/temp employees during busy season. Plus I think most the leases are 10-15 yrs.... but remember amazon is working hard on automation. If you want to get speculative what happens when amazon is the main employer and most others have left town, then say 5-10 yrs later the robots take over.

Now, I haven't fact checked this, but if it's true short term gain could be there, but longer term maybe not?

"Amazon pays its warehouse employees 15% less on average than the prevailing wage of other warehouse workers in the same region, and it is experimenting widely with ways, such as temporary and on-demand employment, to erode job security," Mitchell says.

“Because its technology can closely monitor worker productivity, Amazon takes surveillance and goals to a higher, grueling level,” says Beth Gutelius, a researcher at the University of Illinois-Chicago, who wrote a dissertation on warehouses.

https://www.usatoday.com/story/tech/columnist/2017/01/13/amazons-jobs-creation-plan-comes-amid-labor-pains/96488166/

@Steven Gesis sounds like it a great time to invest in that market right now. Then exit in 3-5 years after rents and property values increase due to demand.

Originally posted by @Brian Tapanes :

Steven Gesis sounds like it a great time to invest in that market right now. Then exit in 3-5 years after rents and property values increase due to demand.

 Brian- its a great time to make a visit to CLE

Steven Gesis, Developer
440-374-8403
Originally posted by @Matt K. :
Originally posted by @Steven Gesis:
Originally posted by @Matt K.:

I remember reading elsewhere was this is great if you had warehouse space but otherwise not much else changes. I think the general consensus was majority of jobs were lower paying warehouse jobs and not the high paying technical ones people typically associated with Amazon.

 Matt, thanks for the input, interesting perspective, I agree the jobs will not be tech or require very high skill set, I think it will certainly help either lift or be the catalyst that can lift the surrounding area - at the end of the day its new jobs, specifically several thousand jobs. We will see :) 

 Agreed, but I think one needs to manage expectations. These are going to be mostly min wage jobs and then probably be augmented w/ a army of contract/temp employees during busy season. Plus I think most the leases are 10-15 yrs.... but remember amazon is working hard on automation. If you want to get speculative what happens when amazon is the main employer and most others have left town, then say 5-10 yrs later the robots take over.

Now, I haven't fact checked this, but if it's true short term gain could be there, but longer term maybe not?

"Amazon pays its warehouse employees 15% less on average than the prevailing wage of other warehouse workers in the same region, and it is experimenting widely with ways, such as temporary and on-demand employment, to erode job security," Mitchell says.

“Because its technology can closely monitor worker productivity, Amazon takes surveillance and goals to a higher, grueling level,” says Beth Gutelius, a researcher at the University of Illinois-Chicago, who wrote a dissertation on warehouses.

https://www.usatoday.com/story/tech/columnist/2017/01/13/amazons-jobs-creation-plan-comes-amid-labor-pains/96488166/

 Managing expectations is accurate - I don't expect a huge boom from it, but it will certainly help nudge the dial in the right direction - all you need is a strong catalyst for a large effect - 

Steven Gesis, Developer
440-374-8403

This is very interesting, I know that Amazon has a distribution center here in San Marcos and San Marcos has really exploded over the past couple of years. I'm not sure if Amazon is to blame or if they even had a part in growing SM but it would be foolish to say they had not part what so ever. The big question is where will HQ2 be....? That will be revolutionary, I haven't heard or seen any updates about it. Does anyone know when they will decide or who they have narrowed it down to?

Originally posted by @Michael Guzik :

This is very interesting, I know that Amazon has a distribution center here in San Marcos and San Marcos has really exploded over the past couple of years. I'm not sure if Amazon is to blame or if they even had a part in growing SM but it would be foolish to say they had not part what so ever. The big question is where will HQ2 be....? That will be revolutionary, I haven't heard or seen any updates about it. Does anyone know when they will decide or who they have narrowed it down to?

 Michael-

Thanks for the note, very good feedback - exactly what I was hoping to get from this post - 

I understand its tough to say what was the driver of the growth but something like a distribution center can be the spark that makes it happen.

Yes, HQ2 is HUGE! Would love to see it land in NE Ohio 

Steven Gesis, Developer
440-374-8403
Originally posted by @Michael Guzik :

This is very interesting, I know that Amazon has a distribution center here in San Marcos and San Marcos has really exploded over the past couple of years. I'm not sure if Amazon is to blame or if they even had a part in growing SM but it would be foolish to say they had not part what so ever. The big question is where will HQ2 be....? That will be revolutionary, I haven't heard or seen any updates about it. Does anyone know when they will decide or who they have narrowed it down to?

 I'd say that's more the college than amazon....

San Marcos, population 58,000, was listed as the fastest-growing city in America according to 2014 census data. The growth is mostly thanks to an expanding Texas State University — the largest employer and largest property owner in the city. With the anchor institution showing no signs of slowing down and the invasion of national developers that have seized on a growing real estate opportunity to provide housing for an increasing number of college students, city residents find themselves much more concerned about the consequences of that growth — including rising rents and flood waters — than noisy parties.

https://nextcity.org/features/view/san-marcos-fast...

But in a situation like that, I don't see how Amazon would be a bad thing. It's not like the college is going anywhere, vs if amazon was the anchor I think it'd be different.

We have a distribution center and an amazon server farm/software location here and they have not had an impact on real estate here.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

@Russell Brazil   I don't know really myself.. but I am building 23 homes 2 miles form the new Troutdale Oregon center.. and have not sold to anyone working there.. I suspect though it will have a boon for multi family.. as in our area there are very few homes to rent.. people rent apartments here not houses.

and maybe townhouse or small condo stuff.. our prices for dirt and construction make it pretty much inmposible to provide a new product for much under 375k.. and if these are 15 dollar an hour jobs.. not many going to be buying the will be renting apartments.. but one of my partners owns 100 units right there I will keep tab on how his rents go in his apartments.. I sold the building in 07 peak of the market at a 5 cap.. but rents have gone up 40% since he bought it.. he is loving it..

Originally posted by @Jay Hinrichs :

@Russell Brazil  I don't know really myself.. but I am building 23 homes 2 miles form the new Troutdale Oregon center.. and have not sold to anyone working there.. I suspect though it will have a boon for multi family.. as in our area there are very few homes to rent.. people rent apartments here not houses.

and maybe townhouse or small condo stuff.. our prices for dirt and construction make it pretty much inmposible to provide a new product for much under 375k.. and if these are 15 dollar an hour jobs.. not many going to be buying the will be renting apartments.. but one of my partners owns 100 units right there I will keep tab on how his rents go in his apartments.. I sold the building in 07 peak of the market at a 5 cap.. but rents have gone up 40% since he bought it.. he is loving it..

 The only thing that would move the needle for us though is if the government collapsed and a new government arose someplace else. With 6 million in our metro area, even if Amazon put their new headquarters here it probably wpuldnt make a difference other than in the immediacy around the HQ. 

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

I'm seeing a lot of locals try to up-sell this news to out of state and inexperienced investors.

The greater Cleveland area has a population of over 2 million.  While I am happy for the city, I personally don't think the addition of roughly 2000, low wage jobs to lower "grade" parts of town is going to have much impact on the real estate market.  I don't think there is going to be a mass migration of new people moving to the area to work for $12, and even if there is they won't be able to afford much home while bringing home $400 a week.

I suspect that if it wasn't "Amazon" hardly anyone would be talking about a new warehouse being built, it just sounds like big news because it's a well known name.  Amazon currently has over 200 fulfillment centers.  Additionally, they are replacing grunt laborers with robots.

James Maradits, Real Estate Agent
Originally posted by @James Maradits :

I'm seeing a lot of locals try to up-sell this news to out of state and inexperienced investors.

 Oh I can't imagine that crossed the OP's mind, given he is a Turnkey Provider and all....

I think @Matt K. is pretty much on the right track when it comes to this.  The "average renter" in the U.S. makes about $16 per hour and the average fulfillment (warehouse) worker for Amazon makes maybe $12.50.  But they do have them working 10 hour shifts which is good (for earning) but less than stellar for the "side hustle" jobs to make extra money.  On top of that a lot of these jobs end up being "replacement job" for displaced retail workers who got displaced...because...of...Amazon.  So the Randall Park Mall dies, people get laid off, Amazon comes in and turns it into a fulfillment center and you're somewhat back to normal.  Only Amazon gets decades of property tax breaks.  I'm not knocking Amazon for doing it, they have leverage, and who wants a vacant mall?  Now, will it create a temporary boon for high(er) skilled construction workers to actually construct/rehab the facility?  I would think so, I'd have to think so, it can't be cheap to build those facilities.

So maybe the best way to look at it is @Steven Gesis ' follow-up thoughts: it might "mitigate deterioration". And that's not a bad thing but if I wasn't going to invest in Cleveland-ish areas before I don't think deterioration mitigation is going to swing me to do it now. Certainly not in the SFR housing market.

@Steven Gesis

I live in Allentown, PA and a couple of miles from us there is an Amazon Warehouse. I can't say overall if it has contributed to the local economy. I am pretty sure they do most of their hiring during the holiday seasons. After they that they quickly let the staff go. I heard it was overwhelming working there because of the quotas people had to meet. As @James Maradits also posted, once robots become more utilized the local economy will definitely not benefit from it.  

Do people in Cleveland commute, I used to think that the big Cerner projects going on in KC were going to be huge for the areas around them. They were/are, but kind of.... a lot of high wage earners in those jobs have no problem commuting from the already established nice areas. Threw me for a loop because here in CA it's the exact opposite, things get more expensive closer to jobs...

There was an Amazon distribution center that came to my town in 2000.  They left in 2015 after the tax incentives expired.  They employed around 1200 people.  Things went to Helenahandbasket after they closed.  Unemployment, Foreclosures, People moving out of town, the Meth problem.

Originally posted by @Matt K. :

Do people in Cleveland commute, I used to think that the big Cerner projects going on in KC were going to be huge for the areas around them. They were/are, but kind of.... a lot of high wage earners in those jobs have no problem commuting from the already established nice areas. Threw me for a loop because here in CA it's the exact opposite, things get more expensive closer to jobs...

KC "traffic" hasn't caught up to that of larger metropolitan cities throughout the US. It took 15 minutes to go a mile and a half up the street from my apartment in Alexandria, VA. But here in Kc I could travel 23 miles in 30 minutes (highway obviously). Everything is so spread out here, so there is less of a commuting culture (it's just another day driving to work), plus virtually no public transportation other than buses. All of that just entails location of your house can be a lot less strategically located and more where you want to live.

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