The RE Amazon Craze - Coming to Cleveland, Ohio
Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
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 -
See the agents BiggerPockets members work with in Cleveland, OH.
See agentsI 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.
There will be more business in quick serving eateries(fast foods) and discount stores. There will be managers brought in fro outside needing housing. I know when Nela Park was idling that part of city did not look right.
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.
As A Texas State grad, (Ok, as a Southwest Texas State Grad... from before the name change...) this is exactly what I was thinking. San Marcos has been exploding for a long time and is a phenomenal strategic spot for industry, commerce, retail, and entertainment -- not to mention academics and county-level government-- smack in between Austin & San Antonio.
On the other hand, I just looked up Euclid and I see no fewer than a dozen colleges there, too. Maybe some decent partnership will occur, which may rise the tides. Amazon would be wise to get out in front of those relationships.
There will be more business in quick serving eateries(fast foods) and discount stores. There will be managers brought in fro outside needing housing. I know when Nela Park was idling that part of city did not look right.
How many well paid managers really going to be brought in for 1200 job warehouse project?
I'm guessing here, but probably not enough to make any kind of impact on the housing market.
Here in Northern Nevada we are a little bit in a similar situation. The Reno economy is very much based on logistics besides tourism/gambling, we have distribution centers for Walmart, Amazon, Chewy, etc. A big net new employer came in (Tesla's gigafactory is here) motivated by tons of tax and infrastructure incentives.
They are having issues ramping up the staff as the plant becomes more and more operational. Tesla pays better than the Amazon distribution center but they are a bit out of town and have had to get creative, putting in shuttle busses to get staff at the plant about 15 miles east of the Reno/Sparks area. We already had a bit of an economic boom in our housing so skilled labor is at a premium. We were trying to get some work done in our yard and can't find anyone to take it on because it's a pretty small job.
Rent has skyrocketed but so has housing. Housing had already been going up but we can assume that there is some sort of additional impact. Note that this plant is supposed to eventually employ about 6500 and is expected to have an overall job impact on the area of roughly 20 000 in an area of only 400-500k residents of which quite a few are CA retirees. the investors have finally started building new multi-family housing but these 1 bedroom units rent for 900 so that's hardly affordable for someone making minimum wage.
My experience tells me that:
- These kinds of jobs do not motivate anyone to move to the area.
- Housing will go up as will rents but I'd keep an eye on the timeline of certain incentives. Due to lack of capital investment from these distributors they seem a lot more flighty.
@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..
Jay, would be interested to hear more about the multifamily results -
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.
Exactly, why I put this post up, wanted to hear from the BP community what experience has shown in areas that they live in.
My view on this is still very positive - jobs are jobs -
Missing the potential here, if one household has an employed and unemployed member, the potential for an additional earner has just increased thanks to the new jobs - alone maybe the wages are not huge, but they are not meaningless ($12x2080= $24,960.00 + Various Benefits). - Whats bad about $25k? Last time I checked its more than many other basic jobs pay - since when did our society become so hostile to new jobs?
Robots are coming in every industry whether we like it or not, we should not discount this fact, this is going to happen!
Thanks to Amazon, people are talking warehouses, nothing wrong with that, you are right nothing happening on those sites before this news - this is amazing news
There will be more business in quick serving eateries(fast foods) and discount stores. There will be managers brought in fro outside needing housing. I know when Nela Park was idling that part of city did not look right.
That's all great news, help the economy every way - all sounds positive
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.
As A Texas State grad, (Ok, as a Southwest Texas State Grad... from before the name change...) this is exactly what I was thinking. San Marcos has been exploding for a long time and is a phenomenal strategic spot for industry, commerce, retail, and entertainment -- not to mention academics and county-level government-- smack in between Austin & San Antonio.
On the other hand, I just looked up Euclid and I see no fewer than a dozen colleges there, too. Maybe some decent partnership will occur, which may rise the tides. Amazon would be wise to get out in front of those relationships.
We do have a good presence of colleges in the immediate region - an Amazon strategic partnership would be very influential.
There will be more business in quick serving eateries(fast foods) and discount stores. There will be managers brought in fro outside needing housing. I know when Nela Park was idling that part of city did not look right.
How many well paid managers really going to be brought in for 1200 job warehouse project?
I'm guessing here, but probably not enough to make any kind of impact on the housing market.
Matt, probably not many, but we will take a little at a time also :)
Some RE engagement will happen, not possible for it to go completely untouched, perhaps not massive appreciation but any addition of jobs, always has some resounding effect on the entire economy of a municipality
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.
Andrew well framed, but two household earners are likely to be over $16/hr collectively. These displaced workers have been out of the workforce for over 10 years, these areas have been shuttered for a very long time, in the case in Cleveland, Amazon is not disrupting any existing ecosystem, they are only enhancing the current situation by providing an avenue for new jobs - agreed - maybe they are not high earning jobs, but it will get cash into pockets of folks that have no jobs right now.
The construction sites are amazing, the speed and tech used by the developers for the Amazon site is incredible.
Everyone has a strategy, perhaps today NE Ohio was not on your radar, but doesn't hurt to know, we have a lot of exciting things happening, not just Amazon :)
Thanks for your input, I appreciate your views and opinions... Happy Investing
http://www.times-gazette.com/news/20180106/amazon-...
I'm not local nor invest in OH, but maybe historical data can help better understand the potential impact? I also have no idea about locations in OH so forgive me if these aren't relevant comparisons.
We have a distribuion center in our area. They do provide a fair number of $10-12/hr jobs l. But I think that if someone would actually do a thorough analysis it would conclude that Amazon is a net destroyer of jobs and businesses. And a deep look into Amazon would most likely show a company with little to no profit margins with most money made from state tax incentives, customer data and gov contracts (600m from CIA is just one example).
@Steven Gesis We have an Amazon distribution here in Baltimore, and many have debated its impact on the immediate community.
The interesting thing is that these roles result in high attrition and aren't well-paying jobs per se, so frankly the correlation between Amazon and local real estate is still yet to be seen.
We have a distribuion center in our area. They do provide a fair number of $10-12/hr jobs l. But I think that if someone would actually do a thorough analysis it would conclude that Amazon is a net destroyer of jobs and businesses. And a deep look into Amazon would most likely show a company with little to no profit margins with most money made from state tax incentives, customer data and gov contracts (600m from CIA is just one example).
We have a distribuion center in our area. They do provide a fair number of $10-12/hr jobs l. But I think that if someone would actually do a thorough analysis it would conclude that Amazon is a net destroyer of jobs and businesses. And a deep look into Amazon would most likely show a company with little to no profit margins with most money made from state tax incentives, customer data and gov contracts (600m from CIA is just one example).
Thanks, Sam, I just don't see how more jobs in the area are going to NET negative jobs - if you add 2000-3000 jobs in an area that does not have these jobs and has an available workforce, how would this be a net destroyer. I read the tax abatement articles, but in reality, it all comes back around full circle, ok, so Amazon doesn't pay some municipal tax, but people buy more in the areas and the taxes trickle back to the cities, it's not huge dollars but its dollars. Yes, I agree most of the jobs may not be sophisticated management positions with huge salaries, but they will contribute to the areas they are entering in a very significant manner.
@Steven Gesis We have an Amazon distribution here in Baltimore, and many have debated its impact on the immediate community.
The interesting thing is that these roles result in high attrition and aren't well-paying jobs per se, so frankly the correlation between Amazon and local real estate is still yet to be seen.
Thanks for the call out and participating, I agree I thik the jury is still out on it and I cannot yet put an educated response together, but I am pumped about the new jobs for these particular areas and I think it can only enhance the environment - yes, I know robots will eventually replace all humans, until then Ill take the jobs for now
Thanks Matt K. You have really posted some great info. I was seriously looking at Cleveland, largely because of Amazon. I had been holding back though, because I just still feel properly values there will barely increase for an exit if needed.
Alex, beyond Amazon, Cleveland has a ton to offer, prices have been going up consistently over the past few years, we still have room to grow, a lot of exciting things hga[[ening around town, we are not your simple one trick pony : )
how about the Progressive HQ coming to Cleveland. In my opinion this will bring in more high paying jobs compare to Amazon Distribution Center .
Truth - well we have Progressive HQ now, in-fact its right outside of my office :) They are expanding and adding almost another 1000 jobs - big job growth in the region between Amazon & Progressive (4000) new jobs - wait did we mention all the Cleveland Clinic Expansion, our Health Tech Corridor (booming BioTech industry) - much much more.....
We have a distribuion center in our area. They do provide a fair number of $10-12/hr jobs l. But I think that if someone would actually do a thorough analysis it would conclude that Amazon is a net destroyer of jobs and businesses. And a deep look into Amazon would most likely show a company with little to no profit margins with most money made from state tax incentives, customer data and gov contracts (600m from CIA is just one example).
Thanks, Sam, I just don't see how more jobs in the area are going to NET negative jobs - if you add 2000-3000 jobs in an area that does not have these jobs and has an available workforce, how would this be a net destroyer. I read the tax abatement articles, but in reality, it all comes back around full circle, ok, so Amazon doesn't pay some municipal tax, but people buy more in the areas and the taxes trickle back to the cities, it's not huge dollars but its dollars. Yes, I agree most of the jobs may not be sophisticated management positions with huge salaries, but they will contribute to the areas they are entering in a very significant manner.
Part of an article that just came across my desk.
"Retail and industrial sectors
2017 was a record year for retail, and not in a good way. Last year store closing announcements more than tripled, reaching about 7,000, said retail think tank Fung Global Retail and Technology. Bankruptcies have increased too, with over 600 reported in the retail sector in 2017. The hit list has included big guns like Sears, Kmart, J.C. Penney and Macy’s (store closures) and Toys R Us, Payless, The Limited and Hhgregg (bankruptcy).
And there’s more to come, warned Cushman & Wakefield. The commercial real estate firm said the number of U.S. store closings is expected to jump at least 33% in 2018, to more than 12,000, and forecast that another 25 major retailers could file for bankruptcy. Gap, Banana Republic, J. Crew and Teavana have already announced plans to close stores in 2018.
Walmart has already kicked off the year by shutting down 63 Sam’s Clubs stores – including those at 2425 E. Florence Blvd. in Casa Grande, Arizona; 3360 El Camino Ave. in Sacramento, California; and 5135 S. Dale Mabry Hwy. in Tampa, Florida – even as it attempted to control the news cycle by announcing employee bonuses and an increase in its hourly minimum wage."
It’s no coincidence that some of the Sam’s Clubs stores belonging to one of Amazon’s biggest rivals will be converted to e-commerce distribution centers. This brings us to a key point about retail trends and their effect on commercial real estate: As e-commerce keeps growing, the retail sector’s need for commercial real estate isn’t disappearing, but rather is shifting as industrial real estate – namely, warehouses and distribution centers – play an ever-bigger role in the retail industry.
Indeed, commercial real estate industry observers like PricewaterhouseCoopers and the Urban Land Institute, which publish an annual report on commercial real estate trends, have singled out the industrial segment as the top-ranked property type for 2018 as well as the previous four years, while Colliers recently found the industrial sector far outperforms all other segments.
Part of an article that just came across my desk.
"Retail and industrial sectors
2017 was a record year for retail, and not in a good way. Last year store closing announcements more than tripled, reaching about 7,000, said retail think tank Fung Global Retail and Technology. Bankruptcies have increased too, with over 600 reported in the retail sector in 2017. The hit list has included big guns like Sears, Kmart, J.C. Penney and Macy’s (store closures) and Toys R Us, Payless, The Limited and Hhgregg (bankruptcy).
And there’s more to come, warned Cushman & Wakefield. The commercial real estate firm said the number of U.S. store closings is expected to jump at least 33% in 2018, to more than 12,000, and forecast that another 25 major retailers could file for bankruptcy. Gap, Banana Republic, J. Crew and Teavana have already announced plans to close stores in 2018.
Walmart has already kicked off the year by shutting down 63 Sam’s Clubs stores – including those at 2425 E. Florence Blvd. in Casa Grande, Arizona; 3360 El Camino Ave. in Sacramento, California; and 5135 S. Dale Mabry Hwy. in Tampa, Florida – even as it attempted to control the news cycle by announcing employee bonuses and an increase in its hourly minimum wage."
It’s no coincidence that some of the Sam’s Clubs stores belonging to one of Amazon’s biggest rivals will be converted to e-commerce distribution centers. This brings us to a key point about retail trends and their effect on commercial real estate: As e-commerce keeps growing, the retail sector’s need for commercial real estate isn’t disappearing, but rather is shifting as industrial real estate – namely, warehouses and distribution centers – play an ever-bigger role in the retail industry.
Indeed, commercial real estate industry observers like PricewaterhouseCoopers and the Urban Land Institute, which publish an annual report on commercial real estate trends, have singled out the industrial segment as the top-ranked property type for 2018 as well as the previous four years, while Colliers recently found the industrial sector far outperforms all other segments.
2018 - industrial is on my radar :)