Amazon HQ2 - REI Opportunity?

Innovative Strategies 108 Replies

Afternoon BP,

After news broke of Amazon moving forward on finding a new HQ, I got really excited for the possibility of a new/increased opportunity in a new area. I currently own and rent in Central Florida, but wouldn't mind investing elsewhere if the opportunity was right.

I lived in Seattle for 2 years and saw (have seen) what Amazon/Microsoft did not only for the job market, but rent as well. 

I know the Triangle in NC was thrown around as a hopeful location, but it's far too early to tell where it's going. 

My question to the community is where/when do you really start to dig into the surrounding area that will become the new site and how do you as an investor stay up to date on what's happening with a big build like an Amazon HQ2?

I heard about that news this morning as well and I'm excited when they mentioned some places that I am currently investing. It would be great if they moved into the locations that I am currently investing but I'm not sure that that will happen. I'm going to stay up to date with the news. Their move is going to take a long amount of time and they're will be plenty of opportunities to buy once the news has broken. I think that people won't invest in those areas because the prices will immediately be higher but long term the prices in those areas will continue to rise. 

@Josh Calcanis

@Antoine Martel


Brilliant discussion, I thought the same thing!!

However, I think once the city is picked (specifically the location within the city) that neighborhood and all surrounding neighborhoods will appreciate rapidly.  

I expect that based on a typical market dynamic, the biggest effect happens right after the news .. then there's a period of "re-correction" and then it acts like it's supposed to from then on out.  This all happens very quickly.

So ... unless you're super mobile or know something that the average person doesn't I think it would be very hard to capitalize immediately on this opportunity. 

I do assume, however, if you're willing to plow the high costs into the real estate after initial announcement, that it will do very well as a long term investment.

Originally posted by @Josh Calcanis :

@Samir Shahani

So it sounds like we need to find an inside person at Amazon haha.

Realistically, how long would it take for list prices to raise to that uncorrected state? weeks? months?

 Yeah so how fast can you guys find someone who works at amazon??? hahaha.

I think that it prices will rise instantly and then value will continue to rise over the long term as well. 

Has there been any information released saying that it will contain Bots or actual people and how much? How much employment they are predicting they will provide?

@Josh Calcanis  

@Antoine Martel

With regards to your question, I'd love to hear someone chime in with an expert opinion (e.g. an agent who witnessed this in their home market).  

I batted back and forth with the concept.  Ultimately I concluded that the real estate market is not that efficient because its highly local and there are always 100 extraneous situations going on regarding home buying/selling.  So I'd argue that you can capitalize on this situation because home prices will not unanimously rise instantly.  There will be opportunities. 

Then again, the "Amazon effect" is very real.  Any news they release results in massive market movement (certainly the stock market, now it looks like the real estate market as well ;).

Time will tell on this one, I'm thoroughly intrigued. 


@Jose Rueda

Official press release here:

http://phx.corporate-ir.net/phoenix.zhtml?c=176060...

Hopefully its a smaller market that meets their criteria.  I love that Telsa picked Buffalo NY for a giga-factory.

I feel this will be a great investment opportunity - it'll take weeks/months for the market to adjust imo.

My parents in upstate NY are convinced it will end up there, I'm sure there are 50+ other places thinking the same thing :)

Excellent marketing on Amazon's part as well, they have cities/states competing to pay them to move there while getting the word out there to the tech community to increase their talent pool. If they locate somewhere with good REI opportunities that might be something for me to investigate myself :)

https://www.bizjournals.com/atlanta/news/2017/09/07/atlanta-likely-in-consideration-for-amazons-5.html?ana=yahoo&yptr=yahoo

Interesting insight considering AMZN is already building a presence in Atlanta.

The Dallas area is certainly one of the main front runners.  It would probably have the least impact on the Dallas real estate market of all the places I have heard mentioned.  That is simply because we have a very fast pace of growth now.

Another place I have heard mentioned was Detroit.  That would have a HUGE impact on that city.

To be exact we are talking about adding $5,000,000,000 in direct salaries per year to one community over 10-15 years. 

These are good paying jobs.  The average salary is expected to be $100,000 in today's dollars.

There is a long history of corporate headquarters moving to our area.  It is not uncommon for us to have a company move 10,000 or more jobs here in a year.

In the Dallas area, I would guess the Collin Creek Mall area of Plano.

1)   The internet access is second to none.  We are talking about the Telecommunications Corridor.

2)   The major highway access is second to none.

3)   Multiple airports including DFW which has non stop flights to almost every country on the planet.

4)  A city, a school district, a county, and state that are willing to give BILLIONS to get the project.

5)  Multiple good school districts in the area.

6)  The property was recently bought for an "unspecified" redevelopment.

The area has had tens of thousands of electrical engineers and computer programs within a bike ride for decades.

Austin is also nice.

They could also chose 'The colony' or Frisco - Nebrasca Furniture Mart and Toyata moved there recently and have brought a  lot of attention and development to the area. But its all speculation for now... following.

@Anirudh Singh Toyota moved to Plano, FYI. 
@Michael Biggs I don't see a warehouse going in at Collin Creek. I believe that area is going to stay a mall but become much more upscale. That's the "word on the street."

They "recently" added a fulfillment center in the DFW area IIRC. I can see them moving their HQ to the Legacy area of Plano. After all, it seems to be the place to go. JC Penney sold their campus at the very end of last year. I know they only occupy a small portion of the space and the whole place is being done over and will be getting leased out. JC Penney will maintain their presence there. But they may find it more tax friendly, and have more options, to place the HQ in Frisco. Afterall, if they care about the people working at HQ, the employees will have more agreeable housing options in Frisco. 

DFW is already a very HOT market. If Amazon (or anyone else) brings in 5000-10000 more jobs to Plano/Frisco. Wow! Housing will get even more expensive.

@Debra Grumbach   This is NOT a warehouse.  It would be the highest concentration of $100,000 a year jobs in Texas.  This is equivalent to their downtown Seattle headquarters.

Which I believe has more than 30 restaurants and a huge amount of other associated retail with it.

Amazon is talking about 50,000 jobs at the headquarters.

Won't the Amazon leadership be asking themselves, among other things, where do programmers/tech talent WANT to live? Wouldn't the answer be the coasts and not the flyover states? Just speculating. Techy folks i'm friends with would change companies before moving to a flyover state to stay with amazon.

@Rohith Janga

Good article, exactly more evidence Amazon would avoid a flyover state, the point I was trying to make.

"There are some softer cultural factors that are difficult to quantify as well. Will flirtations with anti-gay laws under a guise of "religious liberty" (and anti-trans "bathroom bills") hurt the causes of the large metro areas in North Carolina, Georgia and Texas?"

@Michael Biggs - I realized that it's not a warehouse part way through my response. I should have removed that part. But I still don't see them locating that many people at Collin Creek Mall which is why I mentioned the Legacy West area and what used to be the JCP campus (I think it's called The Campus at Legacy West by the new owners). 

50K jobs?! That's huge. How much space does that even take? And I just checked and that number is over the next 15-20 years but still....

I'm in southeastern Wisconsin. Two years ago, Amazon built and opened a 1 million square foot distribution center a few miles down the road from me. Most of the jobs there (and the center employs a few hundred people) are minimum wage, and we haven't seen a lot of uptick in RE prices because of them. 

A headquarters center might be different from a distribution center in terms of the level of wages and salaries that will be paid to employees. Before making any kind of bet on how the new center will affect RE prices, I would try to determine the quality and quantity of employment that the center will represent.

The bigger news that is beginning to have a bit of an effect on RE prices around us is the proposed Foxconn manufacturing facility which, if approved, will purportedly create lots of jobs in the $50,000+ range. Consider the nature of the jobs and the kind of money that people will make before translating that into real estate price inflation. 

NY Times did an analysis based on Amazon's stated criteria and picked a winner - Denver.

https://www.nytimes.com/interactive/2017/09/09/ups...

Honestly, I have no idea if that's how it will play out, but their analysis of cities vs. the criteria is interesting.  Some of the same factors already mentioned in this thread.  Atlanta and Dallas get kicked out for bad traffic.  KC for weak job growth.  A "culture of inclusion" (i.e., not "religious freedom" laws) is mentioned at the very end.

Now, as they say "price overcomes all objections".  May well be in the end that some city is willing to throw huge tax incentives on the table and overcome any other negative factors.  I think its a complete guessing game at this point.

Jon Holdman, Flying Phoenix LLC

L.A is bidding too, but I don't really see Amazon moving to L.A, it's possible though especially since they are getting more involved in their own production competing with Netflix etc so being in Hollywood could be a benefit. 

It sounds like they won't announce where they are going to open the second HQ until 2018. 

I'm sure many rumors will be flying until then.

@Jon Holdman   I agree with you about the "culture of inclusion".  It is certainly the biggest issue Texas could face.  The "bathroom bill" that got a lot of press but went nowhere in the Texas legislature will not help.

On the other hand, in Texas the incentives will be in the Billions of dollars.  I know people working on the packages now.

Expect the maximum allowed tax abatements from the County, School District, and City. Expect a TIF, TIRZ, PID, PUD, MUD, or any other letter combination they might want.

Expect mass transit to be extended, expanded, or relocated, and remodeled.

The politicians I am hearing from are treating this like the Olympics where instead of the benefits lasting 20 days they will last for more than 20 years.

I have even heard of offers of a special legislative session if someone thinks of something that might need a law change.  I doubt that would happen but it is another way of showing exactly how far people are willing to go for this.

The strange part about this is how fast Amazon moves.