By Alex Radosevic
The time-tested maxim “location location location” applies nicely with regard to Amazon’s meticulous search for its new headquarters location – which of course ended up being two separate but equal locales, one in Virginia and one in New York. The company developed criteria and a decision-making matrix that helped guide the process, allowing them to make a well-informed decision specifically relating to its own unique set of requirements.
It is my opinion that Amazon made a good decision. I say this for many reasons, including the fact that the world’s most valuable publicly traded company obviously saw a need to be in both the financial and political epi-centers of the country. Additionally, with its current base of operation being in Seattle the choice of two east coast cities makes abundant geographical sense as well.
Beyond the obvious or more transparent reasons behind this decision there is a set of other factors unique to Amazon that make this choice not only very viable but also, very wise. The immediate access to a tech-savvy and well-educated workforce is particularly attractive to the company, as is the fact that other highly skilled potential or prospective employees would welcome the idea of relocating to the metropolitan centers of Washington DC and New York City. This is an important factor due to the fact that Amazon has clearly stated that they will add approximately 50,000 employees on an almost instantaneous basis.
The company is also rumored to be interested in contract awards from the federal government, which makes the picture even clearer. In an off the record conversation with an Amazon employee a day ago related to this commentary, I was told to watch the news for future announcements about major commercial alliances between the company and the government. The Virginia Amazon location is within walking distance of the Pentagon and only fifteen minutes or less by car to the White House and Capitol Hill. The prestige that attaches to Amazon by locating in both the financial and governmental capitals of the country cannot be overstated.
Finally, it should be noted that the company’s CEO recently said that while data gleaned from its decision-point matrix would be the primary driver of its selection, instinct and a “gut feeling” would also play a role. I believe that he was speaking mostly about his own gut feeling. For Jeff Bezos the Northern Virginia decision means proximity to the Washington Post newspaper which he owns and of course the rest of the federal government, while the New York decision places him in relative proximity to the cache’ of Wall Street and the rest of the New York financial world.
Ramifications for winners/losers and the surrounding area?
For the winners the gains are somewhat obvious: Job creation, enhanced reputation (particularly with regard to technology) and a counter-balance to Silicon Valley and the west coast’s dominance in that particular realm. Both Virginia and New York also offered solid economic incentives to Amazon despite the fact that it is the world’s first trillion dollar company. For both states it made sense to offer incentives because the trade-off makes sense and is thus a win-win for each party from this particular perspective.
Ramifications can be divided into pro and con. I think that the pros far outweigh the cons, but each is worthy of mention. On the “pro” side of the ledger for these new locations are the things mentioned previously, including job creation and overall reputation enhancement, perhaps especially for Northern Virginia, as that particular region is dominated almost entirely by government jobs and entities and is not particularly well-known as a bastion of commerce. Amazon will help to change that particular dynamic.
On the negative side of the equation comes a potentially deleterious impact on the housing market. If the San Francisco Bay Area and Seattle are any indication of the impact that fast-growing tech companies have on the housing market then each area may be in for a rocky road ahead, especially absent any good, solid planning and preparation. Housing prices will likely skyrocket and the barriers to entry for homeowners in these two geographical areas could be very steep. They are not inexpensive markets to begin with, but everyone should expect and anticipate increases at a pace rarely experienced outside of perhaps California. Commercial lease prices will also rise based upon the demand for space in proximity to the Amazon locations and their workers.
Ramifications for those that presented bids and made pitches to Amazon but were not rewarded with a positive outcome include the obvious: not gaining the jobs, economic benefits and prestige that accrues to the location of a major high value corporate headquarters.
What do you recommend investors/homeowners/etc. in your market do in response or just in general?
Prior to commenting upon my own area of Southern California and specifically, Beverly Hills and the surrounding communities I want to provide my opinion as to what I feel investors and homeowners should do in the New York and Virginia communities within the radius of the Amazon operation.
Without question or hesitation my advice to investors would be to buy commercial or residential properties within the area of Amazon’s headquarters, and for current homeowners my advice would be twofold: First, if you were planning to sell your home prior to Amazon’s announcement hold on for a little while longer if your circumstances permit you to do so. Your house will increase in value – perhaps by quite a bit. Real estate in general is the safest investment for people that want certainty and security, but an absolute winning bet is that the housing market will explode in these two areas. Even a cursory look at what has occurred in Seattle regarding housing costs subsequent to Amazon and Microsoft (even despite the fact that Boeing had been there for years) and the unchecked price escalation in the San Francisco Bay Area where Silicon Valley is located provide empirical data to support my premise.
With regard to the Los Angeles market, no response to the Amazon decision is needed. This part of Southern California already features perhaps the world’s most lucrative and valued real estate market. The job statistics are already solid, including a wonderfully low unemployment rate. And while the area presented a spirited bid to Amazon led by Los Angeles mayor Eric Garcetti, it is also true that a great many people in this market were actually relieved that we were passed over by Amazon. The fact that Los Angeles made the list of finalists is a solid testament to the fact that the area is already doing quite well in all of the key indicators that Amazon was looking at in the first place, and no one doubts the prestige that already attaches to the area. Had we been the choice we would have made it work and melded it with the rest of the economy here, but we are also just fine the way we are.
Many felt that Amazon locating its new headquarters in this area would have resulted in far more strains than gains. It is also true that Amazon already has a particularly strong footprint in the area already. But looking at the situation which exists with our neighbors to the north featuring the unpleasant housing crisis that the Bay Area is experiencing gives great pause to those of us that are involved in both commerce and civic affairs. Like I said: Amazon choosing Los Angeles may have equated to more strain that gain in the eyes of many.
Pertaining to your questions regarding general advice about our region, the single most important piece of advice that I can give is this: Invest in real estate. My family office and high net worth clients have found real estate in this area to be the most valuable portion of their investment portfolios. It is in fact the cornerstone of most. The same principle would apply regardless of one’s economic situation. I have seen my clients’ wealth increase exponentially from generation to generation due to the steadiness and ever-increasing value of real estate where I live and work.
Congratulations to Amazon for reaching what appears to be a solid decision. Double-congratulations to the Los Angeles area, because we would have won either way, with or without Amazon in our backyard.
Media Contact: Karen Norris – Karen@CanonProperties.com