The creation of 50,000 jobs by Amazon in Long Island City, NY and Arlington County, VA (25,000 each) will undoubtedly impact the dynamics in both cities. Amazon will help fund some infrastructure projects, including investing in existing public transportation, but the concentration of individuals working at the new headquarters will need access to schools, restaurants, emergency services, and, of course, housing. Our Ali Wolf, Director of Economic Research, explores possible impacts on Arlington County and the surrounding area.
Elevating An Already Prime Economy
Crystal City in Northern Virginia, now part of the rebranded National Landing, will give $550M as an incentive to Amazon over 12 years contingent on Amazon creating 25,000 jobs with an average wage of over $150,000. Hiring is expected to start in 2019. The new opportunities add to the 1,500 employees at the Amazon Web Services corporate office near Herndon announced last year.
- The new jobs will strain an already tight labor market, particularly in Northern Virginia; of all the Fortune 500 companies located in the greater DC metro, 75% of them are in the area.
- The sub-3.0% unemployment rate is met with three of the top five highest median household incomes in the country (Loudoun, Fairfax, and Arlington).
- With the economy at full employment, managers of highly skilled workers will need to adjust compensation to retain the talent.
Of the new roles, Amazon will likely be targeting sales, solution architects, software developers, project managers, and operations*. Amazon’s commitment to 25,000 jobs doesn’t capture indirect employment, ranging from lobbyists to lawyers, teachers, and real estate specialists. A study looking at Seattle shows that for every one technology job hired, another seven jobs were created.
It should be mentioned that the jobs are not without a cost. Both Virginia and New York offered up an unprecedented amount of incentives ($550M for Virginia, mentioned above, and $1.5B in New York) to Amazon. The cost per job in Virginia paid by the tax-funded incentives is $22,000, far below the $48,000 in New York. The money is looked at as an investment in the economy and is predicted to largely pay for itself through new tax revenue, but only time will tell if the economics will play out as planned.
Alexa: Help Find Me A Home
Both Northern Virginia housing permits and contracts were down year-over-year ahead of Amazon’s announcement. That trend will reverse in the coming months given the anticipated growth in the labor pool and speculative buying of land and homes.
- On the resale side, the increased demand will drive prices up in Arlington County considering the area is largely built out and supply for homes priced under $1.1M stands at two months (four to six is considered equilibrium).
- The rental market will see a fairly substantial short-term boost. As the metro experiences an influx of relocating workers, their first move will likely be into rental accommodation. Expect to see a spike in occupancy and rental rates along transit lines connecting to Crystal City.
- New for-sale developments are scarce around Crystal City creating an opportunity for growth in nearby counties. Of the closest actively selling projects, the average square footage is between 2,500 and 3,000 and 75% of them are attached. The Zonda map below shows Crystal City (green pin) and the aforementioned actively selling projects (hammers).