Austin Rents Would Rise If City Gets Amazon's Second Headquarters Site

AUSTIN, TX — While economic development mavens throughout North America — including those in Austin — are in a tizzy trying to land a second Amazon hub, the impact such a development would have on renters already besieged with ever-increasing leasing rates would not be to their benefit.

In a report released on Thursday, Apartment List studied the impact on rents among the top contenders for the project being dubbed Amazon HQ2 — a $5 billion plant going to the winning city that would create 50,000 local jobs with high salaries averaging $100,000. The upshot: Rent would go up in any of the cities fortunate enough to land the economic development plum.

But there's good news for Austin, considered by many industry analysts as the top contender to get the headquarters: Rents likely would rise modestly here relative to other cities by a mere 0.5 percent to 1 percent, researchers found.

The study found parallels to Denver in studying the Amazon HQ2 impact on Austin. "Like Denver, Austin rents are growing rapidly, and the additional Amazon workers would push rents even higher," researchers wrote in their report. "Austin is smaller than Denver, amplifying the impact of the additional Amazon HQ2 workers."

But the news to already-besieged renters isn't all bad: "Luckily, Austin has a bit more slack in its housing market, with a vacancy rate of 8 percent and a higher rate of permitting compared to job growth," researchers wrote. "With relatively low median wages, some of the rent growth in Austin is expected from an increase in high-paid workers who will rent more expensive apartments, pulling the median rent up."

There are about 50 cites in North America pursuing the Amazon hub, all submitting proposals to land the prized project. With rents already on the rise in most cities nationwide, Apartment List studied the top 15 Amazon HQ2 contenders to project the impact that the new headquarters would have on local rents.

Related story: Austin Enters The Race, Submitting Its Proposal For Amazon HQ Project

In doing so, Apartment List analyzed data from the U.S. Census and Bureau of Labor Statistics to determine how much new housing a metro can build, the amount of slack in the housing market and the impact of an influx of high-wage workers. Among the top contenders, Pittsburgh and San Jose, Calif. will feel the rent increase the most, while the impact will be smaller in Washington, D.C., Los Angeles, and Dallas.

The Apartment List reckoning took into account a study into determining the amount of housing a metro can build to house Amazon workers. To achieve those snapshots, the firm combined historical building rates with an ease of building factor. Based on current job growth rates plus the additional 50,000 Amazon workers and 66,250 supplementary workers to be added over the next ten years, researchers project that many metros will add more jobs than new housing.

"Metros such as San Jose, where it’s difficult to build, will see rents skyrocket with the new housing demand from an Amazon headquarters," officials said. "Metros, such as Dallas, that have kept up with existing housing demand and have laxer building regulations, will see lower rent increases. Large markets, such as Detroit and Atlanta, with high vacancy rates, have the most slack and, thus, need less new construction to house new Amazon employees."

Among the study's findings:

• The influx of Amazon workers would increase rents up to an additional 2% a year in the metro selected for the Amazon HQ2. This is on top of baseline rent growth without Amazon, which averaged 3.1% per year nationwide from 2005 to 2015.
• Smaller metros with lower wages or severely constrained housing stocks, such as Raleigh, Pittsburgh, Baltimore, and San Jose, will see rents rise the most from the Amazon HQ2.
• Metros with large housing stocks, including Los Angeles and Dallas, will see less severe impacts on rents, with rent prices expected to rise 0.5% or less a year.

To read the full report, click here. Read more Apartment List analysis of rental price data and trends on our Rentonomics blog. You can also read the Apartment List rental impact summaries on each one of the Amazon HQ2 top contenders by clicking the city of your reading interest below:

• Atlanta
• Austin
• Baltimore
• Boston
• Chicago
• Dallas
• Denver
• Detroit
• Los Angeles
• Minneapolis
• Philadelphia
• Pittsburgh
• Raleigh
• San Jose
• Washington, DC

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>>> Graphics courtesy of Apartment List