"Prime Markup: How Much Would Amazon HQ2 Drive Up Rents?," issued by ApartmentList.com, analyzes the potential Amazon effect on Denver and fourteen other metropolitan areas thought to have a good chance of successfully luring this economic powerhouse: Raleigh, North Carolina; San Jose and Los Angeles, California; Pittsburgh and Philadelphia, Pennsylvania; Baltimore, Maryland; Austin and Dallas, Texas; Detroit, Michigan; Minneapolis, Minnesota; Boston, Massachusetts; Atlanta, Georgia; Chicago, Illinois; and Washington, D.C.
While all of these communities would suffer growing pains trying to accommodate HQ2, study author Sydney Bennet believes they would be particularly acute in Denver, which is already experiencing housing prices so high that most renters quizzed in an ApartmentList.com survey from August said they'd like to move to another city.
In the following Q&A, conducted via email, Bennet digs deep into the Denver findings, going beyond rent prices to examine a slew of other pros and cons related to a potential HQ2 victory. She notes that a significant number of folks would benefit from an Amazon influx — but there could be plenty of losers, too.
Westword: How does Denver compare to other cities cited as being under consideration for Amazon's second headquarters when it comes to rent changes?
Sydney Bennet: Denver would see higher rent prices than two-thirds of the top contender cities we analyzed, with predicted additional annual rent growth of 0.8 percent to 1.1 percent per year. Denver is not as severely impacted as some metros — for example San Jose. San Jose is experiencing an extreme shortage of housing and would see additional rent growth of 1.0 to 1.6 percent per year. But Denver is predicted to experience higher rent increases than many other metros, including Austin, Boston and Los Angeles. Rents are already increasing rapidly in Denver, and the additional rent increase from Amazon HQ2 will put even more pressure on renters.
We analyzed a series of factors to predict the impact of the Amazon HQ2 rents. These factors include historic job creation, historic building permits per year, the ease of building in the metro, vacancy rates, workforce size and growth and median income.
You estimate that HQ2 will result in 50,000 employees and more than 66,000 supplementary workers coming to the city of choice — and that number of folks could populate a rather large city by themselves. Does that mean the impact would be amplified in a mid-sized metropolitan area like Denver as compared to larger ones such as Baltimore, Boston and Philadelphia?
This is definitely the case. Small and mid-sized metros will be significantly more impacted than large metros. The new Amazon and supplementary workers represent large workforce growth for smaller metros such as Raleigh, Pittsburgh and Denver. In large metros, such as Los Angeles and Chicago, the number of additional workers is small compared to the metro’s size and housing stock.
How do you calculate the number of new residents attracted by HQ2 who will rent as opposed to buying a property?
We expect similar trends in both rentals and home prices. It’s likely more of the Amazon workers would purchase homes than the supplementary workers (ex: construction workers, janitors) who have lower incomes. Many Amazon workers will rent when first moving to a metro, but purchase a home further down the line.
Even if the majority of those HQ2 employees and supplementary workers buy a home as opposed to renting, will they still create upward pressure on rents — and if so, how?
We’re analyzing both home and apartment building permits, and there’s a shortage of both to house the Amazon workers. If Amazon workers purchase the homes on the market, other Denver renters looking to purchase homes will remain renting for longer and drive up prices.