What the New Amazon Headquarters Could Mean for Boston Rental Prices
Boston’s profile is rising. The city is a likely choice in the competition to become the host of Amazon’s proposed second headquarters. The city is seen as a perfect choice by many because of its location on the East Coast and amazing pool of talent. There’s no doubt that Amazon executives are considering the potential to scoop up new graduates from the many prestigious universities throughout Boston when filling positions at its new headquarters. Boston’s appeal as a hot spot for talent was recently reinforced when General Electric moved its headquarters to the city. Residents of Boston will undoubtedly see the entry of Amazon as a positive development. However, Boston’s profile won’t be the only thing to rise if it does happen. Rents will also rise considerably if the online retail giant makes a home in Beantown. Find out what recent studies are revealing about the impact Amazon's new headquarters could have on Boston rental prices.
What a New Amazon Headquarters Could Mean for Rents in Boston
It’s important to understand just what the introduction of Amazon into a city would look like when trying to measure the impact that the move will have on Boston’s rental prices. Amazon’s new headquarters will bring roughly 50,000 new jobs to whichever city it comes to. Most of the jobs will pay $100,000 or more. That means that the city will immediately have 50,000 new people looking for places to live. The fact that these new people will have what would be considered high salary ranges by nearly any standard means that local landlords have every incentive to raise rents. In addition to grabbing every apartment available, new tenants would also potentially drive up rental rates throughout the city.
A new study from Apartment List is revealing that it won’t just be jobs created directly by Amazon that will be responsible for raising rents. The new headquarters can be expected to generate an additional 62,000 local jobs in whichever city it lands in. These jobs would come as a result of the boom that a new Amazon headquarters would create in whatever city or neighborhood it moves to. For instance, local restaurants and shops would likely hire additional staff members to keep up with growing demand. Even local dry cleaners and gas stations in the neighborhoods where Amazon employees would live would need to expand to keep up with demand.
What Higher Rental Rates Mean for Boston
Boston is a city that’s already known for high rents. Rents throughout the city rose 2.8 percent within the last decade. It can be expected that the introduction of an Amazon headquarters would put rents on the fast track to rising much more in just a short amount of time.
How Much More Can Boston Residents Expect to Pay Once Amazon Arrives?
Boston residents and business owners are no doubt biting their nails while waiting for Amazon to make its big decision regarding where its new headquarters will open. However, people who call Boston home will have to live with both the positive and negative consequences of welcoming the commerce giant. Just how much can renters in Boston expect to be squeezed if rents do rise as a result of Amazon? The median renter would pay between $6,600 and $10,500 more in rent over the next decade if the city welcomes the new headquarters.
Amazon’s Footprint
Amazon plans to bring 50,000 jobs and a $5 billion investment to the city it chooses to call home next. The good news is that there’s no need to use a crystal ball to predict what Amazon’s impact on a city would look like. Seattle already offers a clear example of the pros and cons of welcoming Amazon. It goes without saying that Amazon’s headquarters in Seattle has brought unprecedented growth and prestige to the West Coast city. It attracts entrepreneurs, startups and recent graduates seeking to tap into the innovative spirit that is now synonymous with both Seattle and Amazon. However, the success of the relationship between Seattle and Amazon is not without its drawbacks. Almost everyone is familiar with how expensive the cost of living in Seattle is for residents. Of course, Seattle was never considered a low-rent town even before Amazon began. Rents in Seattle are among the highest in the country. What’s more, second-generation residents are finding it difficult to stay in the Seattle area after graduating from school due to a high cost of living that essentially shuts out low earners.
Implications for the Suburbs
It won’t just be urban residents who will be affected by higher rents. It’s safe to say that Amazon’s impact on the city will ripple into the many suburbs surrounding Boston. It is likely that many of the 50,000 new employees that will be hired by Amazon will prefer to live in suburban neighborhoods instead of renting one of the brownstone apartments located on Boston’s bustling streets. Boston is considered a fairly easy city to commute to by most standards. The city is surrounded by an extensive highway system that connects it to idyllic New England towns that are known for their close-knit communities and top school systems. In addition, Boston’s rail system connects many surrounding suburbs directly to the city. Real estate prices in these towns are already incredibly high compared to national standards.
The suburbs of Boston may just serve to save the city from astronomical rental prices. Established employees with families may skip city rents altogether and simply head for the suburbs. This may take some of the burden off of the city when it comes to trying to fit all of the new renters that will be coming to Boston. In addition, extended-stay hotels may provide some relief for rental rates during the initial period when there is an influx of new people coming to the city. Many business hotels throughout Boston are equipped to accommodate the long stays of business travelers who are in town for long-term projects.
Why Boston’s College Students May Be Hit the Hardest
It is extremely common for college students in Boston to rent apartments in favor of staying in dorm rooms. This is especially common among juniors, seniors and graduate students. Students generally look for rentals with low prices and lenient leases that allow for them to stay during the academic year and leave during the summer. There’s a good chance that landlords may not be motivated to remain quite so lenient if the demand for rentals spikes. Landlords can’t be blamed for giving preference to full-time renters over seasonal students. What’s more, some landlords or rental agencies may be motivated to update their buildings to create more sophisticated environments for renters with big paychecks. They may improve apartments and raise rents in anticipation of Amazon’s arrival if the company does announce that it’s bringing its new headquarters to Boston.
It is too early to say whether or not the arrival of Amazon would bring a boom in new housing. Boston’s historic nature means that breaking ground on new apartment complexes is something that’s always challenging. What’s more, many of the suburbs surrounding Boston are already pretty built up. People who own homes in these towns have often paid top dollar for real estate. Most wish to restrict new constructions and retain as much of the authentic New England charm that’s left as possible. As a result, local municipalities often make it challenging for developers to come in and build on the few patches of vacant land that do exist.
Is Amazon a Sure Thing for Boston?
It must be stated that there is no guarantee that Amazon will choose to make its home in Boston. Several other high-profile cities present attractive options for Amazon. While Boston stands out for its great location and impressive pool of talent, it does have some drawbacks. For instance, Amazon may be trying to get away from the trap of having a headquarters in a region of the country with a high cost of living. Attracting high-quality talent in areas of the country that have high living costs has become especially difficult in recent years.
What Other Cities Are on Amazon’s Short List?
Boston is undeniably an enviable city to be located in for any corporation. There is little doubt in anyone’s mind that a move to Boston would be a successful move on the part of Amazon. However, that doesn’t mean that there aren’t other choices that could be just as good or better. Which cities are in the running to host Amazon’s new offices? Amazon isn't giving many clues regarding the cities that have made its list. However, analysts have managed to narrow the list down to just over a dozen cities that are likely being seriously considered by Amazon. Here’s a look at the other cities that may see their profiles rise if Amazon moves in:
- Atlanta
- Austin
- Baltimore
- Chicago
- Dallas
- Denver
- Detroit
- Los Angeles
- Minneapolis
- Philadelphia
- Pittsburg
- Raleigh
- San Jose
- Washington, D.C.
Amazon won't be making a decision regarding where to build its new headquarters until 2018. That means it's going to be an intense few months as cities across the country work to prove that they are worthy of the honor. What we do know so far is that Amazon has stated that it is currently reviewing the 238 proposals it has received from locations throughout North America. The wording used means that Amazon could potentially build its new headquarters in a place that is not located in the United States. However, that option seems unlikely. The reality is that Boston has a really strong shot at becoming the new home of Amazon.
How Should Boston Renters Prepare?
There's isn't much that renters or landlords in Boston can do until Amazon makes a formal announcement at some point in 2018. Anyone who is planning to relocate to Boston in the upcoming year or switch apartments may want to take a proactive approach to locking in a lease before January of 2018. Signing a lease agreement now instead of waiting until after the announcement could prove to be beneficial if Amazon does announce that Boston will be its new host city. In addition, anyone entering a new lease or signing a lease renewal between now and the start of 2018 may want to inquire about the possibility of locking in a two-year lease. This option could provide a small buffer between a renter and the rate increases that may be to come throughout the city. Of course, this option is only advantageous for someone who plans to be in Boston for the next two years without question.