On November 13, 2018, Amazon announced that its new headquarters would be split between Northern Virginia and New York, promising to create jobs for 25,000 workers in each location. A few months later, in February of 2019, Amazon nixed its plans to open a location in New York and is now opening its headquarters, HQ2, solely in National Landing, which consists of the Crystal City and Pentagon City neighborhoods in Arlington and the Potomac Yard neighborhood in Alexandria. When HQ2 is finished in 2025, it will occupy as many as 4 million square feet in Northern Virginia.
The announcement of HQ2 has been accompanied by both celebration and concern by many Northern Virginia residents. While HQ2 will provide the Northern Virginia area with more jobs, better infrastructure, and economic growth from new retail opportunities, it also has the potential to exacerbate current traffic issues and decrease the availability of affordable housing.
While there are countless factors to consider when weighing whether or not Amazon HQ2 is going to be a positive overall addition to Arlington, Alexandria, and other Northern Virginia cities, it can be said without question that this move is going to be a good one for landlords with rental properties in these areas.
1 - How Amazon HQ2 will affect the rental market
While experts debate whether the new Amazon headquarters will affect surrounding areas for better or for worse, there is no argument that HQ2 will have an impact on the rental market in Northern Virginia. Since the initial announcement of HQ2, there has been an immense rent spike in Northern Virginia, and Amazon has already begun to cause noteworthy shifts in the Northern Virginia rental market.
Here are a few changes residents in the area can expect after HQ2 opens:
Increased Home & Rental Prices
As HQ2 creates thousands of jobs and brings new attractions and amenities to Northern Virginia, a growing number of people will look to move to the neighborhoods of Arlington and Alexandria. The increased demand for homes will cause home prices and rental rates to increase.
To get the most accurate glimpse of the impact HQ2 will have in Arlington, Alexandria, and surrounding areas, individuals must look to the effects that HQ1, Amazon’s first headquarters, has had on the Seattle area. According to Zillow, in the span of time before the launch of HQ1 in 2010 until it officially opened its doors to the public and employees in 2018, home prices in Seattle increased by almost 73% and increased by roughly 31%.
In a New York Times piece, Ron Kim, a member of the New York State Assembly, and Zephyr Teachout, a law professor at Fordham University, noted that HQ1 drastically increased home prices, leading many to struggle to afford homes in Seattle.
Emory Thomas, market president of the Puget Sound Business Journal, noted that since housing prices in Seattle had doubled within six years of HQ1’s existence, there was increased home displacement and fewer people were able to purchase homes.
With the growing need for affordable housing and a greater number of renters versus buyers in Seattle thanks to HQ1, landlords who owned rental properties were able to charge tenants more to rent out their homes. As a result, rental prices also saw a significant increase in the years following the announcement and completion of HQ1.
Residents of Northern Virginia should expect HQ2 to have a similar impact. In fact, prior to canceling plans to split HQ2 between Northern Virginia and Long Island City in New York, just the announcement of these new headquarters led to a rise in rental rates and a boost in the median home prices in Long Island City, a shift that has since returned to normal now that Amazon’s HQ2 will only be in National Landing.
In the same way, following the announcement that Northern Virginia won the bid for HQ2, home prices in the area rose by 21%. In Alexandria and Arlington, these prices have continued to increase, and experts project that both home and rental rates will continue to grow well beyond the date when this new headquarters is able to open its doors.
From now all the way through the completion of HQ2 in 2025 and beyond, those who live in Northern Virginia or are looking to move to the area should be prepared for home and rental prices to skyrocket.
Population growth in Northern Virginia
According to Amazon, HQ2 will create at least 25,000 new jobs with roughly 3,500 of these jobs being in Arlington alone. Thousands of people will move to the Arlington and Alexandria areas for these new jobs, some of which are even available now, which will influence the rental market and cause demand for homes- and subsequently home prices- to increase.
HQ1 in Seattle provided double the job opportunities with 50,000 new Amazon jobs opening in the Seattle area, which led to an almost unmanageable population and a traffic boom in the city. While Amazon does not promise as many jobs will be created through HQ2 as it promised for HQ1, those with a stake in the rental market in Northern Virginia should prepare for significant growth in demand for available and affordable houses.
This expected influx of people moving to Northern Virginia will come from more than just the 25,000 new jobs that Amazon’s HQ2 will create through 2025. It will also stem from changes that Amazon has plans to make in National Landing, as well.
Amazon aims to improve transit and transportation in areas like Arlington, McLean, and Alexandria that will make it easier to travel around Northern Virginia and lead to an easier commute to Washington, D.C.
According to the Chairman of the Northern Virginia Transportation Commission, Paul Smedberg, the majority of employees at Amazon’s major employment centers either walk to work, bike to work, or use some form of transit. This trend will likely continue as Amazon has already begun construction for an additional metro rail station entrance for the Arlington community and they have begun planning to build an elevated pedestrian bridge directly to DCA Ronald Reagan Airport.
These changes will be a major draw, even for people who do not work for Amazon. Those who work in government offices or other buildings in Washington, D.C., as well as those who travel frequently, will also want to rent homes in Northern Virginia so they can enjoy the affordability and quiet of Northern Virginia suburbs without being too far away from the airport or from their place of work.
Northern Virginia suburbs have already seen higher demand for homes due to population growth. According to MarketWatch, homes are selling in an average of 10 days less time than they did before the HQ2 announcement.
In the years after HQ2 is finished, there will be a massive population increase that will contribute to the demand for rental properties in Northern Virginia.
Higher Property Values
The new pedestrian bridge will not be the only new change that Amazon’s HQ2 will bring to Arlington and Alexandria. Amazon has plans to “revitalize” the Arlington area including making improvements to the Virginia Tech campus and using 50,000 square feet of new retail space for shops, restaurants, and a daycare center for both Amazon employees and area residents to use.
Amazon also will develop 1.1 acres of new public open space, dedicated to creating a large, centrally-located park with areas for recreation, pets, and farmers markets, that will help foster connection within the community.
These additions are going to lead to higher property values in the surrounding areas. For instance, research shows that proximity to a park can boost the value of a home by as much as 8%-20%, which can translate to thousands of dollars when a property owner is ready to sell their home.
The additional amenities and attractions that Amazon will bring to Northern Virginia will also attract new businesses to the area, which will raise property values in Arlington, Alexandria, and neighboring areas. As new restaurants, shopping centers, and other businesses open near National Landing, the neighboring homes will see a boost in value.
Experts note that increased demand for homes will also cause property values to skyrocket in Northern Virginia. According to Market Watch, there is half of the number of available homes for sale in the Arlington area as there were prior to the announcement of HQ2.
Because homeowners will know that their property is going to increase in value over the next few years, many of them are holding on to homes that they would have otherwise sold. Even after moving from the area, some of these homeowners have chosen to rent out their homes rather than sell the properties. Others have invested in homes for the sole purpose of renting them out because they know they will be able to take advantage of monthly cash flow and a great return on their investment down the road.
Amazon’s HQ2 will greatly contribute to property value growth in Northern Virginia, which will influence the rental market and drive rental prices up.
Greater Need for Affordable Housing
While Amazon has pledged to start a $2 billion Housing Equity Fund, to “preserve and create more than 1,300 affordable homes in Arlington’s National Landing neighborhood,” the rising home prices in Northern Virginia thanks to HQ2 will contribute to the need for affordable housing.
People who cannot afford to buy homes in the Washington, D.C. or the Northern Virginia area will look to rent homes in these areas instead, making it easier for landlords to find tenants to rent out their Arlington and Alexandria properties. This increased need for affordable housing will eventually lift rental prices up over the next decade.
2 - What Amazon HQ2 means for prospective landlords
As you can see, Amazon’s HQ2 will have a major impact on the rental market in Northern Virginia. If you have been debating whether or not to invest in a rental property in this area, now is the time to move forward.
As we move closer to the official opening date of Amazon’s new headquarters, rental rates in Arlington and surrounding areas are going to increase. When you hire the right property management company, you can take advantage of this growth and make a steady passive income as rent continues to increase.
Northern Virginia suburbs like Arlington are already attractive to countless renters in the D.C. area. With the jobs, amenities, and transit changes that HQ2 will bring, there will not be a shortage of renters looking for homes in the area. This will drive demand and make renting out your property a profitable venture.
While this might seem complicated, capitalizing on this opportunity can be quite simple if you work with RentSimple. At RentSimple, we address all the challenging parts of the rental process so that you don’t have to. We will find the perfect tenants to rent out your home, collect rent payments, and fulfill all maintenance requests. Best of all, since we understand how the addition of HQ2 will influence the rental market, we know how to set effective rental prices for you so that you can make a great profit when renting out your home.
If you choose to invest in a rental property near HQ2, Amazon won’t be the only one making money in the coming years.Contact RentSimple to learn more about rental property investing and how you can start the rental process in Northern Virginia.