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Amazon HQ2 Effect on Rental Market | Part II of II

As Amazon continues to grow, they are launching a second headquarters, Amazon HQ2, that will be finished in 2025.

After canceling their original plans to split their new headquarters between New York and Northern Virginia, Amazon has announced plans to open HQ2 solely in National Landing, which encompasses the Crystal City and Pentagon City neighborhoods in Arlington and the Potomac Yard neighborhood in Alexandria.

Those who jumped on the opportunity to purchase real estate after Amazon announced the location of HQ2 have already begun to see the benefits of this move. Shortly after Amazon made its announcement, home prices in Virginia rose by approximately 21%.

While experts in a variety of industries and fields have differing opinions on whether or not Amazon HQ2 will have a positive impact on Arlington and Alexandria, everyone would agree that the new headquarters is going to influence the rental market and be beneficial to homeowners and landlords with rental properties in Northern Virginia.

Here is what the launch of Amazon HQ2 means for prospective landlords and real estate investors:

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An Influx of Renters

Amazon has promised the creation of at least 25,000 new jobs, 3,500 of which will be based in Arlington.

This means that there will be thousands of HQ2 employees looking to secure rentals in the area in the coming years. When Amazon HQ1 launched in Seattle, the city saw a massive population spike

Roughly 20% of Amazon workers live within the same ZIP code as their office, and 15 percent walk to work. As Amazon hires people to work at HQ2, there will be a growing number of people looking to rent homes in the Alexandria and Arlington areas. Both executives and employees will look for homes in the neighborhoods housing HQ2: Crystal City, Pentagon City, and Potomac Yard.

Amazon employees will not be the only people flocking to Northern Virginia when HQ2 is finished. Amazon has plans to improve transit and transportation in Northern Virginia, shortening the commute time to Washington, D.C. This will encourage government employees and other people who work in Washington, D.C. to consider renting homes in the suburbs of Northern Virginia where the cost of living is lower and the homes are more spacious.

Furthermore, Amazon aims to completely renovate National Landing. Amazon’s plans include a “comprehensive revitalization plan for the area” which includes expanded restaurant and retail opportunities, improvements to the Virginia Tech campus, and better transportation.

The Washington Post reports that the National Landing will be a “walkable dense community with immediate access to public transit and a variety of shops and restaurants.” 

Amazon reports that their goal is to make publicly accessible spaces throughout their headquarters site and surrounding areas that will “prioritize walkways, landscaping, and retail over motor vehicles” and that they will create “protected bike lanes in the streets” with dedicated bike entrances and other resources that will “encourage safe and convenient bicycle commuting to our Arlington headquarters.”

According to David Hawkins, executive vice president of McEnearney Associates in Alexandria, Alexandria’s housing and rental market will thrive thanks to HQ2 as individuals, particularly millennials, continue to seek out an “urban walkable lifestyle.”

Thanks to these and other changes that will be sparked by Amazon’s move, there will be a rise in renters in the Northern Virginia area. These new developments will be a major draw and will undoubtedly drive more people to rent homes in Arlington and Alexandria.

As progress toward the launch of HQ2 continues, you will not have to worry about finding tenants if you own a property in Northern Virginia. If you are considering purchasing a property to rent out as a way to make some passive income, you can feel secure knowing that for the next several years, there will be no shortage of renters looking for homes in Arlington, Alexandria, and surrounding areas.

Increased Cash Flow

As Amazon HQ2 leads more people to seek to rent homes in Northern Virginia, the demand for available homes to rent will continue to drive rental rates higher. Experts say that many of the new Amazon employees will look to rent homes rather than buy them in Arlington and Alexandria, meaning that local real estate investors can take advantage of monthly rental income while they are waiting for their property value to increase.

Rental rates are already rising, and the increase in demand will mean that you will be able to bring home more money in rent each month if you rent out your Northern Virginia property.

Say you were typically able to charge $2,300 each month for rent- which is the average monthly rental rate for single-family homes in Arlington, and your monthly maintenance and HOA expenses totaled $1,800. This would help you earn roughly $6,000 annually from renting out your home. If you were able to charge $2,500 each month instead, which is a projected average monthly rent for Arlington at the end of the year, you would be able to earn $8,400 in rental income annually. 

These estimates are on the low end of the spectrum. In Crystal City, Pentagon City, and Potomac Yard, the neighborhoods in Arlington and Alexandria which will be home to Amazon HQ2, monthly rent estimates are $3,387, $2582, and $3294 respectively. As these rental rates continue to increase in the coming years, you stand to make a significant profit if you rent out property in these specific neighborhoods.

Prospective real estate investors only need to look to Seattle in the wake of HQ1 to see how rental rates may change in Northern Virginia with the opening of HQ2. According to a Zillow report, rental rates increased 31% in Seattle since the launch of HQ1.

You can expect that rental rates will continue to rise once HQ2 is completely finished, so if you own a rental property, you will have “high rental income with steady occupancy rates” for years to come.

Higher Return on Investment

Rental property investing is not just about making a passive income. It is also about receiving a high return on your investment when you’re ready to sell your home. 

Real estate investment is still one of the top ways for people to acquire wealth in today’s society. 90% of the world’s millionaires have been created thanks to real estate investments. 

While it is great to receive monthly rental income while you are waiting for your home to appreciate, it is beneficial for you to know that you will be able to reap the rewards of your investment when you sell your home down the line.

Amazon HQ2 will significantly increase property values, leading to a higher return on investment. Amazon’s plans to revitalize the National Landing area include a 1.1-acre public park, renovations to the Virginia Tech campus, a pedestrian bridge that will lead directly to DCA Ronald Reagan airport, and 50,000 square feet of retail space among other amenities. These additions and improvements will increase property values and draw other businesses to the area, which will further allow this area to flourish.

Additionally, as HQ2 draws people to the Northern Virginia area, the increase in demand for a limited number of homes will create housing competition that will also drive property values. With this ever-increasing demand and the promise of big changes to the Arlington and Alexandria areas, you won’t have to worry about your home depreciating in value if you choose to invest in a property to rent out in this area.

If you consider Seattle after the launch of HQ1, it will give you an idea of how HQ2 can improve your property value. Home prices have increased significantly in Seattle since the announcement of Amazon’s original headquarters. 

Thanks to what is now called “The Amazon Effect,” Seattle saw an 83.4% increase in the average price of a new home from 2010 to 2017, which is almost double the increase seen in new-home prices nationally during the same time period.  

A Zillow report shows that in the years after HQ1 was announced and opened, house prices have appreciated 73% in Seattle.

While experts note that it will take a few years for Northern Virginia to see the growth that Seattle has experienced, in the months since the announcement of HQ2, Arlington and Alexandria have become the most competitive cities in the country for home buyers, which is a major indicator that property values will increase in the future.

Daryl Fairweather, the chief economist at Redfin, says the housing market can become “highly competitive when buyers agree that home values will increase steeply in the future.” Fairweather also notes that while it will take time for Amazon HQ2 to drive economic growth in the same way as HQ1, homebuyers and home sellers in these Northern Virginia suburbs are “already operating under the assumption that there will be strong demand for homes going forward.” 

Real estate investors can already see that properties in Arlington and Alexandria will appreciate greatly in the next decade, and they are jumping on an opportunity to make a highly profitable investment.

If you don’t already own a property in Northern Virginia, now is a good time to invest in one if you want to follow suit and see impressive returns down the road.

Freedom to Time the Market

Property values are only going to increase, meaning you will want to hold on to your property for the next few years as HQ2 is built and works toward opening its doors.

If your job requires you to travel frequently and for long periods of time, you may be tempted to sell your Northern Virginia property. When you do this, you will miss out on the increased property value your home will see in a few years as well as the extra cash flow you could gain each month from renting it out.

With the expectation of increased rental rates and increased property values due to HQ2, you won’t have to sell your property before it has time to appreciate. You will be able to rake in high monthly rental income while you wait for the perfect time to sell your property. In the meantime, you can also take advantage of your growing home equity and refinancing potential for more opportunities for financial benefit.

Next Steps

As you can see, Amazon HQ2 will have a positive influence on the rental market in the coming years, meaning that now is the time to invest in a Northern Virginia property. You can invest knowing that your property will appreciate in value over time, and rent it out to gain a steady monthly income from reliable tenants in the meantime.

If you want to take advantage of the benefits that will come from renting out a Northern Virginia property, talk to us at RentSimple. 

We are a five-star property management company that specializes in rental properties in Northern Virginia, and we guarantee to make the renting process simple. It’s in our name!

Not only do we have the experience and expertise necessary to help you capitalize on rising rental rates in the area and find high-quality tenants, but we also take care of every single step of the rental process- from marketing to collecting rent- for you so that your experience is headache-free. 

Find out how RentSimple can help you benefit from the announcement of Amazon HQ2 when you visit our website!

 

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