Note to Amazon HQ2 suitors: Be careful what you wish for.
A new analysis shows that apartment rents will increase to handle an influx of new workers to the winning locale – more so in the Triangle than in any other region competing for the company’s second headquarters.
The Triangle’s relatively small population and low median wages are the reason. Of 15 metro areas studied by Apartment List, Raleigh, followed by San Jose, Calif., Baltimore and Pittsburgh, would see the biggest increases.
The Triangle’s average annual rent growth from 2005 to 2015 was 3.2 percent, according to Apartment List, a website that helps renters find apartments. The median rent over that period was $1,113. If Amazon moves in, add another 1.5 to 2 percent growth.
The report says the Triangle won’t be able to build enough apartments for the influx of workers.
“The Raleigh-Durham metro has been touted as North Carolina’s ‘Research Triangle,’ home to multiple top universities to recruit employees from,” the report says. “However, with its relatively small workforce, the metro area would still have to attract many workers from other parts of the country as well. With more competition for existing housing and an influx of workers with higher wages, we expect rents to increase significantly in Raleigh as a result of Amazon HQ2.”
But that’s only one scenario.
MPF Research, which analyzes apartment data in 100 U.S. metropolitan markets, found there are just over 8,000 units currently under construction and about 8,800 vacant apartments in the Raleigh-Durham area. Greg Willett with MPF Research said 16,000 units available over the next year or so is significant.
It’s also unlikely Amazon’s full workforce would materialize all at once, Willett said. In addition, the Triangle is a relatively easy market to build in, Willett said, and developers would spring to action if Amazon chose this region.
According to third-quarter figures from MPF Research, rent in the Raleigh-Durham area increased over last year by 3.5 percent. The national average is 2.7 percent. Currently, the effective monthly rate here is $1,091.
“Our outlook for Raleigh doesn’t vary all that much from the current situation,” Willett said. “Demand would go up but so would the supply numbers.”
He added that occupancy should hold at about 94 to 95 percent over the next few years, solidifying what he sees as a steady marketplace.
Apartment List analyzed data from the U.S. Census Bureau and Bureau of Labor Statistics to gauge how much new housing a region can build, the amount of slack in the housing market and the influx of high-wage earners. It calculated the number of building permits issued yearly, the vacancy rate, median income and median rent. Those metrics put Dallas as the best place to absorb the workforce influx, thanks to its loose building restrictions and a cheaper labor pool.
Amazon has said the second headquarters will bring to a region $5 billion in construction and operating costs, 50,000 workers, tens of thousands of jobs in construction and related industries, and tens of billions of dollars in other investments in surrounding communities.
In addition to the Triangle, three other North Carolina regions submitted proposals by the Oct. 19 deadline: Charlotte, the Triad and Hickory. Amazon says it will select a proposal from somewhere in the country or Canada next year.