Amazon has finally announced its choice of destination for its new HQ2. Many Dallas residents, businesses and taxpayers are letting out a sigh of relief. Here’s why, and what’s on the horizon for the city in 2019…
After long months of hype and heated competition and uncertainty, Amazon has finally declared a winner to house its latest expansion. 3 winners actually. The main new headquarters is to be split between Arlington County, VA, and Long Island City, in Queens, NY. Amazon also said it will be adding new facilities in Nashville, TN in the process. After a furious contest and no doubt millions of dollars spent and gambled on vying for it and speculating where it would go, you’d expect many to be more bitter about the final decision.
However, Dallas-based real estate developer Ruel Hamilton says he’s not heartbroken, and many others may share his sentiment. In fact, neighbors of the chosen locations seem to be among the most upset about the outcome.
What apparently slid under the radar in the news fest was just how much it would cost to land Amazon. New Yorkers are up in arms and are not too happy with their politicians after learning it is going to cost them over $2.5B. That’s on a projected investment by Amazon of $2.8B. Not a great return anyway you slice it, and you don’t have to be a SpaceX scientist to figure that out.
Plus, that’s if Amazon really lives up to its claims and probably not counting all of the other ongoing property tax breaks Jeff Bezos’ baby will get. Not to mention being in an Opportunity Zone which gives investors a huge break on any capital gains they enjoy. Not such a great holiday gift for all of the locals who will be picking up the tab through their income taxes and property tax bills in what is already one of the most highly taxed parts of the country. They wish they could re-gift it. There may not be any takers.
Dallas is Grateful
Aside from the huge cost, Ruel Hamilton says that Dallas dodged the bullet in several others ways too. Dallas is already attracting 100,000 jobs per year. It’s home to at least 9 Fortune 500 companies and is ranked as one of the top cities for business and billionaire residents. Put simply, it doesn’t need any help.
However, as Ruel points out, the affordability, talent pool, and location which has propelled Dallas so quickly over the past decade is also becoming its Achilles heel.
It’s becoming so expensive that the affordability crisis is infecting this traditionally more affordable destination. Land prices are so hot that developers are either having to stick to pricey, luxury developments for the numbers to make sense, or invest further afield in areas like Austin and Houston where truly affordable housing can still be built.
Though if you really want to work for Amazon, you can take one of their remote jobs, and still live here and get a lot more home for your money than in NYC.
The State of the Market
While data shows that New York has already been in a new real estate market correction for a year, things remain very competitive in Texas. This is just like the last turn when Dallas and surrounding cities held their values and kept growing for years after key markets in Florida, New York, and California had collapsed. So, Texans really don’t need any artificial price bumps caused by speculation on Amazon coming to town.
According to Zillow, the average home value in Dallas is just $198,000, well below the national average. Yet, prices have risen by over 12% in the past year, and are projected to rise at one of the fastest paces in the nation in 2019 at over 10%. Prices have already doubled from their bottom around 2013.
At the same time, DFW area rents are averaging over $1,600 per month, that almost $200 more per month than the national average. Definitely a roadblock and source of stress for incoming workers and low to middle-income earners. Those rents are up around 50% in the past 5 years alone. DFW is now one of the top ten cities in the nation for its shortage of affordable housing units.
Looking forward, whether the nation’s property markets keep booming and making things more expensive, or they poor out more homeowners into the rental pool through foreclosure and rising interest rates on adjustable rate mortgages, the demand for rentals and pressure this may cause on rental prices to go up is likely to continue to be a challenge. It’s great news for landlords. It could be great news for house flippers. We’ll have to wait to see if those committed to building truly affordable housing can pull it off and where developers will drive trends and the population next.
Summary
Amazon has made its final call on the locations for its HQ2. Dallas is not it. For most that appears to be welcome news. DFW is still one of the fastest growing and best cities for business in the US. It still has room to grow in 2019. Though rental rates are definitely in crisis territory for those needing an affordable place to live. Next year brings plenty of opportunity for real estate investors and good news for many homeowners. Let’s just hope it brings more options for affordable housing as well.
