The Amazon Effect: What Would Happen to Apartment Rents if Your City is Picked for HQ2?
Projected Impact Varies Across 20 Finalists with Market Size and Construction Pipeline Being Major Factors
If Amazon picks your city for its new co-headquarters, what impact would it have on your local apartment market?
CoStar’s quantitative research team applied a new forecasting model that predicts how the projected 50,000 new jobs Amazon is expected to generate would affect apartment demand, rent growth and rental property values based on historical apartment demand generated by employment gains in the markets under consideration. Amazon has named 20 cities as finalists for its new co-headquarters - dubbed HQ2.
The results suggest that the smaller markets under consideration, such as Nashville, Raleigh and Columbus, would see the most disruption. By the end of 2026, when Amazon is expected to be settled in its new HQ2, Raleigh would see average apartment rents rise 9.6% due to the Amazon effect alone, according to CoStar’s forecasting model. That’s the biggest bump of any of the 20. Nashville rents would rise 6.7%, and Columbus’ would increase an additional 5.9% thanks to Amazon.
New York, Chicago and other major markets would see Amazon have virtually no effect on rents, due to their huge inventory of rentals. Those cities would see Amazon push average apartment rents by just a single percentage point.
Boston, one of the early favorites for HQ2, has a robust multifamily construction pipeline and CoStar predicts Amazon would add an average increase of just 2.4% to the market’s rents. Philadelphia, which has seen a steady stream of rental development during the economic recovery, would see rents rise just 2.1%
"The Amazon effect is in direct proportion to the size of the markets" says John Affleck, CoStar Director of Analytics. The larger markets - and markets with a significant existing pipeline of new apartment construction - could absorb the tech behemoth’s arrival fairly easily. "But smaller markets like Raleigh and Nashville, and even Austin, could see a pretty significant effect."
CoStar’s forecasting model predicts that rental property values would rise at about the same level that rents do. Amazon would lift apartment property values in Denver, for example, by about 4.6%, as rents would inch up 4.4% due to Amazon’s arrival.
The Washington market, which includes the suburban Maryland suburbs and Northern Virginia, would experience just a 1.2% rent bump by the end of 2026 due to Amazon. (Amazon is considering three different sites in the Washington area - leading many watching the process to suspect the area has an inside track at landing the project).
CoStar’s model estimates the effect new jobs and apartment supply have on the market’s vacancy rate. However, the model makes no allowance for how multifamily developers may respond to news that Amazon has chosen their city.
Michael Wolfson, associate director of capital markets research for brokerage Newmark Knight Frank, says multifamily developers are already preparing to pounce when Amazon makes its decision. "There are developers sitting there licking their chops, telling their partners we’re going to raise money now, to be ready," says Wolfson. Builders would be looking for quick turnaround for any new projects to take advantage of Amazon’s arrival. That’s easier in some markets - like Austin and Dallas - than others - like New York where permitting can take months or years.
Wolfson thinks it’s possible Amazon itself could become a player in some of the local rental markets.
Last year, as Oracle expanded its Austin campus, the tech firm bought a 295-unit apartment complex to use as transitional housing for employees moving to the new campus. If Amazon chooses a supply-constrained market, it too could decide to invest in the rental market.
Meanwhile, the wait goes on as Amazon weighs a slew of factors in making its selection, including the amount of available office space, transportation and infrastructure condition, and local culture and entertainment options. Access to technology talent is also expected to be crucial.