SAN FRANCISCO, Sept. 12, 2018 /PRNewswire/ -- Among all U.S. cities on Amazon's HQ2 shortlist, Raleigh, N.C., would need to build the most rental units each year to keep up with rental demand from Amazon's second headquarters, according to a new HotPads® analysisi.
To keep rent inflation at current levels, Raleigh would need to increase the number of rental units available by about 23 percent each year, which equates to building about 2,520 additional rental units annually.
Columbus, Ohio and Nashville, Tenn. follow Raleigh on the list of cities that need to build the most rental units relative to current levels to accommodate new demand and keep rent growth steady.
Amazon's second headquarters ("HQ2") is expected to bring 50,000 jobs to the chosen city, primarily in the management, software development/engineering, legal, accounting and administrative fieldsii. Based on the homeownership rate in the fields Amazon is hiring for, HotPads estimated how many renters the new headquarters would be expected to bring in each yeariii, and how this influx of new renters would affect each metro's supply of available rentals.
Among the U.S. metros still vying for Amazon's second headquarters, Raleigh is one of the more affordable rental markets still in the running. The median rent in Raleigh is $1,470, up about 3.4 percent over the past year. Population wise, Raleigh is the smallest metro still under consideration for HQ2 and typically has about 10,800 available rental units on the market each year.
If Amazon HQ2 went to Columbus, rental supply would need to increase by 22.1 percent to keep rent growth steady, which equates to building about 2,480 additional rental units a year. Nashville would need to increase its supply of available rental units by 15.2 percent a year, or 2,000 additional rental units. The median rent in Columbus is $1,410 a month, and the median rent in Nashville is $1,505 a month.
"An influx of new residents will inevitably influence the rental market, particularly in smaller markets like Raleigh and Columbus," said Joshua Clark, economist at HotPads. "Both Raleigh and Columbus have seen remarkable growth in recent years, but if selected, they'll have to undergo the most dramatic building boom to accommodate Amazon HQ2 and keep rent inflation at current levels. However, finding available land has been a recurring issue for both Amazon and housing developers in Seattle – so areas with more buildable space like Raleigh and Columbus may have an advantage when it comes to building for Amazon's future. No matter which city is chosen for HQ2, planning in advance will be critical as developers, city officials and renters adapt to a new normal that includes a strong and ever-growing tech workforce."
Among the U.S. metros on Amazon's shortlist, the New York City metro would see the smallest impact on available rental inventory from HQ2. New York City typically has about 213,200 available rentals on the market each year and would need to increase its supply of available rental units by just 1.5 percent a year to keep rent growth steady.
HotPads is a Zillow® Group-owned apartment and home search platform for renters in urban areas across the United States. For more information on the U.S. rental market, visit HotPads.com.
Increase in Rental
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Launched in 2005, HotPads is based in San Francisco and is owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG).
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i For this analysis, HotPads used data from the U.S. Census Bureau to estimate the number of renters that will move to Amazon's second headquarters location, based on the renter rate for the five job categories outlined in Amazon's HQ2 Request for Proposal. HotPads then paired the Census data with its own quarterly rental inventory data on the typical flow of new rental listings – which includes new construction and existing rentals that have been off-market for a year or more – to determine how many available rental units each market will need in a year to accommodate the expected number of new renters. For more information about this methodology, email firstname.lastname@example.org.
ii Per Amazon's HQ2 Request for Proposal
iii HotPads assumed a constant rate of hiring for all job types over 7.5 years – approximately the amount of time it took for Amazon's Seattle headquarters to reach its current capacity.
iv HotPads also analyzed what the impact would be on the Seattle metro area's supply of available rental units if Amazon doubled the number of employees in its current headquarters instead of opening HQ2.