Search for Amazon HQ2 Sparks real estate speculation
Search for Amazon HQ2 Sparks real estate speculation
Many real estate investors are willing to buy properties in any city
Selections for its second headquarters. Some are not waiting.
Speculators are raising funds to invest in real estate near the winning site, wherever they are, or are collecting cash commitments so they can jump immediately after the winner is announced. Others are buying shares in a real estate firm that owns much of the property in a northern Virginia city that many consider a major contender.
These investors say that focusing on Amazon's potential sites is a way to gamble widely in fast-growing areas, especially those with a growing group of technology talents.
"It is guaranteed that HQ2 will meet three criteria: technological job growth, technological job growth and technological job growth," said Bryan Copley, co-founder of the Seattle-based real estate company CityBldr, using a shorthand for Amazon's second headquarters. .
Mr. Copley is raising $ 100 million for a fund that will buy residential properties in Seattle, Los Angeles and any city that wins the second Amazon headquarters.
The Seattle-based online giant said last year it was looking to invest $ 5 billion in a second site that could employ up to 50,000 people for two decades. After 238 cities and towns applied, Amazon reduced a list to 20 finalists in January.
While Amazon is looking for a location for its new headquarters, called HQ2, cities across the country have been trying to attract the technology giant. At stake: 50,000 jobs and $ 5 billion in investments.
the list of 20 finalists it includes cities such as New York and Los Angeles, as well as budding metropolitan areas that attract technological talent, such as Denver, Pittsburgh and Nashville, Tennessee.
The rush to invest in the winning city is the result of Amazon's unorthodox approach in its search for a second home. Amazon chose a highly public process, which is leaving room for speculators to place their bets. In general, companies keep the search quiet for as long as possible, according to economic development analysts.
Given that metropolitan areas are launching specific sites and even suggesting certain properties for Amazon's new headquarters, it is as if they were developing maps for real estate buyers to aim. Some investors are investing in sites that they think Amazon might want; others opt for dominant effects, such as the increase in demand in neighborhoods around a new headquarters.
Mr. Copley says that with proprietary software he can choose the most underutilized properties in any city. It will take five minutes to reduce the best 500 multifamily investments once Amazon announces a winning city, he added. Then he will make offers to many of them and hopes that he can get at least a few to bite.
A view of the US Capitol UU In September from the other side of the Potomac River in Arlington, Virginia. Your Crystal City neighborhood has a chance to win the Amazon nomination.
Photo:
saul loeb / Agence France-Presse / Getty Images
Others are betting now. Ryan Dobratz, co-portfolio manager at Third Avenue Real Estate Value Fund, believes that the Washington, DC area has the best chance of winning, particularly the Crystal City neighborhood in Arlington, Virginia.
Your firm has been buying shares of
a real estate investment trust that owns much of the commercial real estate near the Crystal City site that Northern Virginia officials proposed for Amazon's second headquarters. JBG declined to comment.
According to a report by the research firm Green Street Advisors, the concentration of JBG in Crystal City has increased its stock despite a soft office market for the area in general.
JBG's Crystal City funds make it "the most" direct "way to play the Amazon lottery among office REITs," the report said.
The sale price growth in residential properties in 10 of the counties on Amazon's short list increased 7% year-over-year in July compared to a 4% increase in July 2017, according to Realtor.com. (The website is operated by News Corp, owner of The Wall Street Journal, licensed by the National Association of Real Estate Agents).
Pittsburgh's selection as a finalist helped boost a market that had already attracted the interest of investors, said David Cunningham, a retired firefighter and rental property owner in the Hazelwood neighborhood, which is near an old production site. steel considered a possible location of Amazon.
Mr. Cunningham said he receives many more calls from interested buyers since Amazon announced the finalists, and the offers have never been higher. Amazon "cleared the dust of Hazelwood," he said, adding that there are other factors, such as proximity to universities and the city center.
Other searches at high-profile technology venues have triggered a wave of real estate purchases. Uber Inc. purchased the former Sears building in Oakland, California, in 2015 and converted it into a 356,000 square foot office space, Uptown Station, which was planned as a new headquarters for the carpooling company. It was a great victory for Oakland, which was beginning to attract big tech employers from San Francisco and Silicon Valley. The investors followed.
Uber sold the building for approximately $ 180 million in 2017, without ever moving, during a year plagued by scandals. However, many other investments in Oakland have paid off, as the area has continued to grow.
Erick Quay, who runs a hedge fund in New York called Quay Capital, plans to invest within the first six months of an Amazon ad. The prices of the bets will not move much immediately, and he said he would stop investing in the winner if he does not find the right opportunity.
Craig Kinzer believes that playing at Amazon headquarters is too risky. The founder of the Kinzer Partners real estate firm said he heard a speech by Mr. Copley from CityBldr and found it "convincing". But finally he refused to invest.
"Real estate is local," he said. "It can be a national company, but ultimately it's about really understanding what's on the ground at the local level."
Write to Shayndi Raice in shayndi.raice@wsj.com and Keiko Morris in Keiko.Morris@wsj.com
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