Search for Amazon HQ2 Sparks Real Estate Speculation
Lots of real estate investors are ready to buy real estate in any city
Amazon.com
Inc.
picks for his second headquarters. Some are not waiting.
Speculators discover funds to invest in real estate near the winning place, wherever it may be – or collecting cash obligations so that they can beat immediately after the winner has been announced. Others buy up shares in a real estate company that owns much of the property in a northern Virginia city, which many consider a leading competitor.
These investors say that focus on potential Amazon sites is a way to invest in fast-growing areas, especially those with a growing pool of technological talent.
"HQ2 is guaranteed to meet three criteria: Technical growth in jobs, technical growth in jobs and technical jobs," said Bryan Copley, co-founder of Seattle-based Real Estate Startup CityBldr, with a stenography for Amazon's second headquarters. "Every other city from the point of economic development uses three baseball balls, and HQ2 uses a metal bat."
Mr. Copley claims $ 1[ads1]00 million for a fund that wants to buy housing in Seattle, Los Angeles, and which city wins Amazon's second headquarters.
The Seattle-based online giant said last year that it should invest $ 5 billion in a second headquarters that could employ up to 50,000 people over two decades. After 238 cities and cities were used, Amazon reduced a list to 20 finalists in January.
The list of 20 finalists includes cities like New York and Los Angeles, as well as budding metropolitan areas that attract technical talent such as Denver, Pittsburgh and Nashville, Tenn.
Rush to invest in the winning city is a result of Amazone's unorthodox approach to the search for a second home. Amazon chose a very public process, allowing room for speculators to place their bets. Generally, companies keep calm as long as they can, "says economic development analysts.
Since the metro areas pitcher specific locations and even suggest certain characteristics of Amazon's new headquarters, it's as though they have designed maps for real estate buyers to target.
A view of the US Capitol in September from across the Potomac River in Arlington, Va. Its Crystal City neighborhood has a shot of winning Amazon's bids.
Photo:
Saul Loeb / Agence France-Presse / Getty Images
Mr. Copley says with proprietary software that he can choose the most underutilized features in any city. It will take him five minutes to limit the best 500 multifamily investments when Amazon announces a winning city, he added. Then he will make an offer for many of them and hope he can get the least one to bite.
Others place their wagers now. Ryan Dobratz, co-responsible portfolio manager for the Third Avenue Real Estate Value Fund, believes that the greater Washington, DC area has the best result of winning, especially the Crystal City area in Arlington, Va.
His company has bought shares of
JBG Smith Properties
a property investment trust that owns a lot of commercial property near the Crystal City area that northern Virginia officials suggested for Amazon's second headquarters. JBG refused to comment.
JBG's concentration in Crystal City has probably driven its share higher despite a soft office market for the total, according to a report from research company Green Street Advisors.
JBG's Crystal City companies make it the "most" direct "way to play the Amazon lottery among REITs."
Sales price growth of residential properties in 10 of the Amazon Amazon map listings increased 7% year-on-year in July compared with a 4% increase in July 2017, according to Realtor.com. (The site is run by News Corp, owner of The Wall Street Journal, licensed by the National Association of Realtors.)
Pittsburgh's choice as a finalist helped increasing a market that had already withdrawn investor interest, said David Cunningham, a retired firefighter and owner of rental properties in the Hazelwood area, located near a former steel production site, considered a possible Amazon location.
Mr. Cunningham said that He received many more conversations from interested buyers since Amazon announced the finalists, and the offers have never been higher. Amazon "blew the dust of Hazelwood," he said, adding that there are other f actors such as proximity to universities and centers.
Other high-profile technology headquarters searches triggered a real estate store. Uber Inc. bought the old Sears building in Oakland, California, in 2015, making it a 356,000 square foot office space, Uptown Station, which was planned as a new headquarters for the trip. It was a big win for Oakland, which began attracting major technology employers from San Francisco and Silicon Valley. Investors followed.
Uber sold the building for around 180 million dollars in 2017 without going into a scandalous year. Nevertheless, many other investments in Oakland have paid off since the area has continued to grow.
Erick Quay, who runs a hedge fund in New York, called Quay Capital, plans to invest in the first six months of an Amazon announcement. He suggests that the prices will not move much right away, saying that he would continue to invest in the winner if he did not find the right opportunity.
Craig Kinzer believes that playing Amazon's headquarters is too risky. The founder of the real estate company Kinzer Partners said he heard a tone from CityBldrs Mr. Copley and found it "convincing." But he eventually refused to invest.
"Property is local," he said. "You can be a national company, but in the last round it's about really understanding what's on the ground locally."
Write to Shayndi Raice at shayndi.raice@wsj.com and Keiko Morris at Keiko.Morris @ wsj.com
