With Chicago now one of 20 major metro areas making the cut as finalists for Amazon’s second headquarters, area homeowners might wonder if landing Amazon would be simultaneously a blessing and a curse.
The online retailing behemoth would bring an economic windfall to any metro area it chooses with its second headquarters, dubbed HQ2, which could span as much as 8 million-plus square feet of office space and spawn as many as 50,000 well-paying jobs along with $5 billion in investment over the next decade and a half.
But would such a rapid influx of professionals also price scores of Chicagoans out of their neighborhoods? Experts say no.
With all the usual caveats applying — even if Amazon chooses Chicago for HQ2, no one yet knows which part of the city or suburbs the company would select — economists were quick to acknowledge that while Amazon’s arrival would be a nice stimulant for Chicago’s housing market, it would hardly turn the region, or even parts of it, into a place where soaring rents and stratospheric home prices are the norm.
Aaron Terrazas, a senior economist for Zillow, observed that the Chicago area’s real estate market likely would be able to adjust fairly quickly to the demand shock that would accompany winning HQ2.
Although the national housing market has rebounded strongly since the Great Recession, with prices about 5 percent above the pre-crisis peak, Chicago’s prices remain below their pre-crisis peak, he said.
“Chicago has lagged the housing recovery,” Terrazas said.
In addition, those worried about being priced out of Chicago can take comfort in the fact that the city isn’t especially limited by space constraints. Plenty of land in the city and suburbs is ripe for residential development.
“A lot of this depends on where the headquarters would go,” Terrazas noted, but the question is “how quickly can supply respond.”
In tech hubs including Seattle, the San Francisco Bay Area and even New York City, it has been almost impossible for supply to keep up with a tremendous pace of growth, Terrazas said.
Seattle, where Amazon is currently headquartered, “is a very supply-constrained environment, and has very restrictive building codes and is surrounded by water on multiple sides. So it’s difficult and costly to add housing,” Terrazas said. “And, Seattle has an underdeveloped public transit system. None of that is the case in Chicago. Chicago has a well-developed transit network and is not nearly as supply-restrictive as Seattle.”
Ralph McLaughlin, chief economist at Trulia, tends to agree. Because Chicago’s real estate market has lagged those in other major metro areas, HQ2 would be a terrific lift but would hardly overheat the area’s housing market, he said.
“I actually think the Chicago housing market, which has been doing OK but has suffered from more broad population loss in the region, actually could (enjoy) a nice shot in the arm from Amazon, a nice boost to Chicago real estate,” he said.
“The real estate market in Chicago hasn’t been floundering by any means, but compared to other markets, it has been a bit anemic, and a boost of 50,000 new jobs could certainly buoy up the market a bit.”
McLaughlin conceded that if HQ2 is awarded to Chicago and then a site is selected near the downtown area, “demand could outstrip supply” for a time, given how long it could take for added multifamily housing to be constructed. But it’s also possible that the opposite would be the case — that Amazon’s HQ2 would take longer to build than the time to erect new residential housing nearby.
In Seattle, where Amazon has become frustrated with its own current office space limitations, residents in inner Seattle have become similarly annoyed by spiking housing prices and rents.
Amazon “really pushed up the (housing) market” in Seattle, McLaughlin said. “It was hard to expand supply in that market.”
The dynamic in Seattle was different when Microsoft came of age, Terrazas said. The software giant, which has been headquartered in the Seattle suburb of Redmond since 1986, built its campus at a time when the suburban office market was far more common.
Bob Goldsborough is a freelance reporter.