Correction: An earlier version of this article incorrectly stated that Derrick Swaak believed rising interest rates may motivate homeowners to sell and add more housing inventory to the market, easing the overall demand and housing prices as a result. In actuality, Swaak stated that rising interest rates may cause homeowners to avoid selling, which would increase demand and housing prices. The language of the article has been adjusted to reflect this correction.
The possibility of Amazon and Apple selecting the Washington, D.C. metro area as their second homes brings significant change to the region on multiple fronts, with the City of Falls Church and surrounding areas positioned to withstand the surge in residents and possible spike in demand as well as benefit from their inclusion in the local ecosystem.
For those who are unaware, here’s the skinny: Amazon’s HQ2 has been the hottest ticketed item on the national market for the past nine months, with last fall’s original list of 238 hopeful sites being chopped down to 20 in early 2018. Three spots in the D.C. area made the first round of cuts, with the District, Northern Virginia and Montgomery County, Maryland all jockeying for 50,000 jobs, $5 billion in direct investment and $38 billion in indirect investment that the company has promised to bestow upon the winner.
Conversely, Apple has been hush-hush about its own selection process. While the local sites proposed include Tysons Corner, Alexandria’s Eisenhower Avenue as well as Dulles and Crystal City locations Amazon has also eyed, the company hasn’t given any indication where it will build its new headquarters and provide 20,000 jobs to the area. But both tech giants plan to decide where to move before the year ends.
The region meets many of the pair’s prerequisites — from an educated, tech-focused workforce to mass public transit and access to international travel — so now pundits are starting to tease out the pros and cons of either’s entry into the residential and business landscape.
“It’s difficult to judge. Companies want to make their new headquarters sound as attractive as possible, but it should be taken with a grain of salt,” Ryan Bourne, chair for the public understanding of economics at the libertarian CATO institute, said. “Congestion by way of new jobs coming to the market drives up housing demand, so we can’t pretend those are all positive impacts, but a lot of those described as ‘cons’ are what you have when there’s a strong economy anyway.”
Friction caused by housing affordability shouldn’t extend in perpetuity as long as local communities respond with proper policies. According to Bourne, Northern Virginia as a whole absorbs influxes of new workers better than most regions, and the area’s home prices are comparable to the Seattle and Northern California areas where Amazon and Apple, respectively, are migrating from. Though in heavily developed areas, such as the possible D.C. site for Amazon, the Alexandria site for Apple and the Crystal City site for both, affordability spikes will be felt more acutely than in exurbs of the Dulles Technology Corridor or Montgomery County.
Factoring into the affordability equation is inventory keeping pace with demand. According to Derrick Swaak, a partner at TTR Sotheby’s International Realty firm in McLean, the number of home listings have gone down 20 to 25 percent in the past two years, despite stable demand. But with interest rates climbing back up sellers may be less willing to step out of their mortgages to incoming residents. That would keep inventory tight in the market and pressure housing prices to rise. Developers and the construction industry in general will see a boom in activity, although it’ll be in the face of intensifying demand.
Chairman of the board for the Northern Virginia Association of Realtors, Lorraine Arora, counterbalanced Swaak’s take by noting that if either Apple or Amazon were to relocate to the area, employees from the companies wouldn’t flood the market all at once but show up in waves instead. Arora also mentioned that Amazon had recently approached the Virginia Housing Development Authority about mortgage estimates and affordability in Northern Virginia. Principal broker for Silver Line Realty Group in Tysons, Tracy Comstock, added that the only precedent for such a move was when Hilton relocated from Beverly Hills to D.C. roughly 10 years ago, and then only a few hundred workers came. Still, per Comstock, the employees typically rented for a year before buying a condo near their workplace.
Even with the big-picture issues at stake, the City of Falls Church finds itself in a comfortable spot. City Council member Ross Litkenhous, who works as a vice president of strategic development at real estate analytics firm Altus Group, believes that Falls Church’s direct abstinence from the HQ2 sweepstakes puts it in a win-win situation. The City avoids having to account for possible fiscal and budgetary constraints that it would if it was planning to host Amazon in the city proper and can judiciously market itself to newcomers as forward-thinking locality inside the beltway.
Both Litkenhous and Bourne were shaky on how precise the tens of billions of dollars in indirect investment from either Apple or Amazon is. Some of it is sure to come in the form of construction for new homes and the actual headquarters, but that projection was intended to describe a long-term effect. Bourne referred efforts to nail down a prediction as a “mug’s game,” and Litkenhous thought that number was contingent on too many factors at the local, state and federal level to be confident in it. But he echoed the local realtors that either company’s addition would be significant for the region, with Litkenhous singling out the resource for local students and occupational opportunities down the road.
“The future job market for our children will be technology centric. Computer programming, robotics, engineering, social cue and language learning for AI and even vocational jobs that build and repair technological components are all on the horizon,” Litkenhous said. “An injection of capital and demands for highly trained employees centered around a tech company like Amazon or Apple will enhance and drive better education around technology in our schools whether public or private, primary, secondary and beyond.”
For now, the effects of either company are still speculative. Litkenhous predicted in a guest commentary for the News-Press last month that Crystal City is the frontrunner for Amazon at the moment because of its large amount of fallow office space owned by JBG Smith in the area. Moving there would allow Amazon to work with a developer that controls a sizeable chunk of that submarket and permits them to work with a private entity that can be more flexible and innovative to the company’s needs. As it pertains to Apple, recent reports have shown the company is leaning toward a relocation to North Carolina’s Research Triangle, though nothing is set in stone at the moment.
To Bourne, Amazon’s possible entrance into the D.C. market would be a sign that the company is looking to be closer to a federal government that’s taken an interest in regulating online enterprises as of late (with Amazon’s lobbying efforts doubling since President Trump’s election).
On a separate note: Bourne cautions about the precedent the auction atmosphere of HQ2 presents after bids from a few of the remaining jurisdictions revealed extensive tax incentives.
“Most of the economic literature on these incentives is clear — these kind of company-specific packages don’t tend to be good from a public finance perspective,” Bourne added. “What’s more important is having a good business environment.”
As the decision becomes more discernible throughout the year, the City won’t lose its optimal spot. According to Litkenhous, Falls Church is in the driver’s seat. It can be determine how it embraces Amazon and Apple as the City is lean enough to adapt to whatever path it chooses. But, of course, this all remains subject to the both companies’ final selections by the end of 2018.