Amazon Archives » Larry & Kathy Reichle

Remote work may trigger a ‘suburban boom’ in real estate

May 29, 2020 by Kathy Reichle Leave a Comment

SEATTLE – With large tech companies like Amazon and Microsoft extending their work-from-home policies until the fall due to the COVID-19 pandemic, economists are predicting that real estate trends might shift and cause a “suburban boom” in the housing market.

In a newly released survey, the Seattle-based Zillow Group found that 75% of Americans working from home due to COVID-19 would prefer to telecommute at least half of the time once the pandemic subsides, and 66% said they would consider moving if their job allowed them to continue telecommuting.

These trends in the job market are leading economists to predict that post-pandemic housing preferences may move away from dense metropolitan areas due to the virus and more lenient work-from-home situations.

“Moving away from the central core has traditionally offered affordability at the cost of your time and gas money. Relaxing those costs by working remotely could mean more households choose those larger homes farther out, easing price pressure on urban and inner suburban areas,” said Zillow senior principal economist, Skylar Olsen.

As people reconsider housing options in conjunction with remote work, the amount of space desired by home shoppers will also shift. Zillow predicts that larger homes, especially those with extra rooms or home offices, will be in high demand.

Additionally, the growing affordability crisis in cities may also have a major impact on the suburban real estate surge. But proximity to a metropolitan center is still crucial. Redfin CEO Glenn Kelman predicted that people will move to nearby suburban areas like Tacoma to be able to make office visits in Seattle when necessary.

“More permissive policies around remote work and a rising wariness about close quarters will likely accelerate that trend,” Kelman said in a May earnings call. “More people will leave San Francisco, New York and even Seattle, some for nearby towns like Sacramento and Tacoma that are close enough to support a weekly office visit, others for a completely remote life in Charleston, Boise, Bozeman or Madison.”

According to the Pew Research Center, only 7% of American workers had the option to telecommute as a benefit prior to the COVID-19 pandemic although over 40% of jobs could be performed remotely. With more employers seeing that remote work is a possibility, this gap may narrow once the pandemic is over.

However, a shift to living further out of the metropolitan core is not without its drawbacks, which is why Olsen and other economists do not predict that the market surge will extend to more rural areas.

“However, [moving way from cities] means they’d also be moving farther from a wider variety of restaurants, shops, yoga studios and art galleries,” said Olsen. “Given the value many place on access to such amenities, we’re not talking about the rise of the rural homesteader on a large scale. Future growth under broader remote work would still favor suburban communities or secondary cities that offer those amenities along with more spacious homes and larger lots.”

by Callie Craighead | SeattlePI.com

Report: Amazon’s rapid expansion in Bellevue could reach 4.8M square feet and power ‘spectacular’ growth for Seattle suburb

October 24, 2019 by Kathy Reichle Leave a Comment

A sketch of what Amazon’s big new tower in Bellevue, Wash. might look like. (NBBJ Sketch)

Amazon spent most of the last decade gobbling up every available piece of real estate in Seattle, helping power a building boom in the city. But with signs pointing to Amazon cooling on its hometown, a new report lays out how the tech giant’s expansion in nearby Bellevue could galvanize a level of growth over the next couple years that took decades to achieve in the past.

Just two years after opening its first office in Bellevue, Amazon has leased three additional office projects, and it is planning to build a tower — or two —on a high-profile site it bought earlier this year. Combined, those sites could total nearly 2.9 million square feet for Amazon, per the report from real estate firm Broderick Group — and that could be just the beginning.

Broderick Group pointed to three additional properties Amazon has been linked to, bringing its potential footprint in the city to 4.8 million square feet. The report came with a disclaimer that it is just speculating on the additional offices, which total 1.9 million square, and no leases have been signed.

Here is a look at everything Amazon has leased so far in Bellevue, and the properties Broderick Group speculates Amazon could take:

The firm estimates that all this activity could bring upwards of 15,000 or more tech workers to downtown Bellevue over the next few years. And that doesn’t even take into consideration rapid growth from Facebook and others in the city.

Downtown Bellevue has been on the rise for the last few decades, powered by expansion from local and global firms, many of them in the tech industry. But, Broderick Group notes that Amazon’s appetite for space could set off an unprecedented period of growth, with the downtown office market ballooning in size by as much as 40 percent over the next few years.

“Given it took 30 years (1990-2019) for the downtown Bellevue market to develop a total of 5.8M (square feet), Amazon’s expected growth of 4.2M (square feet) in a period of 5 years is staggering,” according to the report. “The result will bring not only significant office growth, but residential developers are also lining up to supply the next wave of Amazon employees with new multi-family housing inventory. The positive impact to the Eastside economy, and to downtown Bellevue in particular, will be nothing short of spectacular.”

Amazon’s real estate expansion in Bellevue kicked off a couple years ago but went into overdrive in 2019. Following a contentious debate over a “head tax” on top employers in Seattle, Amazon confirmed plans to back out of one of its most high-profile buildings and turned its attention to Bellevue.

In April, Amazon said it planned to relocate its entire Seattle-based worldwide operations team to Bellevue by 2023. The new tower Amazon is planning atop a future light rail station at 600 Bellevue will be home to many of these employees when the move is done.

Nat Levy is a staff reporter at Geekwire covering a variety of technology topics, including Microsoft, Amazon, tech startups, and the intersection of technology with real estate, courts and government. Contact him at nat@geekwire.com and follow him on Twitter at @natjlevy.

How Best To Invest In Real Estate In The Northwest

May 7, 2019 by Kathy Reichle Leave a Comment

The Northwest is one of the fastest-growing parts of the country, with home prices soaring as the supply of housing hasn’t kept up with demand.

Investing in such a rapidly changing environment is a challenge because we know from experience that such surges in growth never last. At some point demand will ebb, supply will increase, and prices (and rents) will level off—or even fall.

The area around Seattle has seen the most spectacular growth because of the expansion of the information technology sector—Amazon, Microsoft and many others. This sector now provides 6% of all local jobs, grew 7% in the past year, and provides 23% of local wages because of the high average annual pay, over $250,000.

Oregon and Idaho have had growth on a scale that’s only smaller in comparison, but that leads to similar problems for investors.

The best way to assess these markets is to first see where they are in the price cycle—that is, are they already over-priced? Is there a greater risk that prices will at some point actually come down? If so, your investment will need to be defensive as much as an opportunity for good returns. The table shows that in Seattle, Salem, Bend and Boise, prices are already more than 25% higher than the ‘income’ price. This means they’re over-priced. Another half dozen markets are in the 15% to 25% range, and at the rate prices increased in the past year they’ll soon be there as well.

Over-Priced Markets

If you plan to buy and hold a rental property for the next 10 or 20 years, you don’t care too much what will happen with home prices in the next five years—even if they do go down. Eventually they recover, though the recession showed that it can take a long time. Your greater concern is to have renters in your property if the local economy does go downhill. This means you need to invest in a price range where there are lots of renters right now, what we can call the “sweet spot.” This varies from market to market and from zip code to zip code, so you must do some homework with Census data.

You want to avoid high-end rentals in over-priced markets, because they’re most vulnerable in a down economy; don’t just buy a single-family home and rent it out at a high rate unless you also plan to flip it in the next few years. Instead, split a single-family into several rental units, which will take time and money but will give you better returns in the long run; or you can invest in apartments.

The table shows that the job situation in Seattle is very strong—jobs up 3.5% in the past year—so if you invest now it’s probably not yet the peak of the market. In Boise, on the other hand, job growth is now slower than six months ago and the very sharp increase in prices points toward a riskier situation.

Moderate Markets

Portland is a former high-growth market that may come to a soft landing. Three years ago home prices were rising 12% a year, last year just 5%. With jobs still increasing over 2% a year, which means demand continues to grow, it’s most likely that prices will stabilize but will not fall. In these conditions, investors must be very careful about the price they’re willing to pay for a property and shouldn’t count on appreciation to add to their return. Rents, on the other hand, can be expected to rise slowly, along with income.

Kennewick is a good bet for investors, even though it’s a smaller market and therefore more volatile. Job growth has been good, home prices are close to the “income” price, demand is strong, and home prices are low enough compared to rents that single-family homes can be rented out directly.

Low-Growth Markets

Spokane, Idaho Falls, Billings, Cheyenne—despite the occasional surge in home prices, demand in these markets is driven by job growth, which has been low. This means that the location of your rental property is even more important than usual. You’ll want to be near medical centers, colleges, government offices, revived downtown areas. And because there probably hasn’t been much recent construction of attractive properties, it makes sense to buy inexpensive homes to upgrade into a higher rental/sales bracket.

Wrap-Up

You can successfully invest in any market, but your strategy may be different in each one. The Northwest has a lot of markets that are tricky right now because of a surge in prices; that just means you need to prepare more for the downside. Dynamic markets are a challenge, but that’s often where the best opportunities can be found.

Amazon Has Massive Expansion Plans For Seattle

March 15, 2018 by Kathy Reichle Leave a Comment

(RTTNews.com) – Amazon.com Inc. ( AMZN ) plans to grow its Seattle headquarters to almost 14 million square feet of office space, an addition of more than 2 million square feet from the last time the company updated its local real estate plans, the Seattle Times reported.

As Amazon continues its search for a second headquarters, the retail giant has increased its forecast for the size of its campus in Seattle by about 2 million square feet, the equivalent of three additional skyscrapers.

Amazon now occupies more than 10 million square feet of office space in Seattle, according to a tally the Downtown Seattle Association released in a report Monday and the company confirmed. The retail giant plans to have almost 14 million square feet upon the completion of current and planned construction.

Back in September, when Amazon started its search for its so-called HQ2, the company’s footprint stood at 8.1 million square feet, with plans to grow to about 12 million square feet. At the time, Amazon’s was already the largest presence of any company in a major U.S. city. The company, with more than 40,000 employees in Seattle, is the city’s largest employer.

Amazon has continued to scoop up real estate since, leasing all of the office space planned for a downtown skyscraper called Rainier Square, most of the Macy’s building, and two mid-sized buildings in South Lake Union.

Amazon’s voracious appetite for real estate, taken for granted in Seattle for most of the decade since the company announced its South Lake Union campus, has taken on a new importance after the announcement that it planned to build a second, “equal” headquarters somewhere else.

The company has said it plans to staff that campus with up to 50,000 workers, in a campus of up to 8 million square feet. Amazon hopes to staff HQ2 with its first employees next year.

The real-estate listing company Zillow surveyed dozens of housing experts and economists on what city they believe could land Amazon HQ2, the company’s $5 billion headquarters.

Atlanta, Georgia and Northern Virginia are their top picks.

The survey’s conclusions are similar to other HQ2 analyses, many of which have also pointed toward the Washington, DC area and Atlanta as top contenders.

Earlier this year, Amazon said that it selected the 20 metropolitan areas to move to the next phase of the selection process for the company’s second headquarters. The company planned to invest over $5 billion and grow the second headquarters to accommodate as many as 50,000 high-paying jobs.