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Would a new Amazon headquarters make housing even more expensive in LA?

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The company could bring its massive HQ2 to Los Angeles

Many Amazon employees would likely buy a home—not rent—in LA.
Liz Kuball

Los Angeles is one of 20 cities still in the running to land a second headquarters for Seattle-based tech giant Amazon. Should local leaders be worried about how the arrival of the massive facility—and the high-paid workers who would staff it—would impact LA’s already high housing costs?

Yes and no, says a new report from CoStar Group. The real estate analyst finds that the impact of the new headquarters would be very slight in large urban areas like Los Angeles and New York.

The complex is expected to create more than 50,000 jobs, but LA is big enough that the economic impact of those new workers would be more muted than in smaller candidate cities like Raleigh, North Carolina, and Nashville, Tennessee.

That doesn’t mean that an Amazon headquarters in Los Angeles wouldn’t have any effect on the cost of housing. CoStar estimates that the facility would drive up rents by a little under a quarter of a percent each year, meaning that rental prices 10 years after its arrival would be about 2.3 percent higher than if it hadn’t been constructed.

Local businesses might also see costs rise slightly; the price of an office lease could rise nearly 3 percent in 10 years, and retailers might expect to pay just under 2 percent more for storefronts over the same time period.

Those price increases aren’t nothing, but they pale in comparison with what could happen in smaller cities. In Raleigh, for instance, CoStar expects that Amazon’s arrival could drive up the price of an apartment by nearly 12 percent over the next 10 years. That’s a difference of hundreds of dollars per month for renters there.

But the company’s impact on the neighborhood where the new headquarters is established is likely to be far higher.

“Amazon’s arrival could transform a submarket or neighborhood,” says CoStar economist John Affleck, pointing to the impact of Google’s arrival in New York’s Chelsea neighborhood as a potential template of what to expect.

Locally, residents of Venice and surrounding areas have complained about the impact that tech companies like Snapchat have had on real estate prices and neighborhood culture (though Snapchat’s parent company, Snap, is moving out).

Because of the secretive nature of LA’s bid for Amazon’s new headquarters, it’s not entirely clear where the tech company would move in. Likely sites include the Pomona Fairplex and the former Rocketdyne plant in the San Fernando Valley.

Real estate prices in both areas are already on the rise, and Affleck predicts that homebuyers might be most affected by Amazon’s arrival.

“Many Amazon employees will likely buy a home rather than rent,” he says. That could ease the impact of the headquarters on the rental market, but heat up competition among those shopping for a house or condo. “Get ready for higher home prices,” Affleck says.