Is Amazon the Reason Rents Are Going Up?
Yes, It Is
It's hard to know how many of the people moving into Seattle's expensive new apartments are Amazon employees. We don't even know how many Amazon employees there are—in the past, the company has refused to tell reporters how many people it employs in Seattle. (As of press time, an Amazon spokesperson responded to a question about the size of its workforce with another question about the "angle" of this story. We said it was about real estate and haven't heard anything back yet.) But after Amazon's stunning purchase of 2.7 million square feet of space in South Lake Union last December, analysts including Kate Joncas of the Downtown Seattle Association were guessing around 10,000 Amazon employees in Seattle and counting.
Property managers in South Lake Union, who would speak only if they were not identified, say they've heard Amazon recruiters bragging that they'll bring in tens of thousands more to live in the city—many of them young college graduates who haven't yet developed a taste for the suburbs. "They paid Vulcan a billion dollars for space they're already occupying?" says economist Matthew Gardner of December's mammoth purchases. "If you take 140 square feet per employee and divide it up, that will give you a number of warm bodies Amazon is planning to bring to Seattle."
That number—2.7 million divided by 140—is around 20,000. And how are these newcomers influencing the city's rental prices?
Between March of 2009 and March of 2014, Gardner says, rental prices in the Belltown/South Lake Union neighborhood (which are considered a single market) have increased by 27.1 percent. On Capitol Hill, rents have jumped 31.5 percent. "Is Amazon's expansion an influence?" Gardner says. "Yes, it is. Any leasing agent in the area would say yes." And because of the way rents are headed in those areas, he adds, "It's going to influence a migration to other proximate, submarket areas."
The Amazon effect is being felt beyond the apartment-rental market. Bidding wars between home buyers push up the prices of houses, which "are a fundamental driver for determining rents" according to Nate Clement, business manager of the real-estate site Estately.com. (Full disclosure: Clement is my brother-in-law.) "We're facing the same nationwide conditions that have created a low supply of homes for sale, and locally there's certainly additional demand from an influx of buyers and renters coming for Amazon jobs," he says. "It seems bound to push prices higher and faster than elsewhere."
Barry Blanton of the Blanton-Turner property management company put it more bluntly in a market report last spring: "The in-city Seattle market is booming with the job growth of Amazon; $3 is the new $2."
Mike Scott of Dupre + Scott Apartment Advisors says it's a little difficult to pinpoint exactly how significant the Amazon effect is—partly because Amazon is so secretive, partly because of the recession between 2008 and 2010—but nobody denies that it's driving rents up.
That's great news for property owners who are vying for Amazon dollars. Building managers and lease agents at all the apartments contacted were extremely cagey—routing repeated calls for comment to corporate offices in Dallas or at Vulcan, Inc. (which might as well be Dallas). None of those calls were returned. But one property manager at Stack House in South Lake Union, which is also managed by Vulcan, mentioned a "preferred employer" program that waived fees and deposits for Amazon workers because the company "creates a high volume" of renters.
Gardner suspects we're reaching a peak in rents that will fall as the apartment market settles out and today's college graduates who want to live close to the action get older and move to the suburbs. "At some point," he says, "Amazon employees will decide family is important and will think about moving out."
What will the rest of us do in the meantime? Gardner says the only real solution is getting our mass-transit act together. "You already see these historic markets—Columbia City, Georgetown—getting a life of their own because accessibility is getting better," he says. If we can improve transit, we can figure out affordable-housing solutions beyond Central Seattle, but we're not moving fast enough. "Transit-oriented development is going to answer this question," he says, "if we get it going. We can wax poetic about light rail, but when? 2024?"
He adds that the various affordable-housing credits—such as the multifamily property-tax exemption—aren't working as well as they should. Andre Chaisson, who is studying film and began looking into the Amazon effect on Seattle's rents for a documentary project, is a case in point. He and his wife, who've never had a problem qualifying for an apartment before, recently wanted to move out of their Green Lake place and couldn't find anything. "We make too much to qualify for low-income housing, but then we can't really get anything else in the city," he says. "Is Seattle going to be affordable to people like us?"