By now, you’ve read a dozen articles on Amazon’s search for a city to house its new headquarters (HQ2). At Compound, we’re following this story closely because of the impact it will have on the selected city’s residential real estate market. According to Amazon’s RFP, Amazon will hire up to 50,000 new full-time employees at the HQ2 with an average annual total compensation of over $100,000.
What does this mean for real estate prices in the winning city?
Well, it’s simple supply and demand. Real estate prices correlate directly to employment growth, population growth and wage growth. As each of these increase, demand for housing rises, which increases real estate values.
With Amazon’s announcement coming in the next few months, we wanted to speculate on which city will win, so we strapped on our data scientist hats and did some number crunching.
We took the 20 finalist cities and scored each one based upon the criteria that Amazon cited in its RFP:
Metropolitan areas with more than one million people (Population)A stable and business-friendly environment (Business Environment)Urban or suburban locations with the potential to attract and retain strong technical talent (Quality of Life)Communities that think big and creatively when considering locations and real estate options (Site Availability)
We weighted each of these criteria based on some clues that Amazon has hinted at since the release of the RFP and today. And then, we developed a score for each. Based on our analysis, the HQ2 headquarters will be in:
According to our methodology, Austin stands a 19% chance of winning.
Our top five rankings are (with our predicted odds in parentheses):
1. Austin (19%)
2. Dallas (13%)
3. Denver (11%)
4. Miami (10%)
5. Philadelphia (7%).
Our top five picks differ greatly from the real betting odds, as published by Oddshark.
If you’re considering placing a bet, the current 75-1 on Miami look like the best odds to us. (Of course, in the U.S. this type of speculative bet is illegal.)
But, wouldn’t it be great if you could speculate on a specific market by investing in the local real estate market?
We think that would be cool.