The tech sector has been the backbone of the greater Seattle real estate market over the last few years. Seattle has seen great support from Amazon while Microsoft and Boeing have held ground in Bellevue and peripheral areas. The only area somewhat neglected would be Tacoma. After Russel Investments picked up and moved from Tacoma, a lot of their employees found an overvalued home on their hands with a two hour commute to Seattle.
Seattle’s Tech Growth
There is uncertainty around Amazon’s future and how the recent surge of employees at Amazon will play out in the local market. To begin, the outlook looks good. Forbes recently ranked greater Seattle and Bellevue one of the best cities for tech jobs in the US. Forbes explained how the Seattle metro, alone, has seen a 12% increase in tech jobs in the last two years while the overall Puget Sound area has seen a 43% increase in tech employment.
This growth beat out Silicon Valley and is representative of the potential that Seattle has in the tech sector. From a real estate perspective, this is also important for alluring professionals with higher earning potential. Tech job seekers will start to see Seattle and Bellevue as their first choice for employment. Thus, we could see a lot of new buyers who are relocating from outside the US.
Amazon’s Roll in All This
Amazon has been leading the charge recently with a hiring surge that made headlines on the Wall Street Journal. Specifically, the number of Amazon employees grew by 73% from 28,000 to 65,000. All of these new employees won’t obviously be working in Seattle or even in WA. According to Forbes, Amazon has opened an additional 17 shipment centers and is projected to open an 13 more this year.
There’s also the question of whether Amazon is overextending itself. Amazon’s operating margins were 1.5% for the first quarter while they were 3.3% in the first quarter of 2011. Thus, Amazon is hiring more employees but making a smaller profit.
This does tell us that Amazon is confident in their ability to grow and are planning accordingly. This growth will prove beneficial to Seattle as Amazon hires on additional marketing and sales executives. These type of professionals foster a stronger real estate market and provide an impetus for new construction.
Is Amazon’s Confidence Unfounded?
As the Seattle real estate market will be directly correlated with Amazon’s success, we want to have a firm grasp on the future of the company. Based on hiring reports, confidence is high at Amazon. Bloomberg.com painted a different picture of Amazon and one that involved shrinking operating profit margins.
According to Bloomberg.com, Amazon is sacrificing profits for growth. This is nothing new as Amazon’s Kindle Fire was priced at a loss but with the certainty of profits from Amazon’s services for the device.
Moving forward, Amazon will likely continue to do well as a business. However, what direct impact that growth will have on Seattle real estate is vague. At this point, much of Amazon’s growth results in shipment and fulfillment centers across the US. Built around an efficient model, it’s unclear how much of Amazon’s growth will result in additional Seattle employees. However, if Amazon shrinks, we can hedge our bets that Seattle real estate will suffer.