When a new business moves into town, it is generally something Philadelphians want to celebrate. After all, especially if the business is offering high-paying jobs, it may mean more people coming in to the city who will have plenty of money to feed in to the city’s economy.
What some might not realize, however, is how a big, lucrative company can impact the prices of residential real estate when the company moves into town. Prices tend actually to increase in these sorts of situations, meaning some residents or would-be residents of the city are going to get pushed out of the market.
Take, for example, the case of the Internet retailer Amazon, which has been considering Philadelphia as a possible site for another headquarters, meaning lots of high-paying management and tech jobs. While it may seem like a great thing all around, the city in which Amazon is currently headquartered has seen a spike in real estate prices in both the commercial and residential sectors. Prices in that city have jumped 67 percent since 2010, and experts do not believe that experience is unique.
In fact, experts who study the housing market have suggested that when a local economy takes in additional technology works, there is a corresponding increase in housing costs. Specifically, for every one percent increase in the number of tech employees, prices go up by about one-half of a percent.
While some have suggested the solution is for cities to be sure some of the economic benefits a new business brings will go to improving the city, the reality is that businesses often go to the highest bidder in terms of tax breaks and other incentives. The good news for sellers is that if new business comes into Philly, the seller’s market this blog has discussed will likely continue.
Source: The Philadelphia Inquirer, “Beware, Philadelphia: Amazon could drive up housing prices,” Caitlin McCabe, Sept. 19, 2017.