GHC Thematic Report: Assessing the "Amazon Effect" in Northeast Ohio
One of the most interesting housing trends that emerged as a consequence of Covid-19 was the number of unexpectedly hot markets across regions in the U.S. that aren’t typically in high demand.
Amidst a global pandemic, it can be assumed that many markets would experience a downturn—and many did.
But in small cities as well as suburbs within an hour of major metro areas, there has been strong regional growth that is expected to continue. In particular, the Northeast real estate market remains strong as Americans put more stock into affordability and livability.
In a recent article by Forbes, Cleveland was ranked fifth among the top housing markets to watch in 2021. The list, which also included cities such as Boise, Idaho and Buffalo, New York, comprised data from Zillow, including changes in home values over the last five years, and from Redfin, including the number of home sales and available inventory.
Americans want housing that offers desirable amenities — such as leafy-green neighborhoods, larger homes, and walkability — in a more affordable package.
Businesses, too, want to expand in areas that are low-tax, pro-growth, and comprised of an educated workforce. Rather than remaining in coastal markets where rents are high and operations costly, businesses will continue to seek out low-cost alternatives in suburban locales.
Enter: Amazon.
In 2011, the ecommerce giant first entered Ohio and has since added roughly $2.5 billion to the state’s gross domestic product. The company has also invested more than $5 billion in the state through customer fulfillment, cloud infrastructure, and compensation to employees.
Along with its Northeast Ohio locations in Glenwillow and North Randall, Amazon’s massive fulfillment center in Euclid, which opened in September of 2019, has proven to be hugely beneficial to economic development.
Euclid Mayor Kirsten Holzheimer Gail noted that the entire project exceeded projections on the number of jobs — 2,000 instead of 1,000 — and facility size, 850,000 square feet instead of 650,000.
From an economic standpoint, the “Amazon Effect” in cities like Euclid has helped stimulate boosts in local businesses, including retail outlets and restaurants, and promote growth in additional city projects, such as road improvements and controlled traffic flow.
Moreover, the company’s rapid expansion is directly correlated to surges in housing demand, leading to higher home prices. In Seattle, for instance, where Amazon is headquartered, the median selling price for single-family homes is tenth highest in the nation. In 2016, the median price in Seattle was $412,000 compared to the national median of $236,000, with prices soaring by 10.7% (the fastest growth rate among the 20 cities covered by the S&P CoreLogic Case-Shiller Home Price Index).
There is no doubt that the “Amazon Effect” is a great catalyst for success in terms of economic development and growth. But real estate must also evolve to meet the growing demand for workforce housing in areas where Amazon, and other major industrial players, are creating new jobs at a rapid-fire pace.
In order to accommodate the growing number of full-time employees at these fulfillment centers, workforce housing will be in high demand across small cities in the Rust Belt, like Euclid. In particular, cities such as Euclid are increasingly appealing to those in the workforce seeking housing, with great amenities like the Cleveland Metroparks and access to Lake Erie on offer.
With another fulfillment center slated to open in Akron on the former Rolling Acres mall site, Amazon’s appetite for millions of square feet of warehouse space in Northeast Ohio is likely to shape the local market for housing for years to come.