The Amazon Effect On Bessemer

The announcement that Amazon will be building a distribution facility in the Bessemer area of Birmingham is big news. Many are hailing it as one of the largest economic developments in years.

As real estate investors, it’s important to know about large developments in our city. What will their effects be? Should we invest alongside them?

My research turned up more questions than answers at this point.

Here are some facts about the Amazon facility coming to Bessemer

• They’ll be hiring at least 1,500 full time jobs.
• Starting wages are around $14/hr.
• It’s a 855,000-square-foot, $325 million project. The largest single private investment in the city of Bessemer’s 131-year history.
• The incentive package given by local governments has not been released yet.
• It’s scheduled to open October 2019.
• It’ll be located near the intersection of Powder Plant Rd. and Academy Dr.

Housing Effects

• I couldn’t find any significant home pricing or market impacts. Most likely, these will be seen 2 to 3 years down the road.
• Strong wages should create strong housing payments.
  • An employee making $14/hr will make approximately $2,350 per month. If they spend 1/3 of their income on housing, they can afford a $783 monthly payment towards rent or mortgage.
  • Two income families could double this number to 1,566
• Where will these employees want to live?

What Will The Economic Effect Be?

• A highly publicized study by the EPI (Economic Policy Institute) criticized Amazon’s warehouse program.
  • They found that counties where Amazon opened their warehouses experienced 0 net jobs growth in the years that followed.
    • There was, however, a 30% increase in warehousing jobs
  • Their argument was that counties are giving millions in tax incentives to Amazon, in exchange for little economic return.
    • Amazon has received over $1.5 billion in such incentives from state and local governments.
    • They say it’s a bad investment by politicians. This money would be better spent on education and infrastructure.
• Amazon’s response questioned the validity of this study
  • They pointed out that the study covered a time period (2000-2016) which experienced a significant economic contraction.
  • They also noted that they were not aggressively expanding their fulfillment centers during most of that time. Most have been built in the last few years.
• My thoughts…
  • Amazon is a stable multinational company investing millions of dollars in our city. Lots of people will benefit from this.
  • Their employees will be making a “living wage” well above minimum wage.
  • Same-day delivery may be right around the corner for Birmingham. This could be the real wild-card in the whole development. Same-day delivery presents a whole new threat to traditional retailers.

Amazon Model Driving Trends In Commercial Real Estate

• Amazon, and the retailers who are following their lead, have changed the commercial real estate landscape.
• Demand for retail space has been shrinking. This is highly publicized. Traditional retailers are closing everyday.
• Demand for industrial warehouse space is taking it’s place. This is less talked about, but Amazon is driving this too.
• Internet-retailers are racing to keep up with Amazon. They need massive storage spaces and fulfillment centers of their own.

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