Big tech company accumulates real estate ownership during Covid-19 pandemic

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America’s largest business sits on a record cash stack. They are paid next to nothing to hold it and have no way of using it.

So they buy a lot of commercial real estate.

Google announced last week that it would buy an office building in Manhattan for $ 2.1 billion, the latest in a string of successful real estate deals since the start of the pandemic. Amazon.com Ltd.

Last year we paid $ 978 million to a former Lord & Taylor department store in Manhattan. Ltd.

Purchased an office campus in Bellevue, Washington for $ 368 million.

Overall, listed U.S. companies own $ 1.64 trillion in land and buildings, according to S&P Global Market Intelligence. According to S&P, this is a 38% increase from 10 years ago, the highest in at least 10 years.

Retailers like Walmart Ltd.

Restaurant chains such as McDonald’s Ltd.

For a long time, he was the main real estate owner of his store. Today, big tech companies are joining us in reclaiming offices, data centers, warehouses, and even retail space.

Buying real estate is a way to avoid sometimes expensive and cumbersome leases, as these companies often occupy these buildings and become their own owners. These generally modern or renovated buildings, sometimes custom built, are the type of building that has been valued for many years. However, owning real estate puts a business at risk of loss if the value of a city’s assets declines.

So far, corporate purchases have helped support the commercial real estate market, as many investors are moving away from office and retail buildings due to rising vacancy rates.

Many private equity and real estate funds have also raised large sums of money, but most have been reluctant to spend during the pandemic in the hopes that prices could fall further. Plus, unlike real estate investment companies, large corporations often buy real estate without a mortgage, spending more money and closing deals faster.

Many factors converged and triggered the buying process. On the one hand, companies have more money to buy real estate. The large profitable companies that dominate the industry have grown even larger and are now able to accumulate more money. Christine Hankins, professor of finance at the University of Kentucky, said more recently that uncertainties over how Covid-19 will hurt the economy have led more companies to save money. paddy field.

According to S&P Global, US listed companies, with the exception of real estate and financial companies, hold $ 2.7 trillion in cash, cash equivalents and short-term investments. This is an increase of over 90% since the fourth quarter of 2011.

Brian Kingston, director of real estate at Brookfield Asset Management, said interest rates were at record highs, rather than depositing money in low risk bonds and other government securities. He said you can get higher returns by buying real estate.

“Money isn’t a particularly productive medium, it’s just sitting there,” he said.

Meanwhile, during the pandemic, office prices have fallen in Manhattan, San Francisco, Chicago and other major cities, and investment in this property is cheaper than it was 18 months ago. , the investors said.

Google and its large cash resources set it apart from most other companies in terms of its growing desire for real estate. Ltd,

According to S&P Global, Google’s parent company held $ 135.9 billion in cash, cash equivalents and short-term investments, more than any other publicly traded company, in the second quarter of 2021.

Alphabet is currently one of the largest real estate owners in New York City and the United States. In 2020, it owned $ 49.7 billion in land and buildings, up from $ 5.2 billion in 2011.

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Google buys real estate because it wants to manage the building it occupies, such as making changes without the owner’s permission, said William Floyd, director of public policy and government affairs for the company.

Amazon, which has many warehouses, owned more than $ 57.3 billion in land and buildings than any other U.S. listed company except Wal-Mart. Online retailers don’t care to buy or rent as long as the building is correct, according to John Schottler, the company’s vice president of real estate and global facilities.

“We’re really agnostic about this,” he told The Wall Street Journal last fall.

Write to Konrad Putzier ([email protected])

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Big tech company accumulates real estate ownership during Covid-19 pandemic


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