Business
BIG TECH GETS BIGGER: Companies Amass Property
Google, Amazon and Facebook acquire offices and retail space, helping prop up commercial real-estate markets
The biggest U.S. companies are sitting on record piles of cash. They are getting paid next to nothing for holding it, and they are running out of ways to spend it.
So they are buying a lot of commercial real estate.
Google’s announcement last week that it would purchase a Manhattan office building for $2.1 billion is the latest in a string of blockbuster corporate real-estate deals since the start of the pandemic. Amazon.com Inc. last year paid $978 million for the former Lord & Taylor department store in Manhattan. Facebook Inc. bought an office campus in Bellevue, Wash., for $368 million.
Overall, publicly traded U.S. companies own land and buildings valued at $1.64 trillion, according to S&P Global Market Intelligence. That is up 38% from 10 years ago, and the highest for at least the past 10 years, according to S&P.
Retailers such as Walmart Inc. and restaurant chains such as McDonald’s Corp. have long been major property owners of their own stores. Big technology companies are now joining them, scooping up offices, data centers, warehouses and even retail space.
Buying real estate is a way for these companies to avoid sometimes pricey and cumbersome leases, because they often occupy these buildings and become their own landlords. These usually modern or renovated and sometimes custom-built properties are the kind of buildings that have appreciated in value over the years. But owning real estate also puts companies at risk of losses if urban property values fall.
For now, the corporate buying spree is helping prop up commercial real-estate markets at the same time many investors are shying away from office and retail buildings amid rising vacancy rates.
Many private-equity and real-estate funds have also raised hoards of cash, but for the most part they have been reluctant to spend during the pandemic in hopes that prices could fall further. And unlike real-estate investment firms, big corporations often buy their buildings without taking out mortgages, allowing them to spend more of their money and to close on deals more quickly.