The largest US company sits on a record cash pile. They are paid almost nothing for holding it and lack a way to use it.
So they are buying a lot of commercial real estate.
Google announced last week to buy $ 2.1 Billion Manhattan Office Building It’s the latest in a series of blockbuster real estate transactions since the pandemic began.
Last year, we paid $ 978 million to a former Lord & Taylor department store in Manhattan.
Overall, listed US companies own $ 1.64 trillion worth of 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 the last 10 years.
Retailers such as
And restaurant chains, etc.
For a long time, he was the main real estate owner of his store. Today, major tech companies are joining in to scoop up 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 landlords. These usually modern or refurbished, sometimes custom-built buildings are the type of building that has been valued for many years. However, owning real estate puts a company at risk of loss if the value of a city’s assets declines.
So far, corporate buying has helped support the commercial real estate market, while many investors are moving away from office and retail buildings amid rising vacancy rates.
Many private-equity and real estate funds have also raised large amounts of cash, but most have hesitated to spend during the pandemic in the hope that prices could fall further. Also, unlike real estate investment companies, large companies often buy buildings without mortgages, spending more money and closing deals faster.
Many factors have converged and unleashed the buying process. For one thing, businesses 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 cash. Christine Hankins, a professor of finance at the University of Kentucky, said more recently, uncertainties about how Covid-19 will hurt the economy have led more companies to save cash. rice 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, chief real estate officer at Brookfield Asset Management, said interest rates have been at record lows, rather than depositing money in low-risk bonds and other public securities. He said that you can get higher returns by buying real estate.
“The cash isn’t a particularly productive way, it’s just sitting there,” he said.
Meanwhile, during the pandemic, office prices have fallen in Manhattan, San Francisco, Chicago and other big cities, and investment in this property is cheaper than it was 18 months ago, investors said.
Google and its deep cash resources set it apart from most other companies in terms of a growing desire for real estate.
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 listed company, as of the second quarter of 2021.
Alphabet is currently one of the largest real estate owners in New York City and the United States. As of 2020, it owned $ 49.7 billion worth of land and buildings, up from $ 5.2 billion in 2011.
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Google is buying real estate because it wants to manage the building it occupies, such as making changes without the permission of the landlord, said William Floyd, director of public policy and government affairs at the company.
Amazon, which owns many warehouses, owned more than $ 57.3 billion worth of land and buildings than any other US listed company except Wal-Mart. Online retailers don’t care whether to buy or lease as long as the building is right, according to John Schottler, vice president of real estate and global facilities at the company.
“We’re really agnostic about it,” he told The Wall Street Journal last fall.
Write to Konrad Putzier at email@example.com
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Big Tech Company Amass Real Estate Ownership During Covid-19 Pandemic
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