Internet giant Google — better known for buying out internet rivals and software companies — has now turned its attention to commercial property. In the second quarter of this year alone it spent $2.6bn (£15.4bn) on capital expenditure.
Although the multinational corporation owns land and buildings on six of the seven continents, its recent focus has been nearer to home. Despite already owning 3.8m sq ft of office space in Mountain View, California, where its Googleplex headquarters is situated, its real estate team has been busy acquiring both large portfolios and small one-off plots in the town and nearby Palo Alto and Sunnyvale.
Google reportedly paid $98.1m (£58m) late last month for nine buildings in the San Francisco bay area. Eight of the properties were sold by Boston Properties, with the ninth being owned by California Flower Shippers Inc. Combined they total more than 200,000sq ft.
The biggest chunk of the payout, just over $92m (£54.6m), went to Boston Properties with the search engine giant acquiring the seven-building, 135,000sq ft Mountain View Technology Park. It also bought the 63,000sq ft, East Middlefield Road home of Hansen Medical. All the properties are leased to sitting tenants.
A few days ago, Google also bought 885 Maude Avenue, a 16,000q ft building in the town for $5.6 million (£33m). Its largest deal so far this year has been the $250m (£148.6m) purchase of 700 East Middlefield, a 24-acre office campus that former owner Deutsche Asset and Wealth Management had earmarked for a one-million square foot business campus.
“The acquisition of property, much of it outdated and in contiguous blocks suggests Google might be considering major redevelopment plans,” Nathan Donato-Weinstein, real estate reporter for the Silicon Valley Business Journal has commented.
“Google real estate executives have said publicly they would like to redevelop their older office buildings in Mountain View’s North Bayshore district into something with more modern facilities. Google also leases two development sites, in Mountain View and in Moffett Field, where it has long-term plans to build new campuses.”
As ever, Google has declined to comment on any of its real estate transactions. Nor would it deny a claim, gathering pace among many analysts, that its latest buying spree has nudged it into the world’s top 10 property owning companies.
The only public acknowledgement has come from chief finance officer, Patrick Pichette,who said; “the majority of Google’s capital expenditure spend was related to data centre construction, real estate purchases and finally production equipment in that order.
“As I’ve mentioned before,” Pichette added, “we will continue to invest for the long-term and our infrastructure and real estate assets remain a key strategic area of investment for us.”
Property has historically been such a safe investment over the long term that it would make perfect sense for Google to be rolling some of their incredible profits into property. That said, I wonder whether the buy-ups are being done with a specific plan in hand; new offices and research locations – or simply to snap up a bargain for future use.
Some years ago I heard about other major companies (often supermarkets) buying up chunks of land and property as it became available, with no immediate plans to develop it. For those with the capital it arguably makes sense to swoop when the right opportunity comes along knowing that if you buy at the right price it’ll be very difficult to lose money even if you decide to sell again in the future.