[Asia Economy Reporter Cho Hyun-ui] According to the Wall Street Journal (WSJ) on the 28th (local time), American big tech companies, which have accumulated massive cash reserves since the pandemic, are now shopping for commercial real estate.
Google recently agreed to purchase an office building in Manhattan, New York City, for $2.1 billion (approximately 2.5 trillion KRW). Real estate data firm Real Capital Analytics stated, "This deal is the most expensive single-building transaction since the COVID-19 pandemic and one of the highest-priced building deals in U.S. history."
The building, located on the west side of New York City along the Hudson River, is currently leased and used by Google. Google, which holds an option to buy the building, has decided to exercise this option in the first quarter of next year.
Amazon purchased the former Lord & Taylor department store building in Manhattan last August for $978 million (approximately 1.16 trillion KRW). Facebook acquired an office campus in Bellevue, Washington, last September for $368 million (approximately 440 billion KRW).
Traditionally, real estate wealth in the U.S. industrial sector was held by retail chains like Walmart, which require storefronts, or franchise restaurants like McDonald's. Now, IT giants have joined this group by acquiring offices, data centers, warehouses, and retail stores.
Several factors have contributed to IT companies entering real estate investment. First, big tech firms have more cash on hand, and with interest rates at historic lows, purchasing real estate offers higher returns compared to investing in bonds or other securities.
Many private equity and real estate funds have also accumulated large amounts of cash but are generally holding off on investments, hoping for further declines in real estate prices due to the pandemic. Unlike them, big tech companies can purchase real estate without mortgage loans.
The WSJ noted, "As vacancy rates rise and many investors shy away from office and retail buildings, the real estate buying spree by big tech companies is supporting the commercial real estate market."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
