Source: CoStar / By: Molly Armbrister
Link to article: http://product.costar.com/home/news/shared/842689853
Google’s $1 billion acquisition of the Britannia Shoreline Technology Park in its hometown of Mountain View, California, gives the search engine giant the record for the two most expensive U.S. office deals this year, coming on the heels of its $2.4 billion purchase of the Chelsea Market retail and office building in New York.
The company, part of Alphabet Inc., occupies about 92 percent of the Britannia Shoreline, a 795,000-square-foot, 11-building office campus at 2011-2091 Stierlin Court, a few blocks from Google’s headquarters known as the Googleplex. The campus, in the heart of Silicon Valley, is a past home to business networking website LinkedIn and currently houses offices of Alexza Pharmaceuticals.
Google purchased the property for about $1,275 a square foot from Irvine, California-based real estate investment trust HCP Inc., which expected to make a profit of $700 million upon closing, according to a filing with the Securities and Exchange Commission.
Google’s spending on just two deals this year of about $3.4 billion, which its search engine shows is roughly the gross domestic product of the East African nation of Burundi, reflects the dominance of technology companies in U.S. real estate over the past decade. The tech industry accounts for about one-fifth of all office leasing completed across the country this year, according to brokerage CBRE Group Inc.
HCP, which is focused more on life science and medical offices and less on tech and traditional offices, said it plans to use the proceeds to repay debt and fund acquisition and development activity.
“At the time that we purchased it, there were more life-science tenants within the campus,” HCP Chief Financial Officer Peter Scott told investors on a conference call last month. “Over time, Google has taken over more and more of the space.”
He added that “it became more of a non-core suburban office asset for us that was a great piece of real estate to own, but to get the pricing that we got and to be able to recycle that capital into more of the core markets that we’re in, made sense to us.”
The company acquired the property about 11 years ago as part of its $3 billion purchase of European property investor Slough Estates USA. Slough had purchased the Shoreline property for about $200 million in 2005 from Equity Office, according to news reports.
Google does not have plans to move any employees or redevelop the property, according to someone familiar with the property but unauthorized to speak publicly about it.
Chelsea Market Deal
The sale is the second-largest office deal in the country by dollar volume in 2018, behind Google’s purchase earlier this year of New York City’s Chelsea Market for $2.4 billion as it plots its expansion in that city.
Chelsea Market, a former Nabisco factory, is home to a food hall and retail center on the ground floor with offices above. The 1.2 million-square-foot property sits across the street from the company’s Manhattan beachhead at 111 Eighth Ave., a 2.9 million-square-foot office building that takes up a full city block.
Google has not revealed its plans for the property, which is occupied by companies including Major League Baseball, but the site is entitled for an additional 300,000 square feet, or about eight stories. The company reportedly has plans for a major expansion in New York City by adding about 12,000 workers for a total of roughly 20,000, according to news reports.
Google and other technology giants have been gobbling up real estate in their backyards in Silicon Valley and across the country. Google has made two major leasing moves in the past few months, signing a lease for 300,000 square feet in San Francisco’s Landmark at One Market building this month and moving into 319,000 square feet in a renovated historic airplane hangar once owned by Howard Hughes in Los Angeles in October.
Google has also been amassing properties in downtown San Jose, California, for the development of a massive mixed-use project near the city’s Diridon Station, a major transit hub.
Meanwhile, the world’s biggest online retailer, Amazon, recently completed its year-long search for a major real estate expansion with plans to open major office hubs in the Queens borough of New York and in Arlington, Virginia.
Social media website provider Facebook has been busy expanding its headquarters in Menlo Park, California, which will total 1.4 million square feet upon the completion of the project’s third phase, and cloud-based software maker Salesforce recently said it has signed a lease for the entire office portion of a proposed tower at 542 Howard St. in downtown San Francisco.
Streaming entertainment service Netflix has expanded by more than 700,000 square feet in Los Angeles in the past few months. And Apple is on the hunt for another major campus somewhere in the country.
“With unemployment at 4 percent or lower in each of these markets, tech companies of all sizes are in a war for talent and must do their utmost to hold on to and recruit employees — and that means the best salaries, the best incentives, the best space and the best location,” said Robert Sammons, senior director of Northern California research for brokerage Cushman & Wakefield, in a statement. “That last point has generally meant an urban or even suburban location that is mixed-use, walkable, bikeable and near mass transit.”