The Strategist

US IT giants boost assets in commercial real estate

10/11/2021 - 07:57

The biggest US technology companies - Google, Amazon and Facebook - are buying up office buildings. Investing in new space has become a lucrative way for them to invest record amounts of cash amid low interest rates, experts say.

Phil Murphy via flickr
Phil Murphy via flickr
Major US technology companies such as Google, Amazon and Facebook are increasingly acquiring commercial real estate. During the pandemic, IT -companies have joined retailers and restaurant chains, buying up offices, data centres, warehouses and retail space on the background of record revenues, writes The Wall Street Journal.  Experts called real estate investing a better alternative to keeping money in banks or government securities at low interest rates. 

According to S&P Global Market Intelligence, public U.S. companies own $1.64 trillion worth of land and buildings, a 38% increase from 10 years ago and the highest level in at least the past 10 years, according to S&P. On the one hand, investing in commercial real estate allows getting rid of costly rental buildings and purchase objects that will increase in value over the years, on the other hand - owning real estate becomes a source of new risks, such as losses in case of falling value, the newspaper said, citing experts. 

Unlike real estate investment companies, large corporations often buy buildings without mortgages, which allow them to spend more of their money and close deals faster. Experts attributed the rise in demand for commercial real estate to the large cash reserves of companies that dominate their industries. Uncertainty about the damage the COVID-19 pandemic will do to the economy has prompted more companies to hoard cash, said Kristine Hankins, a finance professor at the University of Kentucky.