November 25, 2020

Big Tech’s Impact on the Real Estate Industry

Big Tech’s Impact on the Real Estate Industry
Big Tech’s Impact on the Real Estate Industry

Tech Companies Snap Up Office and Other Space

The US commercial real estate market has been battered by the COVID-19 pandemic. However, large tech firms are snapping up office space and other real estate, as many non-tech companies scramble to get out of leases.

Big Tech’s influence in the real estate industry has grown stronger as a result of the pandemic, but tech companies’ demand for real estate was surging even before COVID-19. Over the past decade, Amazon (AMZN), Facebook (FB), Apple (AAPL), Google (GOOGL), and Microsoft (MSFT) have increased the space they occupy fivefold. These companies now take up about 589 million square feet of space in the US. This is more square footage than all the office space in New York City combined.

Pros and Cons for Local Communities

Big Tech’s appetite for real estate has been helpful for the economies of many cities and towns. When well-paid tech employees arrive in a new area, property taxes tend to rise, which gives local governments more resources. Local restaurants, retailers, and other businesses also tend to benefit.

On the other hand, tech companies’ impact on the real estate industry has also generated controversy about climbing rents and gentrification. Two years ago, Google canceled plans to open a tech startup campus in the neighborhood of Kreuzberg in Berlin due to protests about how the project would cause rent prices to spike. Around the same time Amazon backed out of plans to open an office campus in Long Island City, New York after facing criticism from residents and lawmakers in the area. Major tech companies have pledged to spend billions of dollars developing affordable housing, but even these initiatives are not enough to counteract their impact on rent prices in many communities.

The Pandemic’s Impact on Real Estate Trends

Though many tech industry employees are working remotely at the moment, and companies like Google (GOOGL) and Facebook (FB) have said they will allow some workers to stay remote even past the pandemic, this has not made tech companies any less eager to invest in real estate—even office space. Because many companies with smaller cash reserves are trying to get rid of leases and commercial property, tech companies can currently buy office space at a discount.

The pandemic and the rise of ecommerce has also caused tech companies to pile into warehouses and data centers. Just this year, the five largest tech companies have grown their real estate presence by more than 25%—the fastest growth rate seen during the past decade.


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