Why Google Will Buy $13 Billion in Real Estate This Year

We hope you love Google, because they could be your new neighbor. Or, they might just buy the entire block as part of a 2019 initiative that includes spending about $13 billion on real estate for data centers and offices across the United States.  Just in time for Valentine’s Day last week, Google CEO Sundar Pichai announced the internet search behemoth will create more than 10,000 construction jobs in seven states over the course of this year. The sweet surprise will result, Pichai said, in Google boasting locations in 24 states and 13 data centers by the end of 2019[1].

“I’m proud to say that our U.S. footprint is growing rapidly; In the last year, we’ve hired more than 10,000 people in the U.S. and made over $9 billion in investments,” Prichai wrote in a blog post on the topic[2]. He added that the developments in Nevada, Nebraska, Ohio, Texas, Oklahoma, South Carolina, and Virginia “will allow us to invest in the communities where we operate while we improve the products and services that help billions of people and businesses globally.” He emphasized that the new data center investments, “in particular, will enhance our ability to provide the fastest and most reliable services for all our users and customers.” Google also noted it will make “significant renewable energy investments” in the United States as it continues to expand.

What Does “Data Center” Really Mean?

As more and more aspects of our daily lives revolve around devices and services that rely on “the cloud” in order to function, data storage has emerged as a pivotal industry in the real estate market. Although for the average user, the cloud may not take up any physical space, there is a need for custom space in which to store and maintain the devices that hold the large amounts of data essential to the process of, say, the operation of a driverless car. This type of facility must either be converted from an older warehouse model or built new, since data storage has unique requirements that have not historically been part of the commercial warehouse space[3].

The construction and design of a data storage center requires a building with a floor plan with enough room to house all servers and equipment necessary for current use and, theoretically, with room for expansion as well since it appears unlikely this space will constrict any time in the near future. These facilities must also be “disaster tolerant,” meaning they must not only be resistant to natural disasters or built in places with a low likelihood of such occurrences, but also be structured preventatively to prevent internal issues like leaky pipes and fires. Data centers also must be built with the goal of minimal wiring and efficient airflow to keep the devices inside as free from interference as possible.

What Data Center Growth Means for the Local Market

This means that when Google or another company announces a large data center expansion, it usually will bring new construction and development to the area in which it is building. This is great for adding jobs in an area but can be hard on the existing commercial warehouse space. For example, in Chicago, the third-largest market in the nation for data centers (behind Dallas and Amazon HQ2 “winner” Northern Virginia), the surge in construction of data center facilities boosted industrial regional vacancies from 2 percent to 11 percent last year, even with companies like CIM Group purchasing existing properties like a 220,000-square-foot baking plant to redevelop rather than breaking ground on new development.

Talk to fellow SDI Members:

  • Has your area benefited from data center development?
  • Does adding construction jobs really help the local economy when labor availability in this sector is already so low?

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[1] https://therealdeal.com/miami/2019/02/13/google-to-invest-13b-in-real-estate-across-the-us/

[2] https://www.blog.google/inside-google/company-announcements/investing-13-billion-2019/

[3] https://www.marketwatch.com/press-release/data-center-construction-market-global-briefing-and-future-outlook-2018-to-2024-2019-02-18

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