Amazon.com Inc said on Friday it will spend over $1 billion to buy its Seattle corporate headquarters in what will be the United States’ biggest commercial real estate deal so far this year for a single property.
The world’s largest Internet retailer plans to buy 11 buildings in the trendy South Lake Union area, comprising 1.8 million square feet of corporate office space, for $1.16 billion from Microsoft Corp co-founder Paul Allen’s investment firm.
Based on the value of the deal, Amazon is paying the highest ever price for an office building over 100,000 square feet in Seattle at around $644 per square foot. That is more than double the average rate of $308 per square foot for the city’s office space, according to Real Capital Analytics.
Amazon has been leasing the properties and it may make more economic sense for it to buy the location in the current low-interest environment and gain more control over its HQ, analysts said.
Amazon expects to close the deal in the fourth quarter on the modern office buildings in South Lake Union, a former semi-industrial wasteland now known as a center for tech firms and fashionable restaurants.
“It’s good to have control over your home office,” said RJ Hottovy, an equity analyst at Morningstar.
At the end of August, Allen’s Vulcan Real Estate, part of his Vulcan Inc investment vehicle, put the buildings up for sale.
The deal marks the United States’ biggest single-asset commercial real estate transaction of 2012, according to Real Capital Analytics, which tracks such sales.
Allen, who co-founded Microsoft with school friend Bill Gates, has been the central figure in the revitalization of the South Lake Union neighborhood.
Amazon already has plans to build new offices nearby to house its growing staff, which total more than 50,000.
Earlier this year, the e-commerce company revealed plans to build more than 3.3 million square feet of office space over the next eight years.
Vulcan said on Friday that it will use some of the $1.16 billion from Amazon to continue other real estate investments, including the re-development of the remaining 30 acres of property it owns in South Lake Union.
Vulcan is working on several residential and commercial projects in the neighborhood, including a 375,000 square foot project that it is developing for Amazon.
(Reuters) – (By Alistair Barr and Ilaina Jonas; Reporting By Alistair Barr, Ilaina Jonas in New York and Bill Rigby in Seattle; editing by Andrew Hay)