While it's now widely known that Verizon Communications Inc. (NYSE: VZ) has bought the core assets of Yahoo! Inc. (NASDAQ: YHOO) for $4.8 billion, what is new is that Verizon secured something
equally coveted in Silicon Valley: real estate.
"When the deal closes, the New York telecom giant will become one of the largest office landlords in the nation's technology hub
thanks to the roughly 1 million-square-foot campus Yahoo owns in Sunnyvale, California," a Los Angeles Times
report said.
According to the report, Mark Ritchie, president of Ritchie Commercial, valued Yahoo's Sunnyvale property at approximately $500
million. "That's one-tenth of what Verizon has agreed to shell out for the entire company — a percentage that reflects both Yahoo's
fall from grace as well as the demand for Silicon Valley land."
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The LA Times continued, "Average office rents in the second quarter were $4.17 a square foot, nearly 70 cents higher than a year
earlier, according to commercial real estate brokerage JLL. Vacancy, meanwhile, ticked down 1.5 percentage points to 12.1
percent."
"Silicon Valley is really difficult real estate-wise," the report said, quoting Ralph McLaughlin, chief economist at real estate
firm Trulia.
For context, Facebook Inc (NASDAQ: FB) now
has 3.5 million square feet in Menlo Park, California, and Google (Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL))'s headquarters totals 3.1 million square feet in a Mountain View,
California, campus known as Googleplex.
The report also noted Apple Inc. (NASDAQ: AAPL) is constructing a 2.8 million square feet second campus, scheduled to open in
2017 in Cupertino, California.
That said, there are questions on the tech boom, especially as venture capital funding declines. JLL said leasing activity has
lagged, and new buildings are more frequently opening vacant.
In its recent report, JLL said it "reflects the beginning of a cooling period as tenants and landlords alike take pause to
assess rent growth in addition to how much longer this cycle will last."
"There are several options for Verizon once the deal is finalized, which is expected to happen early next year. Verizon could
sell the real estate and lease it back, hold onto it and bet values will rise or sell it to another user," the report added.
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