Jeff Bezos

J.K. Dineen
Reporter- San Francisco Business Times

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Amazon.com Inc. is pushing ahead with a San Francisco expansion that will grow its footprint in the city to nearly 150,000 square feet.

In August, the Seattle-based online retailer signed a 65,000-square-foot lease at 475 Sansome St. The deal surprised downtown real estate observers because Amazon (NASDAQ: AMZN) had previously leased 20,000 square feet in the Sansome St. building but had planned to sublease the space when it took 83,000 square feet at 188 Spear St. Instead, not only did Amazon decide to keep its space at 475 Sansome St., it tripled its commitment there.

Amazon has about 80 jobs open in San Francisco, more than half of which are for its Amazon Music division, according to the group’s website. The ads are looking for engineers and designers to “help us build the world’s best online music player.”

The deals come as Amazon, led by Jeff Bezos, is also making big moves in Silicon Valley. In 2012, the group agreed to a lease of close to 600,000 square feet at Jay Paul Co.’s Moffett Towers complex to house its Lab 126 subsidiary, previously located in Cupertino. The lab is where the Kindle and the Amazon smartphone are developed.

“Amazon is on a space tear in the Bay Area,” said Research Director Colin Yasukochi of CBRE. “If you add up what they did down in the valley and what they are doing here, they have added a lot of space in the Bay Area. Of course, if you compare it to what they are doing in Seattle, it’s a drop in the bucket.”

In downtown Seattle, Amazon is developing a 3.3-million-square-foot high-rise campus on three blocks; construction is underway on the first block.

The Sansome St. deal was the second large new lease in the month of August, slightly smaller than Cisco’s 67,000-square-foot lease at 500 Terry Francois.

J.K. Dineen covers real estate for the San Francisco Business Times.

Article source: http://www.bizjournals.com/sanfrancisco/blog/2013/09/amazon-goes-on-bay-area-growth-spurt.html

Zillow on Thursday released new data on the potential impact of Facebook Inc.’s 
 

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IPO on real estate in the San Francisco Bay Area.

Zillow is a home and real estate marketplace that aims to empower consumers with information and tools to make decisions about homes, real estate and mortgages.

The company suggests that for cities near the social networking company’s Menlo Park headquarters, median home values are more than $2 million. In nearby places such as San Jose or Francisco, buyers can pay a quarter of the amount for the same home.

During the three months between Facebook’s (NASDAQ:FB) IPO filing and its IPO debut, Zillow noted an upward trend of $1 million plus homes for sale — the number of $1 million listings in Menlo Park increased 87 percent during this time period.

Zillow also analyzed what a $1 million, 1,580-square-foot home in Menlo Park would buy elsewhere around the country.

Click here to see Zillow’s graphic representing the data.

Written by Lisa Sibley. She can be reached at 408.299.1830 or lsibley@bizjournals.com.

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Article source: http://www.bizjournals.com/sanjose/news/2012/06/07/zillow-weighs-on-facebook-effect-on.html

One real estate sector is still booming; is it about to bust?

^{A version of this article originally appeared on our US site, Fool.com.}

Real estate. They’re not making any more of it. Demand is only increasing. Those arguments helped fuel an epic real estate boom and bust over the past decade — except when it comes to Internet data centres, which have continued to boom on explosive growth in cloud computing. They haven’t been able make those fast enough. But that may be changing, too.

A warning shot over the bow

On its recent earnings call, Akamai (NASDAQ: AKAM.US) was asked about co-location price trends in Internet data centres. Here’s what the company had to say:

… it’s like a real estate market. There are some places where our prices are holding. There are other places where there are very aggressive price declines, and we try to take advantage of that gain in terms of how we deploy our network assets. … The other lever we have on co-location costs, of course, is to make our servers more efficient and get effectively more throughput for our footprint in the co-lo facility.

Based on Akamai’s comments, co-location supply is still constrained in some markets. In others, it’s starting to meet demand. That brings to mind a classic real estate maxim: location, location, location.

Economics 101 teaches us that supply and demand affect pricing. When supply is constrained, prices rise. Internet data centres have been benefiting from that situation. But high prices attract more supply, and eventually supply will catch up with demand. When that happens, prices — and profits — are destined to fall. And that’s starting to happen. What’s more, increasingly efficient IT equipment can offset much of the growing demand for more processing, bandwidth, and storage. What’s good for Akamai can be the opposite for co-location and hosting companies.

Growing up

One factor affecting demand is companies that are shifting from the consumer equivalent of renting to buying their own home. Much like a young adult moving out of Mom and Dad’s place for the first time, companies moving onto the cloud often rent a temporary meets-my-needs-for-now space with no intention of a long-term commitment. As the companies mature, gain a better understanding of their needs, and gather cloud assets, they often began building their own data centres.

Generally, it’s the largest, most attractive tenants that make that shift. Recent examples include Apple (NASDAQ: AAPL.US) and Facebook. They’re following the example of Google (NASDAQ: GOOG.US), which has built its own data centres for some time. As the horde of young companies pursuing cloud strategies gain scale and mature, many more are likely to follow in Google’s, Apple’s and Facebook’s footsteps.

Other tenants are likely to go bust. From a co-location landlord’s perspective, that’s the corporate equivalent of having a tenant lose his or her job and move back in with Mom and Dad. Too much of that, and rental rates take a hit.

Build it and they will come?

Many data-centre developers are doing the equivalent of building on speculation that there will be a tenant. To wit, the CEO of Equinix, a large data-centre operator, has acknowledged that overbuilding is a “main concern.” 

Equinix invests heavily in the IT infrastructure used to serve its clients. Given the rapid depreciation on IT equipment, pricing pressure could make Equinix’s capital expenditures less profitable than anticipated. Pricing pressure is potentially a huge risk for the company.

Say when

When might co-location and hosting supply catch up with demand? Tier1 Research estimates that data-centre utilization in key markets is currently running between 81% (Northern Virginia) and 88% (Silicon Valley). That’s less than I’d expect in an exceptionally tight market.

And it’s a fast-moving market. In the San Francisco Bay area, which includes the Silicon Valley, rental rates for large tenants have reportedly declined 20% over the past 18 months thanks to new supply that’s coming online. A fresh surge of supply is expected in the area before year’s end. In the coming two quarters, data-centre landlord CoreSite Realty predicts that the new supply will outpace demand by as much as 50%.

A recipe for getting burned

With the sector viewed as a cloud play, valuations are sky-high. P/E ratios typically exceed EPS growth rates — that is, when EPS is positive. Over the last four quarters, CoreSite’s EPS was -$0.31 while Internap’s was -$0.10.

The trouble is, supply will catch up with demand sooner or later… and it looks like it might be sooner. When that happens, prices, profits, and P/E ratios are likely to plummet. A UBS analyst stated last December that data-centre developers were grappling with slowing growth, rising competition, and pricing pressure that made their valuations “unsustainably high.”

Foolish takeaway 

When prices sneeze, revenues catch a cold and profits catch pneumonia. Akamai’s comment about pricing trends in co-location centres signals that it may be time for investors to break out the handkerchiefs.

More on US shares:

• Where Should You Invest? This Indicator Will Tell You
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• A Tale Of 2 Silicon Valleys

The Motley Fool owns shares in Google.

Article source: http://www.fool.co.uk/news/investing/2011/08/01/the-coming-digital-real-estate-bust.aspx

Today the Obama administration released its monthly “scorecard” for the Making Home Affordable Program (MHA), a.k.a. the federal mortgage bailout. The Home Affordable Modification Program (HAMP), which is part of MHA, continues to add trial modifications at about 29,000 per month and permanent modifications, a bit less, at 26,000. The redefault rate on the permanent modifications is now at 12 percent.

This month the administration released the first numbers on its Home Affordable Foreclosure Alternative program (HAFA), which pays borrowers $3000 to vacate their homes through short sales (where the bank agrees to let the home be sold for less than the value of the mortgage) and deeds in lieu of foreclosure (essentially giving the keys back to the bank). Banks get monetary incentives as well for that. So far 4500 borrowers have vacated their homes under this program.

It should be noted that in the past two weeks members of the House of Representatives voted to abolish the government’s mortgage bailout, including the HAMP and HAFA programs. It’s interesting that in light of that, the usually optimistic administration put forth this statement:

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Luxury home prices rose in San Francisco, San Diego and Los Angeles in the fourth quarter compared with the third quarter, with the Bay Area having the best showing, according to the First Republic Bank Prestige Home Index.

San Francisco-based First Republic Bank (NYSE: FRC) produces the Prestige Home Index every quarter with Fiserv CSW Inc., (NASDAQ: FISV) a provider of automated property valuation services to the financial services industry.

In another sign of the rising confidence among the wealthy, City National Bank‘s (NYSE: CYN) Bay Area regional executive Robert Brant said this week that investors have a newfound appetite for risk, referencing one potential client focused a few weeks ago on investing in Treasuries coming due over several years now eager to put the money into stocks.

Bay Area real estate agents say buyers are returning to the luxury housing market with greater conviction to seal a deal.

“All of a sudden people have their confidence back,” said Wendy McPherson of Coldwell Banker in Woodside.

David Shepardson of Coldwell Banker in San Francisco said, “We’re off to a good start in 2011. It is shaping up to be a pretty strong year because of low inventory and the fact that there are quite a few buyers out there.”

But he also had a word of caution for home sellers too aggressive in their pricing.

“If the property is overpriced, it will sit there,” Shepardson said.

Olivia Decker of Decker Bullock Sotheby’s International in Mill Valley said the good sales pace from December through February bodes well for the traditionally strong spring selling season.

“The market is definitely much better,” Bullock said.

Mark Calvey covers banking and finance for the San Francisco Business Times.
Contact him at mcalvey@bizjournals.com or (415) 288-4950.
Read his blog postings at Bay Area BizTalk.

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Article source: http://www.bizjournals.com/sanfrancisco/news/2011/03/04/first-republic-real-estate-prices.html