Google Investing Big in Data Centers, Office Space: Should You?

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Google (NASDAQ: GOOGL) isn’t exactly strapped for cash these days. But the fact it’s looking to expand its physical office footprint is surprising — and encouraging — in an age when so many companies are pulling back on office space and making plans to keep employees remote on a long-term basis.

Specifically, Google has announced plans to spend over $7 billion to expand office space and data centers across 19 states in 2021. The company says it will create at least 10,000 full-time jobs in the process.

An office building revival?

Office buildings have seen record-low occupancy rates since the pandemic began. And while some of that is easy to write off as a temporary trend, a lot of companies are making long-term plans to downsize their office space after seeing how feasible it is to keep staff members remote.

Google, on the other hand, isn’t planning for remote work to become a permanent part of its business model. The company intends to bring workers back to the office beginning this fall, though it may initially allow employees to return to a physical workspace on a partial basis rather than full-time.

The fact that Google is planning to expand its office space footprint is good news for REITs (real estate investment trusts) that center on office buildings, because when a major player like Google makes any sort of move, other companies tend to follow suit. If more tech companies follow Google’s lead, it could lead to a surge in leasing activity — something office buildings have been desperate for.

Google says it will open new offices in Seattle, Houston, and Mississippi. It’s also in the process of converting 40 acres of land in Mountain View, California, into a new mixed-use campus that will include over 1.3 million square feet of office space.

Data centers get a boost

Unlike office buildings, data centers weren’t hammered in the course of the pandemic. Quite the contrary — the remote work trend fueled the need for data, and REITs of that nature performed quite well in the course of 2020. But Google’s commitment to expanding data centers can only help the industry further — especially at a time when widespread remote employment may be on the cusp of coming to an end, thanks to the rollout of coronavirus vaccines.

Google is aggressively trying to grow its cloud business. Pumping money into data centers supports that effort.

Should real estate investors react?

To be clear, it’s unlikely that Google’s announcement will revive office buildings overnight. But in the course of the coming year, we could see an uptick in leasing activity, which would make now a good time to scoop up discounted office REITs. Data centers, meanwhile, were already a solid investment, and given their long-term relevance, they remain a good bet.

There was a point when it seemed like office buildings would only grow increasingly irrelevant in the wake of the pandemic. But with enough companies pledging to return workers to the office and Google making bold plans to expand, those who invested in office space before the coronavirus outbreak began may be looking at fewer losses in their portfolios — and more opportunity.