Big tech companies cut back on office space; Equinix forms $600M datacenter JV

S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.

Big tech companies such as Amazon, Alphabet and Meta are reducing their office space across major coastal cities, a reversal of the massive office expansions seen during the pandemic, The Wall Street Journal reported.

The companies are either letting leases expire or selling some offices. Some companies that are renewing or expanding space are seeking less than they did before.

Tech companies realized in 2022 they needed less space than they had thought as work from home remained popular and as some companies laid off workers, according to the report, citing Colin Yasukochi, an executive director at CBRE's Tech Insights Center.

The industry's softening demand for office space can be painful to cities, as landlords continue to deal with higher interest rates and a drop in demand from financial companies, law firms and other tenants.

CHART OF THE WEEK: Canadian REIT capital offerings up QOQ in Q1

⮞ Public equity real estate investment trusts in Canada secured C$1.20 billion via capital offerings in the first quarter, up 26.2% quarter over quarter.

⮞ The retail sector took the largest share of the total capital, with C$750 million.

⮞ Shopping center owner RioCan Real Estate Investment Trust raised C$450 million during the quarter, the largest amount among the Canadian public REITs.

Top deals

– Equinix Inc. formed a $600 million joint venture with PGIM Real Estate for the development and operation of a data center in San Jose, Calif. PGIM Real Estate will own 80% of the venture, while Equinix will own the remaining 20% equity interest. The data center will be built at Equinix's Great Oaks data center campus and is expected to provide more than 28 megawatts of power capacity.

– Swiss private equity firm Partners Group Holding AG agreed to acquire a minority interest in US-based hospitality-focused real estate investor Trinity Real Estate Investments LLC.

Property transactions

– Medical Properties Trust Inc. sold its interests in five hospitals in Utah to a new joint venture with an undisclosed investment fund. The fund purchased a nearly 75% interest in the venture for $886 million. Medical Properties retained about 25% interest in the venture.

– A partnership between BH Group and Kolter Hospitality LLC acquired a beachfront condominium development site on Miracle Mile in Naples, Fla., for $102.6 million from Bahama Club Co-Op. Centennial Bank provided a $56.4 million loan to the joint venture.

US hotel performance

US hotels logged gains in occupancy, average daily rate and revenue per available room during the week ended April 13, STR reported, citing data from CoStar, which provides information and analytics on property markets.

Occupancy was at 65.8%, up 2.8% from the comparable week in 2023. Average daily rate (ADR) improved 2.9% to $160.20, while revenue per available room (RevPAR) increased 5.8% to $105.48.

Among the top 25 markets, Philadelphia logged the largest year-over-year jump in occupancy and RevPAR. Dallas recorded the largest increase in ADR.

Click here to see key people moves in North America real estate.

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