Trophy campuses are the latest must-have in Silicon Valley, an area defined for decades by office parks noteworthy only for their utilitarian banality.
There’s no public price tag yet on the Google build—which will be erected on land leased from NASA. But clearly it’s not working on a tight budget. Earlier this year Google spent a reported $1 billion just to snap up 2.4 acres of central London land that will be developed into its U.K. headquarters.
As shown in this chart—available to YCharts Platinum subscribers—Google’s property plant and equipment (PP&E), which includes worldwide buildings and land has grown sharply since the recession.
GOOG Gross PP&E Annual data by YCharts
In its latest quarterly filing Google reported it held $6.25 billion in land and property alone. At the end of 2009 it held $1.9 billion worth of land and property. Who says Google is just an algorithm?
Some tech companies, like
A short drive north from Google along 101, yet another Silicon Valley work’s in progress. Mark Zuckerberg friended famed architect Frank Gehry to design Facebook’s new Menlo Park spread. At a mere 433,555 square feet this addition to Facebook’s headquarters is the corporate equivalent of the small Eichler homes that are a fixture of the area. Zuckerberg asked Gehry to tone down his original design, a bit ballsy given Gehry’s signature is arresting facades such as the curvaceous Guggenheim Bilbao museum.
Further north, in Bezos Land, Amazon.com recently spent $1.16 billion to purchase a complex it had been leasing from Paul Allen’s Vulcan Real Estate, and is also moving ahead with a separate downtown Seattle development that will give Apple’s spaceship a run for its futuristic money. In its latest proposed design—covering a total of 3.3 million square feet of office space—Amazon intends to build three massive (85-95 feet in height) glass and steel orbs stuffed with trees and plants at the base of three 37-story office towers.
The land for the new orb/office space cost $207.5 million. A year ago the New York Times put a $600 million price tag on the cost of the new buildings, but that was before the orbs came into play.
Let’s just say we’re a long way from Silicon Valley’s hatched-in-a-garage ethos.
Even if Apple were to take a drastic pass at scaling back, a 25% budget reduction would still come in at a price tag large enough to buy more than 19,000 single family homes at the current median price of $193,000. The new Apple headquarters is designed to accommodate up to e mere 12,000 employees, which works out to $416,666.67 per cubicle.
While the other tech HQ projects have so far been able to keep their build costs out of public view, the sheer size and scope of the plans suggests that trophy buildings have become a new way to spend down gobs of cash. (Note that Apple's cash holding is vastly understated in the chart because it holds most in long-term investments.)
AAPL Cash and ST Investments data by YCharts
Salesforce.com was also pretty far down the road with its own custom building plan. It paid $278 million in 2010 for a 14-acre chunk of land in San Francisco’s Mission Bay district and was moving apace with getting the requisite city approvals when it scratched the plan in early 2012 and opted to keep leasing space. A Forbes report put a $2 billion price tag on the building development; which might have been a bit much for a firm that currently has less than $900 million in cash and short term investments.
The four companies moving ahead with bespoke headquarters would no doubt tell us that, far from being vanity projects, spending 10-figures for new offices is all about good business. Quality engineers are an insanely dear commodity for tech firms. Any edge that helps recruit, retain and inspire is pursued. At this point, you don’t want to be the odd company that doesn’t have a spanking new space to crow about. Tim Cook has hailed the collaborative environment that is at the heart of Apple’s design.
Despite its sprawl, Google has let it be known it has left no Excel or algo file unturned in pursuit of the most efficient design to get the most work and innovation out of employees. Despite the nine-building sprawl, Google told Vanity Fair everyone will be able to make it anywhere on campus within 2.5 minutes. That’s if they walk. Using one of Google’s campus bikes would cut the commute even further.
If expensive form inspires greater function inside, the big builds will be money well spent. But for now, shareholders are faced with some serious money being siphoned off that might have otherwise gone toward more direct growth initiatives such as research and development, acquisitions, or shareholder friendly moves such as repurchases. Apple is the only one of the four that pays a dividend.
And it’s not as if the new buildings will be for public consumption. An architect for Amazon’s globe project told the Seattle Times, “Wouldn’t it be cool to go into a building that’s more like a park and be comfortable?” Thing is, the current plan is that only employees will be allowed into those globes; the public will have to make do with pressing their noses against the glass from the outside. Though Jobs remarked he envisioned Apple’s arresting design would spur architects to make pilgrimages to Cupertino, in the super secretive and competitive world of Silicon Valley it’s hard to envision any of these projects welcoming public gawkers inside.
Carla Fried, a senior contributing editor at YCharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money magazine. She can be reached at editor@ycharts.com.
