Google has agreed to buy its Manhattan Office Building for $1.8billion; the largest ever commercial property purchase by a tenant, and in fact one of the largest ever office building transactions, with only a handful of offices selling for more, including the General Motors building, which sold for $2.9 billion in 2008.
Google currently occupies 500,000 square feet of the three million square feet building at 111 Eighth Avenue. Doing the math, Google is paying $600 per square foot for its offices. Colliers International research shows that in the first half of 2010 the average sale price for office space was $400-$500 per square foot.
At this price the purchase looks expensive, but the value of real estate will always be - to a certain extent - in the eyes, hearts and minds of the buyer. For instance, when the consortium, including Boston Properties and Goldman Sachs bought the GM Building in 2008 they paid more than $1,500 per square foot.
It is not yet clear whether Google plans to run the leases for the rest of the building, or to use the purchase to increase its usage to the whole building.