This week’s announcement that Google will restructure itself and become one of a portfolio of companies under an umbrella named Alphabet adds even more mystery to the already guarded real estate plans of the technology giant. Headquartered in Mountain View, CA, Google owns or leases around 10 million square feet of space in locations across the US including 3.8 million sf. in Mountain View alone. Where is Alphabet’s business headed and what kind of space needs are in the cards?
A look at the SEC Form 8K they’ve filed telling stakeholders about the restructuring contains only a few clues. Their plan to create a holding company called Alphabet appears to accomplish a milestone separation. The core web and advertising services (which would include YouTube, Search, Maps, Android, and others) would remain within Google while the company’s major recent moves into biotech (Calico), internet service provision (Google Fiber), environmental controls (Nest), cutting-edge research and development (Google[X]) will be brought into Alphabet and under the direct financial guidance of founders Larry Page and Sergey Brin. At the same time, Larry and Sergey will hand the CEO role of Google to Sundar Pichai.
I see in this a classic sorting of business lines where the most capital-intensive and most speculative ventures are being pulled closer to the founding executives, making it so that an investment in Alphabet is a more direct investment in the vision of those executives.
While there’s no way to tell what direction Alphabet will take in space acquisition, I believe the loudest signals would come in the form of successes in its projects for driverless cars and national fiber optic rollout. Viable automotive designs mean industrial real estate in Alphabet’s future, and probably lots of it. And the more fiber Google can provide, the greater expansion demand for its own already-large data center construction.