(Bloomberg)—All eyes were on Facebook Inc. and its ambitious expansion plans when the social-media giant bought a 21-building campus in Menlo Park, California, from Prologis Inc. Turns out the 2015 deal turned a tidy profit for the warehouse landlord -- and made its other properties in the area more valuable.
Prologis paid $110 million for the site about a decade ago, Chief Executive Officer Hamid Moghadam said in an interview Wednesday at Bloomberg’s headquarters in New York. Facebook ultimately had to double its initial offer for the complex, to about $400 million. Now the warehouses are being torn down to build housing and more work space for the social-media company, Moghadam said.
The anecdote illustrates how tight the market has become for space in fast-growing urban areas, where residential and office demand is muscling out warehouse and manufacturing facilities. That’s benefiting industrial landlords like Prologis that are sitting on well-situated properties and requiring tenants like Facebook to pay top dollar as they expand. The Menlo Park deal alone took about 1.1 million square feet (102,000 square meters) of industrial space off the market in the San Francisco Bay area, Moghadam said.
“The supply of space is going down, and that’s creating more pricing power,” he said.
In many of the markets where it operates, Prologis -- the largest industrial real estate investment trust -- is also looking to get more out of the land it owns. The company is building the first multistory warehouse in the U.S. in Seattle and has plans for another in San Francisco. Such properties may also make sense in West Los Angeles, New York and Miami, Moghadam said.
To contact the reporters on this story: Noah Buhayar in Seattle at [email protected] ;Rob Urban in New York at [email protected] To contact the editors responsible for this story: Daniel Taub at [email protected] Christine Maurus
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