Facebook Buys REI's Elaborate New Headquarters as Covid-19 Pandemic Prompts a Sale

By Peter Grant 

Facebook Inc. is buying Recreational Equipment Inc.'s custom-made new headquarters near Seattle, the latest sign that big technology companies are driving commercial real estate markets during the coronavirus pandemic.

The outdoor clothing and gear retailer, known as REI, had been planning to occupy the 400,000 square foot campus in Bellevue, Wash., this summer. REI designed the elaborate complex to reflect its outdoorsy image, and the company once hoped it would serve as a way to recruit new employees. The property features outdoor staircases and bridges, a courtyard of native plants, and skylights to let in sunshine and air.

But REI never occupied it because of the pandemic, opting instead to cash out while employees work remotely from home or a number of smaller offices in the region.

Both companies announced the deal Monday. Facebook is paying $367.6 million. REI also sold undeveloped land on the property to the developer Wright Runstad & Co., for a total sale price of $390 million.

Technology companies like Facebook, Google and Amazon.com Inc. have been among the most reticent businesses to reopen their offices due to fear of Covid-19 contagion. But, at the same time, their appetite for real estate shows little sign of abating from what it was before the pandemic.

The Seattle area has become Facebook's largest engineering hub outside its Menlo Park, Calif., headquarters. With the REI deal, Facebook now has more than 3 million square feet of space in the region, according to Vijaye Raji, head of Facebook's Seattle office.

The REI property is located next to three other Facebook buildings all under development in Bellevue's Spring District. Mr. Raji said Facebook particularly likes that area because of its large pool of engineering talent and "future as a transit hub."

In New York, Facebook recently agreed to lease the entire 730,000 square feet of office space in the historic James A. Farley Building, formerly the city's main post office. And this summer, Amazon said it expects to create 2,000 jobs in Manhattan and open a 630,000 square foot office in the Lord & Taylor building, which it purchased in the spring.

REI's business has suffered recently as the company closed stores during the height of the pandemic. By selling the new headquarters, the company has more cash for other parts of the business.

REI, which is structured as a cooperative in which anyone can purchase a membership for $20, said that the sale price was above what it invested in the property and that the proceeds will help it meet its carbon reduction goals and other uses.

The campus sale was a high-profile example of how the pandemic is affecting businesses' long-term workplace plans. Some companies are jettisoning plans for large centralized offices partly to save cash.

Others are considering strategies based on remote working from satellite sites.

"Heads of workplace at these big businesses are hard at work figuring out what this all means," said Jamie Hodari, chief executive and co-founder of Industrious, a startup workplace firm. "But other than REI and a few others, not a lot have said, OK we crafted the plan, now it's happening."

(END) Dow Jones Newswires

September 14, 2020 19:13 ET (23:13 GMT)

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