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Google 'Reaccelerating' Investment In Fit-Outs, Ground-Up Construction

St. John's Terminal, one of two marquee office buildings Google's parent company purchased globally this past year.

As Google's parent company beefs up its headcount, the technology giant also is shelling out more money for real estate. 

Alphabet spent $24.6B last year on capital expenditures, up from $22.3B in 2020, according to its annual report filed with the Securities and Exchange Commission. Over the past year, Google made two banner real estate acquisitions: The $2.1B purchase of St. John's Terminal in New York City and the Central St. Giles building in London for $1B.

Alphabet has seen the net value in its equipment and property jump to $97.5B as of December, compared to $84.7B in 2020, according to SEC filings. 

“In 2022, we expect a meaningful increase in CapEx,” Alphabet Chief Financial Officer Ruth Porat said during a Feb. 1 earnings call. “With respect to office facilities, after fairly muted CapEx over the past two years, we are reaccelerating investment in fit-outs and ground-up construction.”

Alphabet's lease expenses also rose from $2.9B to $3.4B during the same period. Alphabet reported that its average remaining lease term is eight years and its future lease balance payments will exceed $15B. That includes leases that are expected to commence between 2022 and 2026 that have future payments of $606M in the short term and $5.2B in the long term. Those leases have non-cancelable lease terms of one to 25 years.

Google's parent company hired more than 20,000 workers in 2021, CoStar reported, bringing the tech giant to more than 156,500 employees around the globe. A majority of the new hires last year focused on technical roles, Porat said.

“We do continue to be a magnet for great talent. The number of applications is up year-on-year. We added almost 6,500 people in the fourth quarter. We do expect the strong pace to continue,” Porat said.

In its annual report, Google signaled it expects to see costs rise in its efforts to get the workforce back to the office or adjust to hybrid work models.

“As a result of the pandemic, our workforce shifted to operating in a primarily remote working environment, which continues to create inherent productivity, connectivity, and oversight challenges,” Google wrote in the annual report. “As we prepare to return our workforce in more locations back to the office, we may experience increased costs and/or disruption as we experiment with hybrid work models, in addition to potential effects on our ability to operate effectively and maintain our corporate culture.”