UPDATE 2-Amazon pays top dollar to buy Seattle HQ

(Adds information on the price and analyst comments)

By Alistair Barr and Ilaina Jonas

Oct 5 (Reuters) - Amazon.com Inc said on Friday itwill spend over $1 billion to buy its Seattle corporateheadquarters in what will be the United States' biggestcommercial real estate deal so far this year for a singlelocation.

The world's largest Internet retailer plans to buy a complexof 11 buildings in the trendy South Lake Union area, comprising1.8 million square feet of office space, for $1.16 billion fromMicrosoft Corp co-founder Paul Allen's investment firm.

Based on the value of the deal, Amazon is paying the highestever price for an office building over 100,000 square feet inSeattle at around $644 per square foot. That is more than doublethe average rate of $308 per square foot for the city's officespace, according to Real Capital Analytics.

Amazon has been leasing the properties and it may make moreeconomic sense for it to buy the location in the currentlow-interest environment and gain more control over its HQ,analysts said.

Amazon expects to close the deal in the fourth quarter onthe modern office buildings in South Lake Union, a formersemi-industrial wasteland now known as a center for tech firmsand fashionable restaurants.

"It's good to have control over your home office," said RJHottovy, an equity analyst at Morningstar.

At the end of August, Allen's Vulcan Real Estate, part ofhis Vulcan Inc investment vehicle, put the buildings up forsale.

The deal marks the United States' biggest single-assetcommercial real estate transaction of 2012, according to RealCapital Analytics, which tracks such sales.

Allen, who co-founded Microsoft with school friend BillGates, has been the central figure in the revitalization of theSouth Lake Union neighborhood.

Amazon already has plans to build new offices nearby tohouse its growing staff, which total more than 50,000.

Earlier this year, the e-commerce company revealed plans tobuild more than 3.3 million square feet of office space over thenext eight years.

Vulcan said on Friday that it will use some of the $1.16billion from Amazon to continue other real estate investments,including the re-development of the remaining 30 acres ofproperty it owns in South Lake Union.

Vulcan is working on several residential and commercialprojects in the neighborhood, including a 375,000 square footproject that it is developing for Amazon.

(Reporting By Alistair Barr, Ilaina Jonas in New York and BillRigby in Seattle; editing by Andrew Hay)

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