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Plans for $15B worth of development in the Bay Area, born of a partnership between Google and Australian developer Lendlease in the months leading up to a pandemic that would turn the real estate market on its head, have been scrubbed.
Google and Lendlease had big plans to develop four neighborhoods in Silicon Valley into mixed-use communities with apartments, shops and new office space. But in a release Friday, Lendlease said it and Google had “mutually reached an agreement to end the Development Services Agreements” for the neighborhoods. Both companies had recently completed reviews of their investments.
The story was first reported by The Wall Street Journal.
“While we have enjoyed an excellent and highly productive working relationship with Google, it became clear that our respective priorities have shifted,” Tony Lombardo, Global CEO of Lendlease, said in an emailed statement to Bisnow. “The end of these agreements allows both organizations maximum flexibility to pursue other strategies.”
While Lendlease is stepping away, Google is continuing to move forward with the projects, a Google spokesperson told Bisnow via email. Google has been working with local governments to rezone $750M worth of Google-owned land to build 15,000 homes.
“As we've shared before, we've been optimizing our real estate investments in the Bay Area, and part of that work is looking at a variety of options to move our development projects forward and deliver on our housing commitment,” Alexa Arena, senior director of development at Google, said in a statement to Bisnow. “We appreciate Lendlease and the work the team has done to get us to this point.”
With the partnership dissolving, Google is looking to work with other developers and capital partners to move the projects forward, as well as continuing to pursue entitlements and investment for the mixed-used developments, according to the spokesperson.
The two companies had planned to build neighborhoods in San Jose, Mountain View and Sunnyvale that included 15,000 homes. Project details also indicated the mixed-use communities could comprise more than 15M SF of office, residential, retail and other space.
Office vacancy rates in San Jose and Silicon Valley have reached near-record levels, with San Jose crossing 30%, according to data collected by CBRE. The more suburban cities have fared better, however.
This isn't the first Bay Area project Lendlease has pulled the plug on this year. In August, the company announced it would stop work on Hayes Point, a $1.2B, 47-story office building under construction in San Francisco.
While Google plans on moving forward with its mixed-use projects, it has signaled a pullback from other nearby plans. It paused Downtown West in San Jose but has claimed its intention is to continue the development, and it made available for sublease 1.3M SF of offices in Mountain View and Moffett Park.
The move was part of a program Google announced in February, when it said it would absorb $500M in costs to reduce its office space as it lays off workers and moves to a hybrid work model.
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