Google and Lendlease end development pacts, including downtown San Jose

Downtown West in San Jose, as well as other major Bay Area projects, will move forward: Google

SAN JOSE, Calif. — Google and its real estate partner Lendlease have ended their collaboration on four massive Bay Area projects, including a massive transit-oriented neighborhood in downtown San Jose — but all four projects will still go forward, according to Google.

Based in Mountain View Google stated that it is continuing to work on the projects, including the downtown San Jose transit village, which is expected to be a game changer for the Bay Area’s largest city.

“Lendlease and Google announced today they have mutually reached an agreement to end the development services agreements of four master-planned districts,” according to a blog post from Lendlease.

The following are the four projects and general locations involved in the now-defunct Google-Lendlease alliance:

— Downtown West, a mixed-use transit village in downtown San Jose near the Diridon train station and the SAP Center.

— Sunnyvale, Moffett Park neighborhood.

— Middlefield Park, Mountain View.

— North Bayshore, Mountain View.

“The decision to end these agreements followed a comprehensive review by Google of its real estate investments, and a determination by both companies that the existing agreements are no longer mutually beneficial given current market conditions,” Lendlease said in a statement.

Following the coronavirus outbreak in early 2020, state and local government agencies imposed wide-ranging business shutdowns to combat the virus’s spread, driving office workers away from their jobs.

While the coronavirus dangers have subsided, the return to work has been uneven. Numerous tech firms have significantly reduced their appetite for office space and expansions.

“As we’ve previously stated, we’ve been optimizing our Bay Area real estate investments,” said Alexa Arena, Google’s senior director of development, on Thursday. “Part of that work is looking at a variety of options to move our development projects forward and deliver on our housing commitment.”

The downtown San Jose economy has made a noticeable recovery from coronavirus-related maladies, though city leaders acknowledge that challenges remain.

“San Jose has the fastest-recovering downtown in California and the third-fastest in the nation,” said San Jose Mayor Matt Mahan. “And Google’s Downtown West campus will only add to this rapid recovery we are witnessing.”

In September, a top executive from Alphabet, Google’s parent company, attended a block party and stated unequivocally that the tech titan still intends to build a massive mixed-use neighborhood in downtown San Jose. Ruth Porat, Alphabet’s president and chief investment officer, spoke at the first of many Creekside Socials gatherings planned to bring people to the western outskirts of downtown San Jose, where the transit village is set to sprout.

“Here in Downtown West, with input from San Jose residents, businesses, and civic leaders, we have created a multi-decade opportunity and development plan,” Porat said at the September block party. “We did that because we believe in the people who live here, who work here and are committed to being here in San Jose.”

Google announced in February that it was reevaluating the Downtown West development timeline, sparking speculation that the tech giant would abandon the project. The company has not specified a new timeline for the downtown project, but Porat’s presence at the September event, along with other top-level company executives, was a clear bid to publicly signal that Google intended to build the project.

The announcement by Lendlease and Google “shows that the Downtown West project is evolving,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy. “Google values its relationships with the communities and will keep its promises.” This makes sense in light of the changes since they signed the agreement with LendLease in 2019.”

Following the announcement of Lendlease, a Google spokesperson stated:

— Google has pledged to work with local governments to rezone $750 million in Google land to allow for the construction of at least 15,000 homes.

— Google had paved the way for up to 12,900 units to be built in Mountain View and San Jose through a partnership with Lendlease. The San Jose housing units would all be built near the Diridon train station in the city’s downtown.

— Google is expanding its relationships and will collaborate with both developers and capital partners to advance Bay Area developments.

— Google is also moving forward with mixed-use projects and infrastructure investments.

Google’s transit village is expected to house up to 7.3 million square feet of offices, 4,000 residential units, 500,000 square feet of retail space including shops and restaurants, 300 hotel rooms, and 15 acres of open space in a formerly industrial area of low-slung, nondescript buildings. Google anticipates hiring up to 20,000 people in the new neighborhood.

“We are going to continue to see the development of some really exciting efforts, office development, residential housing, and something I am particularly excited about — acres of public space,” Porat told the crowd at the block party in September.

According to Mayor Mahan, the Google-Lendlease announcement does not jeopardize the Downtown West neighborhood.

“This news doesn’t change Google’s commitment to San Jose or their timeline,” Mahan said in a statement. “It simply gives them the flexibility needed to get the best possible developers on the project to build 4,000 new homes in our thriving downtown.”

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