The Google construction site is at a standstill on a Tuesday afternoon.
Jennifer Elias
Google confirmed Thursday that it has ended its agreement with the development partner that worked on four key campus locations.
Lendlease announced that Google had decided to end its contracts to develop campuses in areas such as San Jose for a project called Downtown West and in Sunnyvale for a site called Moffett Park. The other projects Lendlease had worked on were Middlefield Park and North Bayshore in Mountain View, collectively referred to as the San Francisco Bay Project.
The companies had worked together for the past four years. Google said it would expand its relationships and work with both developers and capital partners to further advance the development of the campus, and that it may also involve Lendlease.
“As we have previously shared, we have optimized our real estate investments in the Bay Area and part of that work includes exploring various options to advance our development projects and deliver on our commitment to homebuilding,” said Alexa Arena, senior director of development at Google. “We appreciate Lendlease and the work the team has done to get us to this point.”
According to Lendlease, Google conducted a comprehensive review of its real estate investments and concluded that market conditions deemed them “no longer mutually beneficial.”
Alphabet-owned Google is launching its deepest cost cuts in nearly two decades on the public market. The company said in January it would cut 12,000 jobs, representing about 6% of its workforce, as it anticipates a slowdown in revenue growth after headcount increased before and during the Covid pandemic. Despite the return to growth, the company has continued to make small staff cuts, including in real estate.
In 2019, Lendlease inked a $15 billion deal with Google to spend the next 10 to 15 years redeveloping the company’s properties across its three locations. At the time, Google also pledged to partner with Lendlease to build 15,000 housing units in the region, 25% of which would be considered “affordable,” a critical issue in an area with one of the highest homeless populations in the country.
What was originally planned as a mega-campus called Downtown West with thousands of new residential units and 15 hectares of public parks is largely a demolition zone that risks becoming an eyesore and an economic waste in the long term. CNBC reported that the company laid off its San Jose campus development team as part of Google’s downsizing that took effect earlier this year.
Just in September, Google executives, including CFO Ruth Porat, appeared at an event in San Jose aimed at reaffirming the company’s commitment to construction in the city.
To win over the San Jose community, Google made more than half of its campus available for public use and offered a benefits package worth up to $200 million that included relocation funds, job placement training and the opportunity for community leaders included influencing how that money was spent. However, the majority will flow into the development of office space.
San Jose Mayor Matt Mahan said in a statement to CNBC that the latest news “does not change Google’s commitment to San Jose or its timeline.”
“It simply gives them the flexibility they need to attract the best possible developers to the project to build 4,000 new homes in our thriving downtown,” Mahan said.
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