Google, Lendlease end development pacts, including downtown San Jose

SAN JOSE — Google and its real estate partner Lendlease have terminated a partnership to develop four huge Bay Area projects, including a vast transit-oriented neighborhood in downtown San Jose — but all four projects will still proceed, Google says.

Mountain View-based Google said it is still working to move the projects forward, including the downtown San Jose project that is deemed 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,” Lendlease stated in the web post on Friday, Australia time.

These are the four projects and their general locations involved in the now-terminated Google-Lendlease alliance:

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

— Sunnyvale, the Moffett Park area.

— Mountain View, Middlefield Park.

— Mountain View, North Bayshore.

“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 stated.

In the wake of the coronavirus outbreak in early 2020, state and local government agencies imposed wide-ranging business shutdowns to curb the spread of the deadly bug.

Those decisions chased office workers away from their places of employment. While the coronavirus dangers have ebbed, the return to the office has occurred unevenly.

Numerous tech companies have drastically scaled back their appetite for office space and expansions.

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

Even in the face of the uncertainty arising from the Google and Lendlease announcements, downtown San Jose’s economy has mounted a noticeable recovery from its coronavirus-linked maladies.

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

In September, a top executive of Google’s parent company Alphabet joined a block party and made it clear the tech titan still aims to build a huge mixed-use neighborhood in downtown San Jose.

Ruth Porat, president and chief investment officer with Alphabet at a Creekside Socials gathering that was the first of many planned by the search giant and real estate developer Jamestown as a way to bring people to the area where the search giant’s transit village is to be constructed.

Downtown West is slated to sprout on the western edges of downtown San Jose.

“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 block party in September. “We did that because we believe in the people who live here, who work here and are committed to being here in San Jose.”

In February, Google said it was reassessing the development timeline for Downtown West, an adjustment the company confirmed to this news organization at that time, and one that set off speculation the tech giant might back out of the project.

The company has not specified a new timeline for the downtown San Jose project, but Porat’s appearance along with other top-level company executives at the September event was a clear bid to publicly signal the Google fully intends to build the game-changing project.

A Google spokesperson also noted:

— The tech titan has pledged to work with local governments to rezone $750 million worth of Google land to help enable at least 15,000 homes.

— In an alliance with Lendlease, Google has paved the way for up to 12,900 units to be built in Mountain View and San Jose.

— Google is broadening its relationships and will work with both developers and capital partners to move the Bay Area developments forward.

— Google is also pushing ahead with mixed-use projects and investments in infrastructure.

Google’s transit village — in a formerly industrial area of low-slung, nondescript buildings — is expected to accommodate up to 7.3 million square feet of offices, 4,000 residential units, 500,000 square feet of retail space that would include shops and restaurants, 300 hotel rooms and 15 acres of open space. Google expects to employ up to 20,000 of its workers 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 said at the September block party.

The Google-Lendlease announcement doesn’t derail the Downtown West neighborhood, in Mayor Mahan’s view.

“This news doesn’t change Google’s commitment to San Jose or their timeline,” Mahan said. “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.”