Google ends agreement with lead developer of four California campuses
- Google has ended its agreement with Lendlease, the lead developer of four future campus sites.
- The company has been reviewing its real estate investments.
- CNBC earlier reported that Google had paused some construction work and laid off many of its Lendlease development employees associated with the projects.
Google confirmed on Thursday that the company ended its agreement with the development partner that was working on four key campus sites.
Lendlease announced that Google decided to end the contracts it had to develop campuses in districts that included San Jose for a project called Downtown West, as well as in Sunnyvale for a site called Moffett Park. The other projects Lendlease had been working on were Middlefield Park and North Bayshore in Mountain View, which are collectively referred to as the San Francisco Bay Project.
The companies had worked together for the last four years. Google said it will be broadening its relationships and will work with both developers and capital partners to keep moving the campus developments forward and that it may include Lendlease.
"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," said Alexa Arena, a senior director of development at Google. "We appreciate Lendlease and the work the team has done to get us to this point."
Google conducted a comprehensive review of its real estate investments and concluded that market conditions deemed them "no longer mutually beneficial," according to Lendlease.
Alphabet-owned Google is embarking on its most expansive cost cuts in its almost two decades on the public market. The company said in January that it was eliminating 12,000 jobs, representing about 6% of its workforce, to reckon with slowing sales growth after head count swelled before and during the Covid pandemic. Despite seeing growth return, the company has continued making smaller cuts across the workforce, including in real estate.
In 2019, Lendlease struck a $15 billion deal with Google to spend the next 10 to 15 years redeveloping the company's landholdings in the three locations. At the time, Google also promised to jointly with Lendlease build 15,000 residential units in the region with 25% of them considered "affordable," a critical issue in an area with one of the highest homeless populations in the country.
What was poised to be a mega-campus called Downtown West, with thousands of new housing units and 15 acres of public parks, is largely a demolition zone at risk of becoming a long-term eyesore and economic zero. CNBC reported that, as part of Google's downsizing that went into effect early this year, the company gutted its development team for the San Jose campus.
As recently as September, Google executives, including CFO Ruth Porat, appeared at a San Jose event that aimed to reaffirm the company's commitment to building in the city.
To win over the San Jose community, Google designated more than half its campus to public use and offered up to a $200 million community benefits package that included displacement funds, job placement training, and power for community leaders to influence how that money would be spent. However, the bulk is to be given out upon the development of office space.
San Jose Mayor Matt Mahan said in a statement to CNBC that the latest news "doesn't change Google's commitment to San Jose or their timeline."
"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," Mahan said.
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