In a statement released earlier on November 3rd, Lendlease revealed that both parties had mutually decided to terminate the agreement, citing the assessment that "the existing agreements are no longer mutually beneficial given current market conditions."
The agreement encompassed projects such as Downtown West in San Jose, Moffett Park in Sunnyvale, and Middlefield Park and North Bayshore in Mountain View. According to The Wall Street Journal, these developments had the potential to comprise over 15 million square feet of "office, residential, retail, and other space."
"Google and Lendlease agreed to the original $15 billion deal in 2019 and planned to spend 10 to 15 years redeveloping Google’s land across the three locations, CNBC notes. But since then, the covid-19 pandemic has significantly changed business real estate needs after companies shifted toward more hybrid modes of working. The Wall Street Journal cites figures from CoStar Group that suggest that around 17 percent of office space in Silicon Valley was vacant as of June this year, up from 11 percent in 2019. In Mountain View, in particular, vacancy rates have reportedly surpassed 20 percent.
At the same time, Google has also been going through a period of belt-tightening. In January, it cut 12,000 jobs, roughly 6 percent of its global workforce. In April, CNBC reported that Google had gutted the team in charge of developing its Downtown West campus in San Jose and had put the campus plans on hold after completing the demolition phase.
Although Google is ending its agreement with Lendlease, CNBC reports that it will continue to work on the campus developments with other developers and capital partners that may yet include Lendlease. In 2019, the company said its plans included the development of 15,000 new homes and incentives to develop 5,000 more. As of June this year, the company said it had paved the way for up to 12,900 units to be built on its land in Mountain View and San Jose and had allocated over $133 million for 3,800 units across various affordable housing projects."
