Google and Lendlease end development projects worth $15 bln in the San Francisco Bay Area


The contract was awarded in 2019 by Google to develop $15 billion worth of residential and retail space in Sunnyvale, San Jose, and Mountain View to create 15,000 new housing units in the area. Lendlease and Google mutually agreed to end the deals, according to the Australian developer.

Lendlease was meant to develop up to 5 million square feet of residential, retail, and hospitality space and associated amenities, with Google creating office space.

In a statement, Alexa Arena, the Senior Director of Development at Google, said the company has been optimizing its real estate investments in the Bay area, and part of the strategy is looking at various options to move development projects forward and deliver on its housing commitment.

Real estate market troubles

California’s commercial real estate markets have been hard hit as remote working cut down on the need for office space, property value declined, and debt servicing costs rose on the back of increased interest rates.

In June, Unibail-Rodamco-Westfield, the owner of one of the most prominent shopping centers in the city, decided to leave after two decades, impacted by declining sales, foot traffic, and occupancy.

Earlier this year, Lendlease also halted a 47-story Hayes Point development project in central San Francisco, its most prominent project in the Americas, intending to get tenants or a co-investor.

Scaling back

The company intends to remove the San Francisco Bay project, which would have started construction in fiscal 2026, from its development goals.

Analysts at UBS said that despite market expectations for the projects lost steam over the past 12 to 18 months, the change negatively impacts fiscal years 26 to 18 earnings.

Lendlease has not changed its forecast for fiscal 2024, with core operating return on equity ranging from 8% to 10%.

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