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Google-Blog
Erik HaydenApr 27, 2023 1:57:37 PM9 min read

Despite what you may have heard, Google remains committed to Downtown San Jose — as it has been all along

Sometimes, no news is good news. For example, you may have recently heard or read that tech company Google is pausing work on its San Jose mega-campus, Downtown West. Upon reading the news about its project, Google and San Jose’s mayor assured everyone that Google’s commitment to its billion-dollar project hasn’t wavered and is, to quote The Mercury News, as “solid as ever.”

Google remains “fully committed to San Jose in the long term, and San Jose is fully committed to Google,” San Jose Mayor Matt Mahan said during a meeting with the media last week. Mahan continued: “We’re very excited about future prospects.”

Just this week, it became public that the company has occupied two office buildings in North San Jose totaling nearly 370,000 square feet. The properties are part of Google’s four-building Brokaw Campus, which was “bustling with tech workers,” the Mercury News reported. A nearby parking garage serving the campus was “packed with vehicles,” a reporter at the newspaper said after walking around the site.

The latest from Google on Downtown West is that it plans to continue moving forward with its 10-year, $19 billion build-out that would redevelop 80 acres surrounding Diridon Station, one of the nation’s largest transit hubs. The company has city approvals to transform that land into up to 7.3 million square feet of offices, 4,000 housing units, 15 acres of parks and open space, and other uses.

“While we’re assessing how to best move forward with Downtown West, we’re still committed to San Jose for the long term and believe in the importance of the development,” a Google spokeswoman wrote in a statement to CoStar News.

Google said in a February earnings call that it would close some offices to align its office portfolio with its “adjusted global headcount look,” to quote the company’s chief financial officer. Of them, we speculate that the majority are leased to rather than owned by Google, based in part on the company’s plan to primarily exit space it has yet to occupy. Although the Mercury News reported that Google is expected to exit some of its offices in the Bay Area, we speculate that most of the ones it shutters aren’t in Silicon Valley, the site of its global headquarters.

Google’s efforts to exit office leases are “fundamentally distinct” from its San Jose plans, the company told the Mercury News earlier this year. And while Google told CoStar News that Downtown West’s original timeline might not begin as planned, that doesn’t surprise us. Google crafted its timeline for the project before it found itself in a “different economic reality,” to borrow a phrase the company used in a January blog post. Unless Google started listing all or part of its Downtown San Jose real estate holdings for sale, we have no reason to doubt its plans for the area.

In 2020 and 2021, Google increased its total headcount by 16 percent, to 156,500 employees, according to data analytics company GlobalData. That makes the company’s 12,000-person layoffs — which it disclosed in January — seem small by comparison, especially because Google and its subsidiaries are laying off only 1,500 or so jobs in Silicon Valley. To put that number of Silicon Valley jobs into context, Google has just over that number of open positions on its online “Careers” page.

Just like every other company in America, Google is assessing its office needs not just in Downtown San Jose but across the board. That will probably take some time to complete because Google occupied about 20.5 million square feet of commercial space just in Silicon Valley last year, according to Colliers data.

By the way, let’s not forget that Google has been one of the more active office developers in Silicon Valley over the past couple of decades. The company completed four ground-up development projects in Silicon Valley just last year, representing nearly 2.3 million square feet of office space, JLL data show. Despite the enduring adoption of remote and hybrid work models, Google’s decision to forge ahead with those projects shows how much it values physical workplaces.

We understand that San Jose stakeholders want to see Google put shovels in the ground and cranes in the sky for Downtown West as soon as possible. Although we want to see that happen as much as anyone, we haven’t lost sight of how long projects of Downtown West’s scale take to build.

The city’s development agreement with Google, ratified in 2021, gives the company 10 years to complete 2 million square feet of the project’s offices and another decade to construct that same amount of space to comply with the agreement. Therefore, the company has plenty of time to remain compliant and build the most ambitious mixed-use development San Jose has ever seen.

Moreover, Google received approvals from the City of San Jose in 2021, and we know from experience that these types of approvals typically last for only four years. Logically, it makes sense for Google to start vertical construction on some components of Downtown West before mid-2025.

Before the city approved Downtown West in 2021, Google went above and beyond when it met with the San Jose community to get feedback on its project plans. Then, the company used those responses to craft a community benefits plan that some of the development’s harshest early critics praised. We expect Google to show that same level of professionalism in the coming months as it keeps us all in the loop on the status of its San Jose project.

Like Google, we're committed to Downtown San Jose and seek to bring a mix of property types to the area. Contact us today to learn more about our development projects and how to become an investor in Urban Catalyst Opportunity Zone Fund II.  

Credit for the rendering we used in the above graphic is SITELAB urban studio. 

 

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