Lendlease, Google end development deals for $15 billion San Francisco Bay Area projects
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:Lendlease Group and Alphabet’s Google reached a mutual agreement to end development services deals for four master-planned districts in the San Francisco Bay Area, the Australian developer said on Friday.
Lendlease bagged the contract from Google in 2019 to develop the $15 billion worth of residential and retail space in Sunnyvale, San Jose and Mountain View, which could ultimately bring about 15,000 new housing units to the region.
Under the project, Landlease was to develop up to 15 million square feet of residential, retail and hospitality space and associated amenities and Google would develop office space.
“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,” Alexa Arena, Senior Director of Development at Google, said in an emailed response.
California’s commercial real estate market is one of the hardest hit globally as remote working has reduced the demand for office space amid declining property values and higher debt servicing costs on the back of rising rates.
In June, Unibail-Rodamco-Westfield, owner of one of the biggest shopping centers in the city, decided to walk away after 20 years, hurt by declining sales, occupancy and foot traffic.
Earlier this year, Lendlease also paused its 47-storey Hayes Point project in central San Francisco, its largest investment in the Americas, looking to line up tenants or find a co-investor.
Lendlease said it will remove the San Francisco Bay project, which was expected to commence construction in fiscal 2026, from its development pipeline.
“While market expectations for the project had deflated over the past ~12-18 months, the change is negative for medium term (FY26-28) earnings,” analysts at UBS said.
Lendlease retained its forecast for fiscal 2024, with core operating return on equity at the lower end of its 8 per cent-10 per cent range.
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