SAN JOSE — On the heels of moves to cut jobs and slash office space, Google said Monday it is reassessing the timeline for its highly anticipated San Jose transit village, a shift that could have a major impact on the city’s beleaguered downtown.
The company offered no specifics about the future of Downtown West, a planned transit-oriented neighborhood surrounding Diridon Station and SAP Center that would consist of office buildings, homes, shops and restaurants and could employ up to 25,000 people. In recent weeks, Google had indicated it was pushing ahead with the development and would break ground by the end of the year, following significant demolition in recent months.
Now, Google is saying only that it remains committed to the project.
“We’re assessing how to best move forward with Downtown West,” Sheela Jivan, Google’s Downtown West Development Director, said Monday in comments the company emailed to this news organization.
The tech titan’s eventual pace for the project, construction of which has always been expected to take many years, could affect many other plans for the downtown district, whose vitality has been sapped by business shutdowns — some of them related to the pandemic — as well as recent trends toward remote work throughout Silicon Valley.
Alex Stettinski, chief executive officer for the San Jose Downtown Association, said he hopes Google will resist a lengthy delay that leaves the western side of the downtown in its current under-utilized state.
“We certainly don’t want to see acres of dormant construction sites for an extended time and hope the project will pick up shortly,” Stettinski said.
For his part, newly elected San Jose Mayor Matt Mahan sought to put a positive spin on the announcement.
“We’re glad that Google remains committed to Downtown West,” Mahan said Monday. “With the state recently completing funding for Caltrain electrification and adding $375 million to the BART to Silicon Valley extension, the rationale for Google to invest in Downtown West is stronger than ever.”
Google’s interest in downtown San Jose became a centerpiece for the city’s future plans when it emerged several years ago. Nevertheless, the Downtown West development must comport with the company’s overall real estate strategy, which is shifting as work patterns shift, Jivan said.
“We’re working to ensure our real estate investments match the future needs of our hybrid workforce, our business and our communities,” Jivan said Monday.
Google has intensified the in-house scrutiny of its real estate because the company has announced it would significantly reduce its employee levels. In recent days, Google owner Alphabet revealed plans to cut 12,000 workers, or about 6% of the company’s workforce. The company intends to eliminate 1,600 Bay Area jobs.
“I can’t get in Google’s head but they play long ball. They’re thinking years in front of them,” said Gary Dillabough, an active developer in downtown San Jose and a principal executive with real estate firm Urban Community. “San Jose should be a pretty attractive part of those (Google’s) plans. “This short-term blip is not going to influence their long-term thinking.”
Soon after the layoff disclosures, Alphabet Chief Financial Officer Ruth Porat said Google and Alphabet were “optimizing how and where we work.” She told Wall Street analysts during a conference call to discuss fourth-quarter financial results that it expects to incur approximately $500 million of costs “related to exiting leases to align our office space with our adjusted global headcount look.”
The departures relate primarily to floors or even entire buildings that Google has yet to occupy, spread around Silicon Valley, even when the company had already signed a lease with a property owner, a company spokesperson said.
The reductions in office space leases as well as the decisions on how quickly to proceed with Downtown West are both components of Google’s overall assessment of its future real estate needs and how quickly to proceed with its projects.
Multi-decade projects of the size and complexity of Downtown West go through cycles when they slow down and moments when they speed up, a Google spokesperson said.
The company said it’s working with Lendlease, its development consultant for Downtown West, to review the scope of work for the project. That scope depends on the future project requirements.
“Everyone was aware that the actual timing of the project was yet to be determined. Nothing concerns me about this,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy. “Downtown West is a long-term project that benefits both the city of San Jose and Google.”
The city’s approval of the Downtown West neighborhood was accompanied by Google’s agreement to provide an array of community benefits to the city of San Jose. In May 2022, Google completed an early payment of $7.5 million for a community benefits program. The company will pay the rest of the public benefits as the Downtown West development proceeds. All told, the community benefits package totals $200 million.
Google was expected to begin infrastructure installations this year to serve the project. The company has also begun demolitions of multiple buildings just south of the train station.
“We’re still committed to San Jose for the long term and believe in the importance of the development,” Jivan said.
Staff writer Gabriel Greschler contributed to this story
