Google Cancels Major Project

After completing just the first demolition phase, Google has decided to stop construction on the 80-acre new campus it was building in San Jose, California.

CNBC reported recently, citing sources who are in the know about the situation, that the Big Tech giant has no plans to potentially revive their sprawling project anytime soon.

That’s quite a quick change of direction. In June of 2021, the company was approved to build the campus, which would provide it with 7.3 million square feet for office space. The economic impact of the project was estimated to be around $19 billion.

But, with advertisers expressing major concerns over a looming recession and pulling back on spending as a result, Google’s growth prospects have shrunk considerably. What’s more, interest rates have been rising, thanks to moves made by the Federal Reserve Bank, which usually hurts the tech industry the worst.

Now, the “Downtown West” campus project in San Jose – which was set to include 15 acres for public parks and thousands of housing units being built – could just become an eyesore for the city.

CNBC reported that Google began downsizing in early 2023 to offset some of its losses, and one of the biggest cuts came from the development team that was assigned to the San Jose project. 

Originally, ground was supposed to be broken by the end of this year, though it’s uncertain when – or if – the project will be restarted.

On Google’s last earnings call, Ruth Porat, the company’s CFO, said the company would incur roughly $500 million in costs during just the first quarter in an effort to reduce its office space around the world.

Google started setting the groundwork for this slowdown months ago, too, CNBC reported. It started sending word to related contractors late in 2022 that this project might face changes and delays.

The project’s lead developer, LendLease, laid off nearly 70 of its employees in February of this year. CNBC reported that among those cut were heads of business operations, senior development managers and some other executives.

A spokesperson for that company emailed a statement to CNBC that read:

[LendLease remains] committed in the creation of thriving mixed-use communities in the Bay Area, including the Google developments [and still has a] significant team to aid in delivering these communities.”

In addition, Google removed all of the construction updates it was posting to its website in March.

Just a little more than one year ago, the Big Tech giant announced plans to invest almost $10 billion for 20 real estate projects it considered key during 2022. At the time of the announcement, Google already finished grabbing up much of the land it needed for the planned San Jose campus, which was going to be located downtown.

But, things changed quickly.

In January, Google announced that it would be eliminating about 12,000 jobs, or roughly 6% of the company’s total workforce. They said it was a necessary move after sales growth slowed and the total number of employees it had swelled during the pandemic.