Related’s $8B Project Swaps 4 MSF of Office for Industrial
The change in plans comes as Silicon Valley grapples with high vacancy, technology layoffs and shifting work patterns.
After a decade of planning and approvals, Related Cos. is seeking to change the mix of uses at Related Santa Clara, its $8 billion, 9.2 million-square-foot public-private partnership and megaproject in Silicon Valley. The company now plans to swap out most of the office space for up to 1.6 million square feet of light industrial and advanced manufacturing space.
As originally approved in 2019 by the Santa Clara City Council, the 240-acre LEED-certified, multi-phased, mixed-use project adjacent to Levi’s Stadium was expected to have a city center with commercial office, retail/entertainment including a globally inspired food market, approximately 5 million square feet of corporate office space, 1,680 residential units and 700 hotel guestrooms. About 168 of the apartments will be designated as permanently affordable. The urban village, designed to be a new live-work-play neighborhood built on city-owned land that was previously a golf course and landfill, will also include new roadways and a 30-acre city park.
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However, the Silicon Valley Business Journal reported Related Santa Clara has filed an application with the city to replace about 4 million square feet of office space on the eastern portion of the property with industrial uses. The developer would reportedly incorporate the remaining 2.4 million square feet in the City Center section. That would mean taller buildings in the City Center, according to the Mercury News.
The shift away from a heavy emphasis on new office development comes as Silicon Valley is facing high office vacancy rates of around 22 percent to 23 percent as of late last year. The overall office vacancy rate in Santa Clara was 28.4 percent in the fourth quarter of 2023, according to Cushman & Wakefield. Layoffs in the technology industry have also hit Silicon Valley hard and remote and hybrid work trends have also impacted the office market.
Steve Eimer, an executive vice president at New York-based Related Cos. & co-managing partner of Related Santa Clara, said in a prepared statement the development firm is optimistic this adjustment will allow it to advance construction on the project by focusing on market segments where there is demand. Eimer added that reimagining portions of the projects in ways that better suit the current economic environment has the potential to accelerate economic benefits to the city.
Further details were not available yesterday and the City of Santa Clara Planning Department did not respond to a request for more information on the project’s status. On the city government website, the project was slated to begin construction in mid-2023 but it has still not started.
In June 2016, Commercial Property Executive reported the project, then estimated to cost $6.5 billion, had received unanimous approval from the Santa Clara City Council after three years of planning. At that time, the Related Santa Clara was to be constructed in multiple phases over a 30-year period. But the report noted some of the later phases, including office campuses, would be built to market demands. Related began the process in April 2013, when it signed an exclusive negotiating agreement with the city.
The public-private partnership with the city is expected to create as many as 10,000 construction jobs and almost $1 billion in wages over the life of its construction and hundreds of union jobs for hospitality workers. Once completed, the entire project is expected to bring up to 25,000 local jobs and nearly $40 million in taxes, fees and lease revenue annually.
Meanwhile, Related California is expected to finish construction of its 684-unit Tasman East residential project located east of the Related Santa Clara site this year. Two towers, which will combine apartments and condominiums with senior and affordable housing, received $690 million in construction financing in August 2022, according to CPE’s sister publication, Multi-Housing News.