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.
"The decision to end these agreements followed a comprehensive review by Google of its real estate investments, and a determination by both organisations that the existing agreements are no longer mutually beneficial given current market conditions," Lendlease said.
Google did not immediately reply to Reuters' request for comment.
Lendlease in 2019 bagged the contract from Google to develop US$15 billion worth of residential and retail space in Sunnyvale, San Jose and Mountain View.
Under the project, Leandlease was to develop up to 15 million square feet of residential, retail and hospitality space and associated amenities, and Google would develop office space.
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 8.0 per cent to 10 per cent range. - Reuters