SANTA CLARA — A huge mixed-use village in Santa Clara will undergo a major shift by replacing millions of square feet of offices with manufacturing and industrial spaces.
An estimated 4 million square feet of office space won’t be built as planned in a project known as Related Santa Clara, according to Related Cos., the principal developer of what would essentially become a new neighborhood in the South Bay if it’s built as envisioned.
Instead, as much as 1.6 million square feet of “light industrial and advanced manufacturing uses” would be built on a site where the offices were planned.
The 4 million square feet of offices would be shifted to a section of the Related Santa Clara development that is known as City Center, executives with Related Co. stated.
“Overall, there is no net loss of space in the project,” a spokesperson for Related Cos. stated in an email to this news organization.
The office space footage from the location where the offices are being replaced will instead be allocated to the City Center section of the project.
“The buildings will get taller” in the City Center site, the Related Cos. spokesperson stated in the email.
It’s not a huge shock that this dramatic shift has emerged for the project, which is planned for a site near the corner of Great America Parkway and Stars and Stripes Drive.
The office markets in the Bay Area and nationwide have begun to suffer from vacancy rates that have hopped higher and rental levels that have weakened.
Plus, in the Bay Area, tech companies have greatly curbed their hungerfor office space. Numerous tech companies have chopped jobs and offered some office sites as sublease space or put the buildings up for sale.
“We appreciate the partnership we have with the City of Santa Clara and are optimistic this adjustment will allow us to advance construction of Related Santa Clara by focusing on market segments where there is demand,” said Steve Eimer, a Related Cos. executive vice president.
The forbidding landscape for many segments of commercial real estate made the shifts necessary, in Related’s view.
“Reimagining portions of the project in ways that better suit today’s economic environment has the potential to accelerate economic benefits to the city,” Eimer said.
The vacancy rate for offices is 26.4% in Santa Clara, according to Colliers, a commercial real estate firm.
Even so, industrial and advanced manufacturing development bears plenty of risks.
Some commercial real estate reports have reported that demand for even these kinds of properties has begun to fade in certain markets.
Related has been successful in constructing housing in the huge complex, however.
During the summer of 2023, Related topped out two towers that together would produce roughly 684 residential units.
“Related is proud to help the city meet its housing goals,” said Nick Vanderboom, chief operating officer of Related California.
