Related Companies Looks to Switch Offices for Industrial

Related Companies is adapting to the struggling Bay Area office market by proposing a replacement for 4 million square feet of planned offices in Santa Clara.

On Tuesday, the Santa Clara City Council approved a plan from the New York-based developer to replace 4 million square feet of offices at its 240-acre development across the street from Levi’s Stadium with 1.6 million square feet of industrial or manufacturing space, The Mercury News reported.

In total, Related is looking to build more than 9 million square feet of new homes, shops, restaurants, hotels and some offices. The mixed-use development would turn the area around the San Francisco 49ers’ home into a state-of-the-art entertainment core known as City Center.

The project was approved by the Santa Clara City Council in 2016 but has run into obstacles including a lawsuit from the neighboring city of San Jose, increasing construction costs and regulatory issues with remediating and building on a site that was once partially a landfill.

Related first shared its revised plans to substitute offices for industrial with the city last year. At the time, it pitched 1.4 million square feet of industrial space at the site.

The move comes as the Bay Area office market experiences a long road to post-pandemic recovery. In Silicon Valley, the office vacancy rate has been decreasing; it dropped to 20.7 percent last quarter, down from 21.1 percent in the first quarter, according to reports from Cushman & Wakefield.

“Consolidating the office into the City Center will ultimately help us with the feasibility, because that’s the type of office that really is in demand,” Nicholas Vanderboom, COO at Related California, told the city council, per The Mercury News. “It’s not the office campus environment today; it’s the downtown, walkable mixed-use environment where office space is leasing, whether that’s Santana Row or downtown Sunnyvale.”

It remains to be seen whether warehouses, data centers or other offerings will go in the new industrial space. In recent years, Santa Clara has become one of the nation’s biggest hubs for data centers — so much so that its more than 50 data centers now consume roughly 60 percent of the city’s energy, according to The Mercury News.

— Chris Malone Méndez