Google’s ‘San Francisco Project’ wanted to build 15,000 homes in the Bay just 3 years ago, but the deal is off due to ‘market conditions’

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Three years ago, Google announced plans for a huge residential campus in the San Francisco area. The project vowed to build at least 15,000 new homes, as well as office space and hotel rooms.

On Friday, those plans seemed to go up in smoke, for at least the short term.

Google and LendLease, its developer for the project, have mutually terminated their agreement to build the four master-planned districts that made up what was called “The San Francisco Project”. Construction was originally set to begin in 2026.

“The decision to end these agreements followed a comprehensive review by Google of its real estate investments, and a determination by both organizations that the existing agreements are no longer mutually beneficial given current market conditions,” LendLease said in a statement.

Plenty has changed since the project was announced, of course. Mortgage interest rates have more than doubled in that time. Hybrid work has become more prevalent at the company, reducing the need for offices. And Alphabet, Google’s parent company, has undergone a period of belt tightening, laying off 12,000 workers earlier this year.

The dissolution of the partnership with LendLease doesn’t mean this project is dead in the long term. Google reportedly has some flexibility in when it can begin work—and it had already cleared out a large area in San Jose for the campus.

“As we’ve shared before, we’ve been optimizing our real estate investments in the Bay Area, and part of that work is looking at a variety of options to move our development projects forward and deliver on our housing commitment,” Alexa Arena, Google’s senior director of development, told Fortune.

A Google spokesperson added the company plans to broadening its relationships and work with developers and capital partners to move the Bay Area developments forward, though no time frame was given.

The slowdown of The San Francisco Project comes as the state of the housing market in the Bay area is less than rosy. A recent study by Redfin found that sellers in San Francisco are four times as likely to sell at a loss. And Zillow says the average San Francisco home value is down 11.5% over the past year, and 13.2% from its peak. The typical San Francisco homeowner who took a loss sold their home for $100,000 less than what they bought it for.

A separate Redfin analysis found that the total value of homes in San Francisco fell by nearly $60 billion since last summer.

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