Microsoft gears up for million-square-foot North San Jose campus

By Jennifer Elias and Janice Bitters  –  Silicon Valley Business Journal Updated Sep 29, 2017, 4:04pm PDT Microsoft Corp. has purchased nearly 65 acres in north San Jose, a site it’s currently trying to get entitled for up to 1.2 million square feet of light industrial and data center uses. The property, a swath of farm land north of Highway 237 between Zanker Road and Coyote Creek, sold for more than $73 million, or about $1.3 million per acre in a transaction made public this week. The land lies alongside the western region of Coyote River. That stretch of land, positioned in the midst of a portion of the city that is primed for growth and new transit options, will be considered for a couple of development options next month by the San Jose Planning Commission and then the City Council. One option up for approval would bring 1.2 million square feet of light industrial space to the site while the second would bring a 436,880-square-foot data center and a new PG&E substation on 26.5 acres with another 728,000 square feet of light industrial space on the remainder of the site, city documents show. That second option could come in phases, city officials said Friday. “The company is being really smart entitling for flexibility, looking at their own needs and looking at market conditions,” Nanci Klein, deputy director for the Office of Economic Development and the director of real estate for the city, said in an interview Friday. Redmond, Washington-based Microsoft did not immediately respond to requests for comments on Friday. The city files reveal the company wants to demolish or remove nearly two dozen trees, two single-family houses, a mobile home and some farm-related structures to construct the light industrial or data center campus. If those plans sound familiar, it’s because the sale comes mere months after the former property owner, Cilker Orchards Management Group, submitted the two development options to the city with no tenants identified, though Microsoft was said to have been involved in that application. In total, the company has filed three permits currently filed for this property: Rezoning for changing a designation to light Industrial use, a special use permit to remove the trees and construct six buildings with 14 generators, and a development exception to allow for reduction in off-street parking standards. Those applications will be heard by the planning commission on Oct. 11 and then by San Jose's City Council on Oct. 17, if all goes well, Klein said. But at the moment, San Jose officials seem excited to open their arms to Microsoft, even for a data center and industrial space that would bring far fewer jobs than an office or R&D building. The city's excitement isn't about whether the building is office or data center, but about being a part of the Microsoft ecosystem, Klein said. "Honestly, we've talked to Microsoft over the years and pointed out that we're a great place for them to be and we're very, very glad that this is finally coming to fruition," she said. "Microsoft is so great on so many different levels: industry leading, great for people and great for the environment in terms of corporate responsibility." Though this would be the company's first foray into San Jose, Microsoft has worked with the city on smart city technologies, mostly around civic engagement and sustainability. Earlier this month, the company announced it would be spearheading a new group for Urban Planners in the Bay Area for “technology-based innovation.” In June, it presented San Jose building permit data on its data visualization platform Power BI for city staff. The company's proposal comes at a time that San Jose is pushing forward with goals to make North San Jose more of a destination with new retail, hotel and apartments. A report from CBRE earlier this moth noted that between North San Jose and neighboring Milpitas, a development pipeline of nearly 14,000 new residential units are in the works. The Milpitas and the San Jose Berryessa BART stations are also both under construction currently. Microsoft's growth in Silicon Valley The tech titan already has a Mountain View campus, which includes its Technology Center located on 1065 La Avenida. Microsoft has had a presence in Silicon Valley since 1981, and now has about 1,600 employees in the region, according to the latest Business Journal research, working on products ranging from Azure, Xbox, Outlook.com, and Skype. It acquired Mountain View-based LinkedIn last year. The company has 71,000 employees in the U.S. and 121,000 employees globally. Looking forward, it wasn’t immediately clear how many employees the new facility could house. A brand new campus would allow the company to compete for competitive cloud talent in a central area that could be accessible to South Bay, North Bay and East Bay commuters. However, if the company goes with its second data center option, fewer employees would be needed. Microsoft has been undergoing company-wide workforce restructuring as it focuses on the cloud-services product Azure. Last month, the company said it was going to cut nearly 10 percent of the company's total sales force, about 75 percent of whom were to be outside the U.S. It said its plan is to use employees who are more knowledgeable about specific verticals so they can sell bigger packages, according to reports. Microsoft has seen its cloud business grow massively: The company reported its Azure sales grew 93 percent last quarter. Its competitors include Amazon Web Services and Google Cloud, among others.