Microsoft has received approval to move forward with its North San Jose data center project, marking the first time the tech giant will build, own and manage a digital infrastructure facility in the South Bay.
The San Jose Planning Commission has green-lit a conditional use permit that will allow Microsoft to build two data center buildings totaling approximately 397,200 square feet on a 64.5-acre site at 1657 Alviso-Milpitas Road. The data centers will have a maximum electrical load of 99 MW.
“We’re very excited to get started,” said Jonathan Noble, senior director of government affairs at Microsoft. “We have been working on this project for a number of years. In fact, the original project was passed way back in 2017 (and) the vision for data centers out in this property, in this area of San Jose dates back to ‘91.”
Even before the artificial intelligence boom put a greater emphasis on the need for data centers, Microsoft had eyed the North San Jose site near the Coyote River to bolster its cloud services and data processing business. At the time, it paid $73.2 million for the property and the company also floated another data center proposal in 2023 for a parcel at the corner of Orchard Parkway and Component Drive.
The approval of Microsoft’s project also comes at a time when the company announced that it would be slowing down data center construction, including putting the brakes on plans for a $1 billion project in Ohio’s Licking County.
Silicon Valley has seen a large influx of data center projects over the past few years as the region looks to capitalize on the interest in AI.
Just this week, the San Jose City Council voted to fast-track two combined data center and housing projects envisioned by Westbank in the downtown area.
Noble said that Microsoft’s project would help San Jose attract leading technology firms as the city needs more investment in digital infrastructure to maintain a competitive advantage.
Along with the two data center buildings, a new 115 kilovolt substation will be constructed on the northwestern corner of the site and connect to PG&E’s Los Esteros Substation.
While the project will take 33 months to complete, San Jose stands to receive several benefits both during and after construction.
Microsoft has committed to making $65 million in infrastructure improvements, including the widening of Zanker Road and the rebuilding of bike lanes.
Noble said the project would also create 100 construction jobs and the facility will employ 140 people once it is up and running.
The project also will generate approximately $8.4 million in development impact fees and over $10 million in annual property tax revenue. Between taxes and fees, the city stands to receive between $3.6 million and $6.4 million in annual revenue.
