Data center and advanced manufacturing campus eyed near regional wastewater treatment facility in North San Jose

In an economic boon for the city, a massive plot of empty fields near the regional wastewater plant in North San Jose could become a new data center and advanced manufacturing campus, potentially infusing the city’s coffers with tens of millions of dollars annually.

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San Jose plans to enter negotiations with Prologis, the world’s largest developer and owner of logistics real estate, to develop the 159 acres of economic lands bounded by Los Esteros Energy Center to the east, Artesian Slough to the west, Highway 237 to the south, and the Silicon Valley Advanced Water Purification Center to the north.

Prologis’ proposal — dubbed the Sustainable Technology, Engineering and Manufacturing (STEM) Park — includes four 99MW data centers, totaling 1.68 million square feet and four buildings for advanced manufacturing.

While the city received several proposals from credible firms, San Jose Mayor Matt Mahan said Prologis’ vision for the property leveraged the significant energy capacity coming online and could contribute to the artificial intelligence revolution.

“I was really hoping to see data centers but also advanced manufacturing and high-paying jobs of the future,” Mahan said. ‘I want us to continue to make things here in San Jose … Prologis clearly offered the highest and best use of all the proposals.”

Within the 2,680 acres where the regional wastewater sits, the city has envisioned developing a portion of the buffer lands for economic purposes. The site is one of the largest undeveloped parcels left in Silicon Valley.

The property included restrictions on what could be built, preventing “odor-sensitive” uses such as residential projects, hotels or motels, schools, hospitals, churches or event venues.

In May, San Jose released a request for qualifications, compiling a list of 231 potential developers and brokers and 19,433 other parties in its bidding system to drum up interest in the opportunity.

The three finalists vying to develop the property included the San Francisco-headquartered Prologis, Catellus-Deca, and TC. No. Cal. Development, Inc., a subsidiary of the Trammell Crow Co.

Catellus-Deca’s proposal called for roughly 3 million square feet of flex space, including data centers, R&D space, or a business park, and 562,000 square feet of retail space located near the Highway 237 exit.

Trammel Crow envisioned developing the land with 3.2 million square feet of warehouse space, 54,000 square feet of office space and 60,000 square feet of retail.

While Prologis is a global firm, it has extensive holdings and experience in the South Bay, where it owns 47 properties, totaling 4 million square feet. The investment trust also has 1.2 million square feet under development.

The firm is also the long-time owner and operator of the International Park of Commerce in Tracy, which spans more than 1,200 acres.

A deal with Prologis will still require City Council approval. If an agreement fails to materialize, city staff have recommended selecting Catellus-Deca as the backup developer.

A timeline shared by Prologis with The Mercury News targets construction between 2028 and 2029 and initial occupancy sometime in 2030.

“This project is an incredible opportunity to combine power, modern infrastructure and strong partnerships to drive the next wave of innovation in Silicon Valley,” said Damon Austin, global head of Prologis’ Customer Led Development business. “San Jose’s vision aligns perfectly with ours — to create the space and energy that fuel what’s next for AI, advanced manufacturing and digital infrastructure.”

With the city currently facing some financial constraints, Prologis’ project could generate around $30 million in annual general fund revenue from utility taxes and paying rent to the wastewater treatment facility.

Mahan said Prologis’ proposal also made sense, given the energy commitments the city has secured that will triple its grid capacity.

LS Power, a Missouri-based utility development firm, is constructing two major high-voltage transmission lines over the next few years, including one that runs through North San Jose, descending from Fremont along a path near the regional wastewater facility.

The second transmission line runs from the Metcalf substation, just north of the Coyote Valley, to downtown San Jose. Once both are complete, San Jose’s power capacity could reach 3GW.

Mahan added that in other parts of the country, cities are scrambling to secure more energy to keep up with the growth of data centers, R&D, and advanced manufacturing, while raising concerns among residents that they will see a rate hike.

But because San Jose has excess capacity, the addition of a project like Prologis’ would help spread out some of the fixed costs and lower bills.

PG&E officials have noted that adding 1 GW of use could reduce ratepayer bills by 1-2%.

“Today, PG&E’s grid is utilized at 40-45% on average,” said Michael Medeiros, vice president of strategic commercial solutions at PG&E. “That means we have room to add large, steady loads without compromising reliability — and without having to build new infrastructure overnight. Therefore, by adding large energy users, like data centers, to our underutilized grid, we can spread the fixed costs of maintaining the grid over more customers and lower the unit cost of energy.”

In June, months before the city selected Prologis as the developer, San Jose also inked a first-of-its-kind deal with PG&E that committed the utility giant to delivering major grid improvements with clearly defined performance milestones.

The agreement included a commitment to provide 250MW of electrical capacity for the first phase of the wastewater land development. Medeiros said PG&E has yet to meet with Prologis, but was aware of its desire for more capacity.

“We look forward to working closely with the developer,” Medeiros said. “Once the developer signs with the City in 2026, we will need to conduct load and system impact studies. These studies will give us a clearer picture of the infrastructure that must be built to meet the developer’s needs.”