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Hudson Pacific feels brunt of slow office market
REIT reports wider loss in the third quarter, calling it “a time of pause” for leases
Hudson Pacific Properties feels the impacts of a slow office market.
“It’s a time of pause, slowness and maybe even reversing path and giving up space,” particularly for technology tenants, the company’s President Mark Lammas said during an earnings call on Thursday.
The Los Angeles-based REIT signed new leases and renewals spanning about 381,000 square feet — half of the physical volume that was signed in the second quarter, according to its third-quarter report.
“It’s taking longer to get deals over the finish line,” CEO Victor Coleman said on the earnings call. “The flow of deals is nowhere near what we’ve seen in the past.”
In the third quarter, Hudson Pacific reported a $17.3 million net loss, up more than 130 percent from the prior period, when it saw a net loss of about $7 million.
The company lost a few key tenants from June through September. In the Bay Area, Qualcomm did not elect to renew its lease for about 376,000 square feet at Skyport Plaza, a 38-acre mixed-use campus in North San Jose.
In Los Angeles, NFL Media terminated its lease for Hudson Pacific’s 168,000-square-foot property at 10950 Washington Boulevard in Culver City early, after trying to sublease the space.
No other key tenants have leases expiring in the next year, Arthur Suazo, the firm’s head of leasing, said on the earnings call.
Despite the losses, the company is collecting slightly more revenue, reporting $260 million from June through September, compared to $251 million in the second quarter.
Most of that increase can be attributed to Hudson Pacific’s studio business. The company reeled in $46.9 million in studio revenues in the third quarter — a 33 percent increase from the second quarter.
Hudson Pacific also offloaded some of its office properties in the third quarter, including 6922 Hollywood Boulevard in Hollywood, which it sold for $96 million. Harbor Associates bought the property, according to Commercial Observer.
Coleman took the time on the call to answer a question about whether social or political issues in L.A. and San Francisco were impacting a return to office.
“I was pleasantly surprised by the activity in streets and the flow of traffic, specifically in the financial district in San Francisco,” Coleman said, adding pressure from companies and the government were “loud enough” to “clean up” the city.
In L.A., Coleman touched on the upcoming election, in which developer Rick Caruso will face Congresswoman Karen Bass to take over the helm as mayor.
“Next week is a big week for Los Angeles,” he said. “I’m hoping for a little bit of sea change.”