Hudson Pacific Eyes San Francisco Office-to-Resi Conversion

Hudson Pacific Properties is looking to turn a century-old office building into housing.

The Los Angeles-based firm, one of the largest real estate owners in the Bay Area, is seeking approvals to convert the upper floors of the six-story building at 901 Market Street into residential units, the San Francisco Business Times reported.

The ground floor of the 205,000-square-foot building is anchored by a Ross Dress for Less and previously hosted a Nordstrom Rack before it closed in 2023. The 114-year-old Mid-Market building was once the home of the Hale Brothers department store.

Hudson Pacific is studying the conversion as demand for office space in San Francisco heats up thanks in part to the ongoing artificial intelligence boom. AI-driven tech firms have been scooping up offices in the city and across the Bay Area at a breakneck pace in recent years.

At the same time, there is nearly 27 million square feet of vacant office space waiting to be leased, much of it located in older buildings. With many tech firms planting flags in newer buildings, many downtown buildings with longer histories usually have higher vacancy rates.

Office-to-residential conversions have become a critical part of city officials’ plan to revive downtown.

Last month, Mayor Daniel Lurie established a public financing program, known as the Downtown Revitalization Financing District, meant to incentivize developers to convert old office buildings in San Francisco’s urban core into housing.

The district encompasses the Financial District, Union Square and parts of the Market Street corridor and South of Market. Lurie has also sought to increase tenant interest in aging buildings by proposing cutting red tape to allow building owners to easily convert vacant ground-floor commercial space into tenant-serving amenities like gyms and lounges.

In its latest earnings call last month, Hudson Pacific reported a loss of roughly $278 million in the fourth quarter of last year, up from $167 million in Q4 2024, The Real Deal previously reported.

The company posted $572 million in losses last year, an increase year-over-year from a $364 million loss in 2024. The company chalked up the losses to its Quixote business, which rents sound stages and other film and TV production necessities, as the industry in Los Angeles navigates a downturn in activity. Still, Hudson Pacific’s office business did well; the company signed more than 2 million square feet of office leases, marking its best year since before the pandemic.

— Chris Malone Méndez