Hudson Pacific Properties is feeling the burn of withering office markets.
The Los Angeles-based real estate investment trust lost $52 million in the first quarter, up 160 percent from its $20.4 million loss reported in the same period last year, according to an earnings release on Wednesday.
The reason: Hudson Pacific harvests less and less revenue from its office properties.
Vacancy “remains stubbornly high as many existing tenants continue to downsize,” CEO Victor Coleman said on a call Thursday discussing the firm’s quarterly earnings.
The company reeled in $175 million in revenues from its office portfolio from January through March, down roughly 15 percent from the first quarter of 2023, financial filings show.
Its office portfolio was 78 percent occupied on average in the first three months of this year, down from 85 percent a year prior.
Hudson Pacific is looking to sell three office buildings totaling around 900,000 square feet, or roughly 8 percent of its office portfolio, Coleman said on the call. The firm did not identify which buildings it was looking to shed.
The San Francisco Bay Area is causing the most pain for the company in terms of vacancy — its portfolio there was 74 percent leased on average in the first quarter.
The leasing is uneven, too. One building, Skyport Plaza in North San Jose, was 6 percent occupied, while others including 3400 Hillview Avenue, were 100 percent leased.
On some buildings, Hudson Pacific is still bullish. At 1455 Market Street, where the firm just signed the City of San Francisco to a 157,000-square-foot lease, the firm paid $43.5 million for a 45 percent interest in the building, the firm said on Wednesday.
Over the past few years, Hudson Pacific has relied on its movie studio portfolio to boost revenues, given the uncertainty around the office sector.
But, with two sweeping strikes that hit the entertainment industry, Hudson Pacific is in recovery mode on those assets, too.
Revenues from its studio portfolio — about 10 percent of all its holdings — have shrunk 15 percent over the last year, financial filings show. In November, the firm was expecting a “tremendous upswing” when filming resumed, but hasn’t seen it yet.
“The film and television industry has recovered far more slowly than anticipated,” Coleman said, though he remained hopeful. “There is no question that high-quality, original content will remain essential for the studios growing their subscriber bases and building valuable IP.”
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Uncategorized, Earnings, LA Office Market, SF Office Market, Studio Real Estate
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