Office Leasing Increase, New Film Credits Offer Hope At Hudson Pacific

Hudson Pacific Properties signed 558K SF of new leases in the second quarter of 2025, which executives at the company say is on pace to be its best office leasing year since before the pandemic.

But its occupancy numbers still sag after several quarters of depressed leasing demand for its two main property types: office and studios.

Year-over-year occupancy in HPP’s office portfolio declined from 78.7% in the second quarter of 2024 to 75.1% this year. Space leased dropped from 80% last year to 76.2%. Both metrics remained relatively flat from the prior quarter.

The company has exited Quixote leases since the beginning of the year in an effort to cut costs. In July, the company filed Worker Adjustment and Retraining Notification paperwork relating to the layoffs of 82 people at Quixote facilities. These cuts were a continued part of that cost-cutting, executives said.  

But leadership was focused on the positive during the call. The Q2 leasing activity brought year-to-date leasing to 1.2M SF, and 60% of the quarter's leases were new.

Those numbers put 2025 “on pace for our strongest office leasing year since 2019,” HPP President Mark Lamas told investors. 

There was good news out of the Bay Area, where tech and artificial intelligence leasing in San Francisco drove the single-largest quarter occupancy increase for that market in seven years and a third consecutive quarter of positive net absorption, Coleman said. HPP’s Silicon Valley properties saw occupancy improve for the third quarter in a row. 

Overall, the firm posted an $83M net loss attributable to common shareholders, a larger loss than in the first three months of the year, when it posted a roughly $74M net loss.

The net loss was largely due to “items affecting revenue as well as accelerated depreciation resulting from Quixote lease terminations and disposal of obsolete fleet,” according to a release from HPP. 

Still, the overall optimism for HPP’s West Coast portfolio was not just confined to company executives. In June, global asset manager Cohen & Steers purchased $300M of HPP stock in a big bet that a West Coast office market recovery is, if not underway, in the offing. 

The studio arm of the business is still struggling, but a handful of changes gave executives reason to hope for a turnaround.

“There are multiple reasons we are gaining confidence in the business despite weaker overall production activity in the second quarter,” CEO Victor Coleman told analysts. 

In early July, Gov. Gavin Newsom signed a law increasing the cap on California’s film and TV tax credit program to $750M  almost double the previous $330M cap — in a move to attract productions back to the state. Statewide, soundstages averaged 63% occupancy in 2024, a low not seen since 2016, according to FilmLA. 

HPP soundstages and studio space were 63% leased in Q2, down from 76.1% the same period in 2024. The large dip was due to the inclusion of HPP’s recently completed Sunset Glen Oaks studio campus, Lamas said. If that development were left out, HPP's stage-leased percentage would have increased to 80%.  

Pilot shoot days were up 11% year-to-date and 48% on a trailing 12-month basis, Coleman said. There were also 134 productions in development in California during Q2, the most since the 2023 writer and actor strikes. 

With productions only now starting to apply for the $750M in film tax credits approved in the state, Coleman anticipated that HPP could start to see an uptick as those credits are received, which could be as early as Q4. 

Lamas said that quarter-over-quarter, HPP’s studio revenue increased by 3% to $34.2M due to additional studio occupancy and transportation utilization at Quixote, even though there had not been an increase in filming at their properties.