When it comes to office investments in the Bay Area, two of the biggest REITs have been expanding in two very different ways, according to a new report from Green Street Advisors. Kilroy Realty and Hudson Pacific Properties have both taken on expansion that carries "promising upside but also risk," says the real estate research firm.

Kilroy is focused mainly on development at this point of the cycle. The company's overall planned development as a percentage of assets is the largest in the office REIT sector, the report finds. In the Bay Area, Kilroy's holdings include the big LinkedIn campus in Sunnyvale where Apple signed to sublease two buildings (424k SF total) at the beginning of this year.

With the groundbreaking on The Exchange on 16th earlier this year (shown above), Kilroy has four projects under construction in the Bay Area with more than 1.6M SF of space and a total estimated investment of $1.1B, the REIT reports. The other three are fully leased by Salesforce, Box Inc. and Dropbox.

Back in March, John Kilroy told us The Exchange may be close to full when it opens with two tenants in the works. Kilroy reports it has 3.9M SF of operating properties in the Bay Area.

Hudson Pacific's growth has been driven by the $3.5B acquisition of 8.2M SF of office space from Blackstone. The portfolio included 26 office assets and two development parcels in San Francisco, Redwood Shores, Palo Alto, Silicon Valley and the San Jose airport.

Hudson Pacific now owns and operates 33 office properties in the Bay Area, including Skyport Plaza in San Jose (shown above); and 3400 Hillview in Palo Alto's Stanford Research Park (leased to Google for Nest Labs HQ).

Green Street Advisors' report lays out some of the fundamentals in the Bay Area office market, which it says has been the country's strongest office market for several years now.

Even as new office space is developed, supply has been getting soaked up by strong demand, most of it driven by the tech sector. Tech has recently made up more than half of office space demand in San Francisco, the report notes. Some demand is moving into nearby areas like Oakland as availability in prime locations gets very tight and rents continue to spike.

A significant amount of space is expected to come on the market in a few years, including Kilroy's The Exchange on 16th and Boston Properties' Salesforce Tower (above).

Green Street senior analyst Jed Reagan tells us there are not a lot of new office development entitlements remaining under San Francisco’s Prop M, so that should help keep a lid on how much new supply will come out of the ground in the city in the coming years.