Hudson Pacific Properties released its latest quarterly earnings report earlier this week, and the public REIT had some good news to report to its shareholders that included a slew of leases around the region that show a market maintaining its momentum.
“We had a strong second quarter, particularly in terms of leasing and building upon our foundation for long-term growth through prudent capital recycling,” said Victor Coleman, Hudson Pacific Properties’ chairman and CEO in a statement.
One of those leases was in San Jose, where cloud computing and software company Nutanix renewed its 212,600-square-foot lease at 1740 Technology and Metro Plaza in North San Jose through May 2024. The company also signed two new leases with the same expiration for an additional 21,379 square feet at 1740 Technology and 58,714 square feet at Concourse in North San Jose.
Another lease increase for the company was in San Francisco, where Square, Inc. signed a new 104,135-square-foot lease through September 2023, which matches the timing of its existing lease at 1455 Market in San Francisco. Square now leases a total of 469,056 square feet at 1455 Market. In 2010, Hudson Pacific paid $93 million, or $90 per square foot, to buy a 100 percent interest in the property. In January of 2015, Toronto-based Canada Pension Plan Investment Board invested $219.2 million, or $476 per square foot, to acquire a 45 percent interest in the roughly one million square-foot 1455 Market Street property.
These two are just two of the local examples Hudson Pacific saw over the last few months that included 804,000 square feet of leases with 23 percent average rent growth. “Already standout West Coast market fundamentals continued to improve. We executed leases in excess of 800,000 square feet with 23 percent GAAP and 17 percent cash rent growth, including the early renewal and expansion of two of our largest tenants, Nutanix and Square, Inc.,” added Coleman. “We have renewed or backfilled, or are in leases, LOIs or proposals on 76 percent of our 2018 and 48 percent of our 2019 expirations.”
There was some mixed news, as well, from the company. Total revenue at the company’s office properties decreased 5 percent to $158.6 million from $166.9 million for the same quarter a year ago, according to a company statement. The decrease was primarily the result of a $3.9 million decrease in rental revenue to $129.7 million, a $3.1 million decrease in tenant recoveries to $22 million, and a $1.4 million decrease in parking and other revenue to $6.9 million. The decrease in rental revenue, tenant recoveries and parking and other revenue largely resulted from the Cisco and Robert Bosch lease terminations at Campus Center in Milpitas and Foothill Research Center in Palo Alto, respectively, as well as the sales of Pinnacle I and Pinnacle II (sold November 16, 2017) in Burbank, Embarcadero Place in Palo Alto, which sold on January 25, 2018 for $136 million, 2180 Sand Hill in in Menlo Park, which sold on March 1, 2018 $82.5 million and 9300 Wilshire in Los Angeles, which sold on April 10, 2018.