By Jon Peterson
With its lease to on-demand luxury-car service Uber, Los Angeles-based Hudson Pacific Properties Inc. has successfully filled 1455 Market St. in the last two-and-a-half years, taking occupancy to 95 percent.[contextly_sidebar id=”3bb00c104def3c75460bd17b8ecdeaa9″]Hudson acquired the mammoth 1.012 million square-foot offices and data center from Bank of America in December 2010, paying $93 million. The bank at the time occupied 800,000 square feet of the property; it now occupies half that. The building was developed in 1977 as a build-to-suit for the bank. There are now 25 tenants roaming its 22 stories.
The next lease terminates in 2016 “when a portion of the existing 400,000 square feet occupied by Bank of America opens up,” said Victor Coleman, Hudson’s chairman and chief executive. A company spokeswoman declined to specify how many square feet that would be.
Tech tenant demand, which drove a more than 70 percent increase in average asking rents for offices in San Francisco since the first quarter of 2010, has cooled dramatically in the first half of 2013, according to research by real estate services company CBRE Inc. and others. During the same six months, business, financial and legal services, retail companies and a smattering of other industries have relinquished more than 170,000 square feet among them.
Net absorption, or the difference in occupied space from one period to another, totaled two million square feet from the middle of 2011 to the middle of 2012. It was not quite 450,000 square feet in the most recent four quarters, CBRE said, adding less than 200,000 square feet in the quarter just completed.
He is not worried, Coleman said: “We are aware of the reports. Our company is still a believer in the [San Francisco] office market on a long-term basis.”
San Francisco-based Uber Technologies Inc. leased 88,134 square feet for 10 years at 1455 Market. In February, Hudson Pacific said that Square Inc., an electronic-payment service provider that allows credit cards to be used on mobile devices, was expanding to another 81,354 feet at 1455 Market. That was on top of not quite 250,000 square feet that Square leased in November.
“I would consider both of these companies not to be emerging-technology firms. Both of them have been around since 2009 and have a proven track record of performance,” Coleman said.
Hudson declined to release a list of all 25 tenants, citing confidentiality agreement.
Uber provides “on-demand private driver[s]” to people who want a luxury ride. Consumers use their iPhone or Android apps to send Uber information about where they want to be picked up. Uber responds by telling them how long before the car arrives. Payment is handled electronically with a credit card on file. “For the quality of property like 1455 Market gross rents are in the range of mid $50 per square foot. This represents a $15 per square increase over the past two years,” Coleman said.
Photo courtesy of Hudson Pacific Properties