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Hudson Pacific (HPP) Signs Long-Term Lease for 70,285 Sq Ft

Zacks Equity Research
·3-min read

Hudson Pacific Properties, Inc. HPP has acquired a lease for 70,285 square feet at its recently-completed Class A office development — Harlow — situated in at Sunset Las Palmas Studios in Hollywood. The tenant is a global post-production company, Company 3.

The 11-year lease will start in second-quarter 2022. The tenant also fully occupies Hudson Pacific’s entire 3401 Exposition office property in Santa Monica.

Per management the lease is a “shining example of what we deliver for our tenants — stunning architecture; sustainable, wellness-centric and tech-forward design and operations; and a unique on-studio lot location.”

With the lease, the property is more than 50% leased and the company is seeing strong interest from prospective tenants for the remaining space at the building. This highlights the robust demand for the company’s assets as companies return to offices with the easing of mobility restrictions.

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In fact, Harlow is a four-story, newly-constructed Class A office building spanning 130,000 square feet of space. Last year, Hudson Pacific sold a 49% stake in its Hollywood Media portfolio to Blackstone BXMT. With this, Harlow is owned by both companies.

Notably, office-space demand is being driven by the de-densification to allow higher square footage per office worker and the need for better-amenitized office properties to focus on health and wellness amid social-distancing requirements. This emerging trend and Hudson Pacific’s ability to offer new and modernized office space have likely enabled the company to clinch the lease.

However, the coronavirus pandemic has led to an uncertain economic environment. In such a scenario, office space utilization has reduced and rental payment collections have become uncertain. Consequently, in a bid to attract tenants, landlords are offering tenant lease extensions and concessions.

Also, the rising supply of office properties remains concerning for the company. Moreover, with numerous developers, owners and operators of office properties and other commercial real estates, including sublease space available from its tenants, the office real estate landscape remains competitive. This restricts Hudson Pacific’s ability to attract and retain tenants at relatively higher rents than its competitors.

Shares of this Zacks Rank #3 (Hold) company have gained 8.9% over the past year compared with the industry's rally of 20.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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Zacks Investment Research