A Silicon Valley tech company has recommitted to anchoring its South Bay headquarters, further solidifying the region's return to pre-pandemic levels of office space demand.
Qualys, a cloud security company based in Foster City, California, agreed to extend the lease on its 75,275-square-foot headquarters for another six years, pushing the expiration date until at least August 2031. The multifloor renewal accounts for about half of the 143,000-square-foot building at 919 E. Hillsdale Blvd., bolstering landlord Hudson Pacific Properties' occupancy for the property and Qualys' own future in the tech-concentrated hub.
The company initially moved into the Foster City building in early 2017 as part of an expansion from its original space in nearby Redwood City, California, where it was founded more than two decades ago.
The renewal was part of a significant boost Hudson Pacific recently reported in leasing demand and activity across the San Francisco Bay Area. Tech companies such as Qualys, along with booming growth across the artificial intelligence sector, have helped bolster the regional office market in the aftermath of the turmoil wrought by the pandemic.
Leasing generated by tech companies in the area drove the single-largest quarter occupancy increase over the past seven years, according to CoStar data. This marks the third quarter in which the industry signed on for more space than it offloaded. It is also setting the stage for the highest annual leasing volume since 2019.
In Silicon Valley, much of the tech-induced activity has been generated by new leasing and deals that span upward of 100,000 square feet.
Hudson Pacific Properties reported a nearly 10% bump in tour activity across its Silicon Valley office portfolio compared to this time last year, executives of the Los Angeles-based real estate investment trust recently told analysts, hitting its highest level of activity in more than two years.
"It's 100% driving the strength across the San Francisco Bay Area," Arthur Suazo, the REIT's executive vice president of leasing, said in response to a question regarding the tech industry's role in the regional office market recovery. "It's the tech sector and its relationship to the leasing pipeline, so we're seeing these tenants take 8,000; 10,000; 15,000 square feet and then grow."
Anchored growth
Other landlords with stakes in the region have pointed to the tech industry's resurgent demand as a signal of the Silicon Valley area's broader recovery.
A recent spate of blockbuster leases and acquisitions has collectively added to the growing sense of optimism that global tech companies are evolving beyond the days of making significant cuts and implementing widespread lease terminations, both of which crippled the national office market as the sector scrambled to adapt to the impacts of the pandemic.
The Silicon Valley market has increasingly shown signs of stabilization, with companies such as Apple, LinkedIn, Walmart and Amazon committing to larger blocks of space for longer periods as they appear willing to return to their pre-pandemic days of real estate expansions.
LinkedIn, for example, recently closed a $75 million deal to purchase a 120,000-square-foot property in Sunnyvale. Walmart recently inked one of the San Francisco Bay Area's largest pandemic office deals. And Amazon has ramped up its partnership with coworking operator WeWork to add roughly 141,000 square feet to its Silicon Valley footprint.
Unlike some of its Silicon Valley counterparts that have experienced or are fueling dramatic growth spurts, Qualys' own trajectory has maintained a steady upward climb as the company has taken a more moderate approach to expanding.
Its headcount has increased from about 1,450 people in 2020 to about 1,900 employees by year-end 2024, according to information filed with the Securities and Exchange Commission, mirroring its revenue growth over the same period as it has focused more on profitability than a growth-at-all-costs approach adopted by other tech companies in the area.