Hudson Pacific Properties is doubling down on plans to trim its portfolio of office and studio properties in order to best capitalize on rebounding demand.
The real estate investment trust, owner of properties along the West Coast, boosted its financial outlook for the remainder of the year. It's seeing renewed demand for premium workplaces and is winding down some of its underperforming studio operations in secondary markets elsewhere across the United States.
Executives of the Los Angeles-based landlord said increases in tour activity and tenant space requirements over the past several quarters are now translating into material occupancy gains, leaving it and other office property owners scrambling to capture the growing demand.
"Our markets are recovering, but importantly, the deliberate decisions we are making ensure Hudson Pacific Properties can capture this recovery better than most," Chief Executive Victor Coleman told analysts on the company's earnings call Thursday. "We are actively refining our studio portfolio to focus on the highest performing assets and lines of business, and we are making the necessary and, quite frankly, difficult decisions."
One of those decisions included Hudson's move last month to begin winding down some underperforming operations under its Quixote studio-and-equipment rental subsidiary as part of a broader effort to save up to $27 million annually across the segment. Those savings will instead be directed toward shoring up the landlord's balance sheet and redirecting the capital toward its office portfolio, a slice of its business that is far outshining the soundstage side.
"We are making the hard calls and continue to ensure our overhead is controlled," Coleman said.
'Path to growth'
So far that has been helped by fielding increasing demand from tenants for space in recovering markets such as San Francisco and Seattle. Hudson signed more than 554,000 square feet in the first quarter, about half of which represented new deals.
The REIT's struggling studio business meant Hudson posted a net loss of a little more than $53 million in the first few months of the year, yet brightening office market dynamics are lending a boost, officials said. The landlord closed the quarter with more than 2.4 million square feet of deals moving through its leasing pipeline, a 13% jump compared to the same period last year.
That boost has been enough for Hudson to raise its outlook for the remainder of the year, as it expects to build on its recent leasing momentum and continue to strengthen its financial position.
Despite a cloudy macroeconomic and geopolitical environment, the national office market has largely been able to build on the post-pandemic rebound that has been taking hold since the start of the year.
The national vacancy rate has largely peaked at about 14%, according to CoStar research. Tenants across the U.S. collectively signed nearly 120 million square feet of deals throughout the first quarter, the most since 2018. That's particularly notable given that average lease sizes are still about 15% smaller than pre-pandemic averages, meaning that companies signing those smaller deals are fueling the market, while larger tenants are increasingly locked into their existing spaces.
The uptick in leasing since the beginning of the year has closed the gulf between occupancy and lease rates, a residual sticking point for landlords that have struggled in recent years to backfill large blocks of space that tenants ditched during the pandemic.
Hudson's office portfolio, for example, posted its third consecutive quarter of occupancy gains, jumping to just shy of 78% compared to the roughly 76% the landlord reported at year-end 2025. And its leased rate is now about 78.5%, up from the 77% it reported for the prior quarter.
"Our outlook is up, occupancy is growing, prime studios are performing and Coyote's drag is being addressed," Coleman said, referring to its lackluster studio real estate business. "And we are doing all this while keeping our liquidity and balance sheet intact. Each of these actions reinforces the same outcome: a clear and credible path to growth through the balance of 2026."