Hudson Pacific Properties: San Francisco’s Office Recovery Has Found An Anchor Tenant -( $FGI $HPP )

Hudson Pacific Properties, Inc. (NYSE: HPP) is making a credible case that the West Coast office recovery is no longer just a conversation held over expensive coffee. With landmark San Francisco leasing, steadily rising occupancy, improving operating earnings and a resilient Hollywood studio platform, HPP is turning a bruised portfolio into a potentially powerful cash-flow recovery story. The centerpiece is 1455 Market Street, where the City and County of San Francisco has made a multidecade commitment that gives HPP something office landlords have missed dearly: visibility. In real estate, as in life, a 23-year commitment is generally preferable to a promise to “circle back next quarter.”

A Landmark Lease Rewrites the Narrative

HPP recently signed a 502,082-square-foot, 23-year lease expansion with the City and County of San Francisco at 1455 Market. The transaction brings the City’s commitment above 900,000 square feet, pushes occupancy in the roughly 1 million-square-foot tower to 89%, and extends the City’s occupancy through 2049, with two five-year extension options. The City becomes HPP’s largest tenant by square footage and second-largest tenant by annualized base rent. This is more than a handsome leasing statistic. It is one of the clearest signs yet that San Francisco’s office market is beginning to separate durable, transit-accessible, high-quality buildings from the broader vacancy headlines. The deal was the city’s largest office lease since 2018, placing 1455 Market at the center of a more practical municipal consolidation strategy.

For investors in HPP, the implications are substantial:

• Long-duration rent provides rare revenue visibility in an office market that has lived through a period of short leases and longer doubts.
• The 1455 Market transaction alone was expected to add roughly 400 basis points to HPP’s in-service office occupancy.
• A municipal tenant with investment-grade ratings—AA+/Aa1/AAA, according to the company—materially upgrades the quality and durability of the rent roll.

Occupancy Gains Are Becoming Earnings Gains

The second quarter of 2026 suggests that this is not simply a one-building victory lap. HPP executed 56 office leases totaling 1.3 million square feet, including 891,000 square feet of new and renewal leases with San Francisco. In-service office occupancy rose 470 basis points sequentially to 82.5%, marking the fourth consecutive quarterly increase.

More important, the operating results are beginning to translate leasing activity into financial results:

Q2 2026 operating measure	Result
Office leases executed	1.3 million square feet
In-service office occupancy	82.5%
Sequential occupancy change	+470 basis points
Core FFO per diluted share	$0.35
Core FFO per-share growth	30% year over year
Same-store cash NOI growth	7.5%
Total liquidity	$876.1 million

HPP reported Core FFO of $23.1 million, or $0.35 per diluted share, up from $0.27 a year earlier. Same-store cash NOI increased to $90.2 million, while management raised full-year 2026 Core FFO guidance to $1.12 to $1.20 per diluted share from $1.10 to $1.18. That is the recovery equation investors want to see: more leased space, higher property-level income and an improved outlook. Office real estate has rarely been accused of moving quickly, but the arithmetic can become surprisingly persuasive once occupancy starts climbing.

West Coast Exposure Is a Feature, Not a Footnote

Hudson Pacific’s portfolio is built around West Coast tech and media hubs, with office and studio assets serving the companies that shape digital work and entertainment. Management said it is seeing demand from AI, technology and professional-services users across its markets, supported by a 2.4 million-square-foot leasing pipeline. The company’s studio business adds a second recovery lever. Its Hollywood stages were 95.5% leased during the quarter, while Sunset Pier 94 Studios improved to 78.5% leased from 38.8% in the prior quarter. Across in-service studio stages, trailing three-month leasing reached 74.6%, up from 72.8%.

That combination is strategically compelling:

• Office: HPP can benefit if San Francisco, Silicon Valley, Seattle and Los Angeles continue converting return-to-office mandates and AI-driven hiring into physical-space demand.
• Studios: HPP retains exposure to content production infrastructure, where well-located stages are not easily replicated with a Zoom link.
• Capital recycling: The company sold a 161,000-square-foot, 55%-leased North San Jose office property for $25 million after quarter-end, continuing its effort to streamline the portfolio and preserve financial flexibility.

The Preferred Stock Adds a Different Lens

For investors seeking income rather than a pure common-equity recovery bet, HPP’s 4.750% Series C Cumulative Preferred Stock (NYSE: HPP.PR.C) declared and paid a quarterly dividend of $0.296875 per share, equivalent to $1.18750 annually based on its $25 liquidation preference. Preferred holders sit ahead of common shareholders in the capital structure for dividends and liquidation proceeds, although preferred securities still carry interest-rate, credit and trading-liquidity risks. The key distinction is simple: common shareholders own the upside if HPP’s recovery accelerates; preferred holders prioritize contractual income and seniority.

The Bull Case Is Execution, Not Magic

The bullish thesis for Hudson Pacific Properties (NYSE: HPP) rests on a concrete sequence rather than a heroic forecast:

1. The company is leasing meaningful square footage, not merely discussing demand.
2. Office occupancy is rising, and the 1455 Market lease gives the company unusually long cash-flow duration.
3. Core FFO and same-store cash NOI are improving alongside occupancy.
4. HPP has $876.1 million in total liquidity and had all debt fixed or capped at a weighted-average rate of 4.9% as of June 30.
5. The studio business offers an additional source of leasing upside as production activity normalizes.

The fair-minded caveat is that the turnaround is still a turnaround. HPP reported a second-quarter net loss attributable to common stockholders of $104.6 million, including a $50.4 million real-estate impairment, and AFFO remained negative at $0.05 per diluted share as leasing-related capital expenditures, tenant improvements and commissions weighed on cash flow. Cash rents on newly signed office leases also declined, reflecting the realities of re-leasing space previously contracted at pre-pandemic peak rents. Those facts do not erase the bull case; they define it. HPP is not a pristine-growth narrative. It is a recovery-and-repricing story whose investment appeal depends on management continuing to turn higher occupancy into durable NOI, FFO and eventually stronger cash flow after lease-up costs.

A Separate Small-Cap Turnaround: FGI

Today’s FGI Industries Ltd. (Nasdaq: FGI, $15.67, up +224.24% during intraday trading on Thursday) earnings release is unrelated to Hudson Pacific but presents its own modestly encouraging operational story. FGI, a kitchen-and-bath-products supplier, reported second-quarter revenue of $31.9 million, up 2.9% year over year; gross margin expanded 530 basis points to 33.4%; and it produced net income attributable to shareholders of $1.3 million, or $0.65 per diluted share, versus a prior-year loss. FGI reaffirmed 2026 revenue guidance of $134 million to $141 million, though tariff uncertainty, regional demand softness and a relatively modest $7.9 million liquidity position underscore that its risk profile differs sharply from HPP’s real-estate recovery thesis.

The Sources

1. Hudson Pacific Properties — About
2. Hudson Pacific Properties — Expertise
3. Ferry Building Birthday Party Attracts Thousands to San Francisco’s Embarcadero
4. San Francisco’s Biggest Office Lease in Years Comes to a Troubled Neighborhood
5. Hudson Pacific Properties Reports Second Quarter 2026 Financial Results
6. Hudson Pacific Executes 502,000-Square-Foot, 23-Year Lease with City and County of San Francisco at 1455 Market
7. Hudson Pacific Properties Declares Second Quarter 2026 Preferred Stock Dividend
8. FGI Industries Announces Second Quarter 2026 Results

Disclosure: This material is for informational and editorial purposes only and is not individualized investment advice or a recommendation to buy or sell securities. Investors should review HPP’s and FGI’s SEC filings, property-level disclosures, capital structures and risk factors before making an investment decision.