Last Update 07 Dec 25

Fair value Increased 568%

HPP: Gateway AI Office Demand Will Drive Upside Despite Recent REIT Reset

Analysts have trimmed their average price target on Hudson Pacific Properties by roughly $0.50 in recent weeks, citing a reset of expectations following sector wide REIT target cuts, even as operating fundamentals and long term AI driven office demand remain supportive.

Analyst Commentary

Bullish analysts continue to highlight that, despite modest price target reductions, the overall backdrop for Hudson Pacific remains supported by relatively healthy REIT operating trends, particularly in markets benefiting from artificial intelligence driven office demand.

At the same time, more cautious voices see the lower targets as a reflection of execution risk and uncertainty around how quickly fundamentals can translate into sustained value creation for equity holders.

Bullish Takeaways

Bullish analysts point to broadly healthy Q3 2025 operating conditions across REITs, suggesting that the reset in price targets is more about sector wide valuation discipline than a company specific deterioration.
Exposure to traditional gateway markets tied to AI job growth, including San Francisco, Seattle and other coastal hubs, is viewed as a structural tailwind for long term office demand and potential rent growth.
The sustained Overweight or positive stance from some on the Street indicates confidence that current pricing already discounts macro and labor market worries, leaving room for potential upside if leasing trends and occupancy stabilize or improve.
Gateway market positioning is seen as enhancing Hudson Pacific’s relative risk reward profile compared with peers that have heavier exposure to slower growth or non AI driven markets.

Bearish Takeaways

Bearish analysts interpret the sequential cuts in price targets into the mid to low two dollar range as evidence that the stock’s fair value has been compressed by lingering concerns around office utilization and capital market conditions.
Neutral and Hold ratings underscore skepticism that management can quickly convert favorable AI and tech demand narratives into higher cash flows and net asset value per share.
Transfer of coverage related adjustments and sector wide rebalancing highlight the risk that further de risking by investors could cap near term multiple expansion, even if property level metrics remain resilient.
Uncertainty around the timing and magnitude of recovery in coastal office leasing keeps some investors cautious on underwriting faster growth, which in turn limits conviction in material upside from current levels.

What's in the News

Hudson Pacific filed Articles of Amendment in Maryland to implement a reverse stock split, reduce the par value of its common stock, and cut authorized shares to 121.6 million, aligning its capital structure with the smaller post split share count (Key Developments).
A 1 for 7 reverse stock split of Hudson Pacific common stock is scheduled to take effect in early December 2025. Every seven existing shares will be consolidated into one new share (Key Developments).
The company reported that, as of the quarter ended September 30, 2025, it had completed repurchases of about 9.35 million shares for $213 million under its share buyback program initiated in 2016 (Key Developments).
Hudson Pacific updated full year 2025 guidance, projecting GAAP non cash revenue from straight line rent and above or below market lease adjustments in a range of approximately $3 million to $8 million (Key Developments).

Valuation Changes

The Fair Value estimate has risen significantly from approximately $3.08 to about $20.58 per share, implying a substantially higher intrinsic value baseline.
The Discount Rate is unchanged at 12.5 percent, indicating no adjustment to the assumed risk profile or required return.
The Revenue Growth forecast has edged down modestly from about 4.70 percent to roughly 4.22 percent annually, reflecting slightly more conservative top line assumptions.
The Profit Margin expectation has increased slightly from around 10.41 percent to about 10.65 percent, suggesting a small improvement in anticipated profitability.
The Future P/E multiple has decreased moderately from roughly 21.8x to about 20.5x, signaling a somewhat lower valuation multiple applied to forward earnings.

Increased AI and tech sector leasing, along with studio demand from content creation, is boosting occupancy, revenue, and future margin potential.
Operational streamlining, balanced portfolio repositioning, and improved liquidity enhance earnings stability and support growth amid evolving workspace trends.
Concentration in tech-centric West Coast markets and weak office demand, combined with financial pressures and studio volatility, undermine stability and limit earnings growth potential.

Catalysts

About Hudson Pacific Properties

A real estate investment trust, or REIT, and the sole general partner of our operating partnership.What are the underlying business or industry changes driving this perspective?

Accelerating office leasing momentum, particularly driven by AI and tech sector expansion in West Coast markets, is resulting in rising tour activity, increasing average deal size, and a strong leasing pipeline; this trend should drive higher occupancy and ultimately top-line revenue growth as well as improved earnings visibility over the next several years.
Growing content creation demand from streaming services and the ramp-up in California film and television tax credits are leading to rising studio show counts, improving occupancy at core studio assets, and the potential for a return to meaningful studio NOI/EBITDA levels-providing both revenue diversification and a runway for margin improvement as studio utilization recovers.
Enhanced focus on cost containment, with ongoing G&A cuts and operational streamlining (notably in the Quixote studio business), is driving immediate margin improvement and reducing the breakeven occupancy threshold, with further upside as show counts and utilization improve.
The company has significantly strengthened its balance sheet, securing over $1 billion in liquidity, refinancing near-term maturities, and raising equity to deleverage, which reduces interest expense and supports future growth capital needs, further benefiting net margins and earnings stability.
Portfolio repositioning through the sale of non-core assets and ongoing investment in premier studio and office developments positions HPP to capitalize on rising demand for high-quality, amenity-rich, sustainable workspaces-catalyzing future rent growth and supporting resilient long-term cash flows.

Hudson Pacific Properties Earnings and Revenue Growth

Hudson Pacific Properties Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Hudson Pacific Properties's revenue will grow by 4.4% annually over the next 3 years.
Analysts are not forecasting that Hudson Pacific Properties will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Hudson Pacific Properties's profit margin will increase from -53.3% to the average US Office REITs industry of 10.7% in 3 years.
If Hudson Pacific Properties's profit margin were to converge on the industry average, you could expect earnings to reach $96.5 million (and earnings per share of $0.21) by about September 2028, up from $-422.8 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.3x on those 2028 earnings, up from -2.5x today. This future PE is lower than the current PE for the US Office REITs industry at 37.9x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Hudson Pacific Properties Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent shift towards remote and hybrid work is driving long-term reductions in traditional office demand, as evidenced by office occupancy rates still well below pre-pandemic levels (currently around 75%), putting pressure on leasing, achievable rents, and revenue.
Company's heavy geographic and asset concentration in West Coast tech and media markets heightens exposure to cyclical downturns, regional outmigration, and tech sector volatility, increasing the risk of revenue shortfalls and inconsistent net operating income.
Structural oversupply and weak absorption in key office markets remain an ongoing challenge, as indicated by declining trailing 12-month net effective rents (down 11% versus pre-pandemic), limiting rent growth and constraining earnings improvement.
Elevated leverage and reliance on asset sales and equity offerings to boost liquidity signal ongoing pressure on free cash flow, with dilutive impacts on earnings per share and increasing refinancing risk, especially if interest rates remain high.
Studio operations, despite some improvement, remain vulnerable to inconsistent production volumes and show counts; recovery to prior profitability levels is not guaranteed, and continued underperformance or weak occupancy would weigh on overall revenue and FFO growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $3.232 for Hudson Pacific Properties based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $5.0, and the most bearish reporting a price target of just $2.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $902.1 million, earnings will come to $96.5 million, and it would be trading on a PE ratio of 22.3x, assuming you use a discount rate of 12.3%.
Given the current share price of $2.81, the analyst price target of $3.23 is 13.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

AI And Tech Expansion Will Revitalize West Coast Leasing