Kilroy Realty Corporation - Fourth Quarter 2023 Earnings Call Summary
As a leading US landlord and developer with operations in San Diego, Greater Los Angeles, the San Francisco Bay Area, the Pacific Northwest, and Austin, Texas, Kilroy Realty Corporation’s Earnings Call is a good indicator for office, life science and mixed-use submarkets in the US. Dunn and Bradstreet say Kilroy’s portfolio includes over 120 office properties (approximately 16.2M square feet of leasable space) and eight future development sites. The earnings call for featured discussions on past performance, future trends, and strategic plans under the new leadership of CEO Angela Aman.
Key takeaways include:
Past Performance: The company highlighted its vigorous leasing activity in Q4, with 590,000 square feet of leases signed, marking the highest quarterly volume since 2019. Notable leases included agreements with a Fortune 500 technology company and an international law firm in the Bay Area. For the full year 2023, Kilroy leased approximately 1.3 million square feet. Early 2024 continued this momentum with a significant lease extension with Riot Games.
Future Trends and Guidance for 2024: Kilroy expects the office market to remain challenging, but is well-positioned to respond to evolving tenant needs, emphasizing the demand for high-quality, amenitized spaces. The company's in-process development pipeline stands at approximately $1.1 billion, with a focus on maintaining high-quality properties and strategic capital allocation. For 2024, Kilroy projects an average occupancy expectation of 82.5% to 84%. No new developments are anticipated for 2024, highlighting a cautious approach to expansion amid market challenges.
Market Observations: The call included observations on the West Coast markets' recovery post-pandemic, with increased activity levels in foot traffic, public transit usage, and tourism. Office space demand is evolving, with tenants seeking spaces that enhance productivity and collaboration.
Financial Results: The balance sheet remains robust, with significant liquidity to fund development needs and potential strategic opportunities.
Development Pipeline: The Kilroy Oyster Point Life Science Development in South San Francisco is a key focus, with the second phase's stabilization date now estimated for the fourth quarter of 2025 due to scheduling revisions. Despite these delays, Kilroy remains optimistic about the project's appeal to prospective tenants.
