Los Angeles-based Kilroy Realty Corp. recently revealed that it has signed new or renewing leases on more than 890,000 square feet of space across the company’s portfolio during the first four months of the year. Rents on these leases were up 19% on a cash basis and 36% on a GAAP basis.
This robust leasing activity, in addition to the leases signed in 2016 that have not yet commenced, has reduced the company’s 2017 expirations of 757,000 square feet to approximately 355,000 square feet or less than 3% of total expirations, according to the firm.
The strong leasing performance spanned all four major markets of the company’s West Coast portfolio that include Seattle, San Francisco, Los Angeles and San Diego.
“Our real estate markets are among the most dynamic in the United States today,” said John Kilroy, the company’s chairman, president and chief executive officer. “They are the breeding grounds for some of the most innovative companies in the world, and magnets for new creative talent. Large, established companies continue to expand their presence here, while enterprising start-ups seek to establish a foothold. Our portfolio of well-located and well-designed contemporary, sustainable work environments is in constant demand.”
For the quarter ended March 31, 2017, the company executed 747,000 square feet of leases at rents that were up 15% on a cash basis and up 29% on a GAAP basis. The leases signed during this period included a renewal by Expedia of its 112,000 square-foot lease at the company’s Skyline Tower in the Bellevue CBD submarket of greater Seattle. The renewal terms extended half the square footage to 2020 and the other half to 2023. In San Francisco, at the company’s 303 Second Street property, App/Dynamics, recently acquired by Cisco, renewed and expanded its lease by 67,000 square feet or 76% to take a total of just under 150,000 square feet for a term of five and a half years. And in San Diego, the company signed multiple leases totaling 157,000 square feet of space in several different projects.
As of April 26, 2017, KRC’s stabilized portfolio was 95.7% leased.
In a recent analyst report on the firm’s Q1 results, RBC Capital Markets says that move-outs pushed occupancy lower. The lower FFO results, according to RBC, was likely driven by higher than expected interest expense in part due to lower capitalized interest with the stabilization of Columbia Square during the quarter.