Los Angeles-based Kilroy Realty Corp. recently revealed that year to date it has signed approximately 2.6 million square feet of new or renewing leases at rents that are up 15% on a cash basis and 37% on a GAAP basis over the prior leases. The average lease term is approximately nine years and annual rent escalations are approximately 3%. Included in this leasing activity are nearly 2.2 million square feet of leases signed through the end of the third quarter and 415,000 square feet of leases signed month to date.
During the third quarter, the company completed two large transactions greater than 80,000 square feet, including 10-year leases with Facebook Inc. encompassing 85,000 square feet in Bellevue, Washington and a 12-year renewal with Internet Brands for 92,000 square feet in the El Segundo submarket of Los Angeles.
In October, among other leases, the company signed a long-term lease with a technology tenant for approximately 193,000 square feet of office space in the South of Market Area district of San Francisco. This lease underscores the intense demand that exists for high quality, well-located, large blocks of space among San Francisco’s creative companies whose expectations have risen dramatically as they face increasing competition for top talent. To lock-in space that is desirable to today’s millennial workforce, companies are having to be flexible in how they acquire space, often times, committing to leases a few years out.
Also in October, in the submarket of Del Mar in San Diego, the company signed two large leases at strong rent levels, including a 67,000 square foot lease with a publicly traded life science company for its future headquarters space for a term of 10.5 years. FICO, formerly known as Fair, Isaac and Company, a data analytics company, also signed an 80,000 square foot renewal that extends the original lease expiration from early 2020 to 2027.