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Kilroy Realty Experiencing Record High Rents in Most Markets

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Demand remained solid up and down the West Coast. That is according to John Kilroy, president and CEO of Kilroy Realty, on the firm’s Q1 earnings call. “We are seeing more diversified demand, it’s not just technology and media it’s far more broad base.”

He explained that those strong conditions have driven double digit rent growth on a net basis across the company’s key urban markets. Among the biggest gains, he said, South Lake Union rents are up more than 25% year-over-year, San Francisco rents are up 15%, vacancy rates are now below 6% in the REIT’s urban markets and hitting record lows in some areas Bellevue is at 2.9%, San Francisco is at 4.4% and South San Francisco is about 2.5%. “And with very few large blocks of space available in our key markets, we expect the upward pressure on rents to continue. In fact, we’re currently experiencing record high rents in most of our markets.”

Other indicators that the company is monitoring including job postings and VC funding remained healthy. “Seattle and San Francisco Bay Area, continue to create new jobs at the fastest rate in the nation, led by big technology.”

In San Diego, he said, job postings ticked up approximately 15% over the prior quarter. “Capital raising also remained strong year-over-year, driven by steady VC funding and a dramatically stronger IPO market. We also see support for continued regional strength in the robust levels of investment the key industries are making in their future.”

He also pointed out that global research and development spending across technology and life science approach $675 billion in 2018. “This level of spending is driving rapid innovation and the continued penetration of technology into the core operations of nearly all businesses. The entertainment and media industries alone are expected to generate globally more than 2 trillion in revenues this year as digital content accelerates growth across the sector and we expect this to continue, we now have Disney and Fox and others to come, expanding into content streaming. We think this will translate into significant increased demand for space.”