Kilroy Realty (KRC) Citi’s 30th Annual Global Property CEO Conference 2025 summary

Portfolio performance and market dynamics

• Portfolio of 17 million sq ft, mainly Class A office in West Coast markets, with a growing life science segment and presence in Austin.

• Strong leasing momentum, especially in Q4, driven by return-to-office trends and demand from tech and AI companies, notably in San Francisco and Seattle.

• Office utilization has trended up to just over 50% in the past year, with San Diego and Bellevue showing high occupancy.

• Leasing pipeline includes both large established tenants and smaller startups, with AI companies as a significant demand driver.

• Office fundamentals appear to have reached an inflection point, with trends generally positive but some market variability expected.

Leasing, occupancy, and rent trends

• Vacancy in high-quality assets presents upside; targeted leasing strategies focus on market-specific demand, such as spec suites for AI firms.

• Recent large leases include a 250,000 sq ft deal in Silicon Valley and a 100,000 sq ft lease in Bellevue.

• Renewals show a mix of downsizing and expansions, with more balance and some tenants growing.

• Net effective rent growth is positive in Bellevue, Seattle, San Diego, and Austin, especially for completed spaces; concessions are deal-specific.

• For 2026, Class A office rent growth is expected to be mid-single digits, while Class B may remain negative.

Life science and development projects

• Kilroy Oyster Point (KOP) phase II delivered in January 2025, with strategic leasing to capture early-stage and larger tenants.

• Increased tour activity at KOP, driven by improved VC funding and interest from a broad range of tenants, including tech and fintech.

• No current impact from NIH funding volatility on leasing activity, but the situation is being monitored.

• Carry costs for KOP (excluding capitalized interest) are small; Flower Mart capitalization is about $8 million per quarter.