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\n Kilroy Realty Corp.’s headquarters on Olympic Boulevard in Los Angeles\n <\/p>\n
Kilroy Realty<\/a> got a leasing boost in the third quarter from San Francisco\u2019s rapidly rebounding\u00a0real estate market, but it still has a large wave of impending vacancies.<\/p>\n The Los Angeles-based REIT signed approximately 552K SF of leases in Q3, with 315K SF of those leases renewals. That\u00a0total is Kilroy\u2019s highest-ever third-quarter performance.\u00a0<\/p>\n Kilroy also reported that of the 1.9M SF of leases it had previously reported as expiring in 2026, it had signed renewals for all but 970K SF, giving the company a 40% retention rate.\u00a0<\/p>\n However, most, if not all, of those remaining 970K SF\u00a0are expected to move out, CEO Angela Aman<\/a> told analysts on a Tuesday earnings call.<\/p>\n \u201cThe path forward will require a greater emphasis on new leasing activity,\u201d Aman said. \u201cAs a result, we’re approaching the remainder of this year with a clear focus on capturing growing demand across our markets and ensuring that our assets are well positioned to outperform.\u201d\u00a0<\/p>\n Kilroy\u2019s stabilized portfolio was 83% occupied and 83.3% leased as of the end of September, compared to 84.3% occupied and 85.8% leased the same time last year.\u00a0<\/p>\n One space that Kilroy hasn\u2019t lined up a new occupant for is the 95K SF at Hollywood\u2019s Columbia Square that private club Neuehouse<\/a> previously occupied. The entertainment industry-focused company\u00a0shuttered all locations abruptly<\/a>\u00a0in September and\u00a0filed for bankruptcy<\/a>. The club will be out of Columbia Square this month.\u00a0<\/p>\n The Neuehouse space\u2019s interior build-out and historical significance are generating strong interest from prospective users, Kilroy Chief Financial Officer Jeffrey Kuehling told analysts.\u00a0<\/p>\n Kilroy has a heavy\u00a0presence in Los Angeles, San Diego and San Francisco, and\u00a0the latter saw\u00a0strong renewed interest in\u00a0office space from\u00a0tenants specializing in artificial intelligence<\/a>. Kilroy has been a beneficiary of that, especially in the South of Market neighborhood in San Francisco, executives said. The firm\u00a0closed\u00a095K SF of new leases and renewals in that neighborhood in the third quarter.\u00a0<\/p>\n Overall, Kilroy is seeing a shift in the market that it anticipates can work in its favor.\u00a0<\/p>\n \u201cOne change we’re noticing in our portfolio is that there’s less demand for bargain space and more demand for impactful space,\u201d Chief Leasing Officer Robert Paratte said. \u00a0<\/p>\n Kilroy purchased a Class-A Beverly Hills office property called Maple Plaza for $205M in Q3. That asset\u00a0has become the strongest driver of leasing activity in Kilroy\u2019s Los Angeles portfolio, Chief Investment Officer Eliott Trencher said.\u00a0<\/p>\n Beverly Hills has seen several outsized sales in the last year or so, with a property next to Maple Plaza\u00a0selling to apparel retailer Fashion Nova<\/a>\u00a0for $118M in August 2024.\u00a0<\/p>\n Executives were noncommittal about plans to buy additional properties.<\/p>\n