Kilroy Hits Pause On SoCal Developments, Citing Economic Conditions
Kilroy Realty Corp. will place two Southern California projects on the back burner, taking a more cautious position regarding speculative development following the economic news of the past few months.
The company’s 26th Street project in Santa Monica and one in San Diego called Santa Fe Summit are on hold, CoStar first reported. Construction has yet to begin on either project, and Kilroy reportedly will wait for more favorable conditions before it kicks off.
The 26th Street project involves the rehabilitation of an existing three-story office complex and the addition of two four-story office buildings with three levels of underground parking, according to Kilroy.
“On the capital allocation front, we intend to use caution when evaluating new investments and new development starts,” Kilroy CEO John Kilroy said on the company's second-quarter earnings call. “The bar for us to make meaningful acquisitions or start something new on a speculative basis is higher than three months ago.”
A JLL second-quarter outlook on the national office market reported that the slow and sometimes unsuccessful return-to-office effort and wider economic uncertainty have flattened office leasing.
“Gross leasing activity totaled 47.2M SF, a 0.1% increase over the quarter, as tenants both large and small in a number of high-growth sectors such as tech, media and creative industries put expansion plans on hold,” the report said.
Kilroy plans to sell anywhere from $200M to $500M worth of property but said that it wouldn’t sell unless the prices were right.
“If it doesn't make sense to sell, we're not going to sell,” said Elliott Trencher, Kilroy’s executive vice president, chief investment officer and interim chief financial officer. “We're not going to force the issue.”