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Kilroy Realty is looking ahead and seeing more workers in the office.
Kilroy CEO John Kilroy Jr. said during a first-quarter earnings call that he couldn't find parking the last time he was visiting a Kilroy office property in San Francisco, a sign to him that more people are heading into their offices, CoStar reported.
Kilroy pointed also to an increasing number of return-to-office announcements from major tech employers that have "translated to noticeable increases in physical occupancy in our San Francisco portfolio," he said.
"There's going to be a quantum jump in the next three months or so" in terms of people going back in to work, Kilroy told investors, adding that he anticipated seeing marked improvements in office occupancy.
Investors might not be so confident, CoStar noted: Kilory's stock is down more than 20% year-to-date, though funds from operations in the first quarter were $1.22 per share, the highest quarterly FFO in the company's history, Chief Investment and Financial Officer Elliott Trencher said on the call.
Nationally, average usage from 10 U.S. cities grew 3.3% between April 12 and April 19 to nearly 50%, according to Kastle Systems, a keyless entry company. Those numbers are slightly lower in the two California cities where Kilroy has the majority of its properties in terms of square footage. In San Francisco, usage increased 2.7% to 44% in that same period. In Los Angeles, where Kilroy is based, usage rose 2% to 47.8%.
Kilroy's net income attributable to common shareholders rose 6.6% to $56.6M. Revenue increased by about 10% to more than $292M, up from $265.5M in the first quarter of 2022.
Despite what he characterized as a strong quarter, Kilroy noted that the economic landscape still presents headwinds for the company, as well as the entire real estate sector.
"The macro environment today, it just lacks certainty," he said.
To learn more about LA's office market, register for Bisnow's Los Angeles Office Market Outlook July 26.
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