Kilroy Realty's Leasing Volume Rebounds After a Slow Quarter

The Tip Desk · October 27, 2026 · 3 min read

The office REIT signed about 815,000 square feet in the third quarter, lifting leased occupancy to 83.0% and widening the signed-but-uncommenced pipeline to 610 basis points.

Kilroy Realty Corporation (KRC), a publicly traded real estate investment trust focused on office and life-science properties in the San Francisco Bay Area, Los Angeles, Seattle, San Diego and Austin, signed approximately 815,000 square feet of leases in the third quarter ended September 30, 2026, after 376,000 square feet in the second quarter.

Chief Executive Officer Angela Aman said momentum in West Coast markets continued to accelerate, with the volume representing one of the company’s highest quarterly leasing totals since 2019. She said the company recorded sequential leased-occupancy gains across all five regions.

Leasing comprised 345,000 square feet of new leases on previously vacant space, 127,000 square feet of new leases on currently occupied space and 343,000 square feet of renewals. Renewals included a 12-year, approximately 243,000-square-foot lease at Crossing 900 with Box, Inc. Activity also included about 12,000 square feet of short-term leases.

GAAP and cash rents on leases signed in the quarter increased 30.6% and 9.7% from prior levels on second-generation leasing, excluding short-term leases, versus 21.0% and 6.1% in the second quarter. Excluding leases on space vacant for more than 12 months, those increases were 37.9% and 13.9%.

The stabilized portfolio was 76.9% occupied and 83.0% leased at September 30, 2026, with 610 basis points of leases signed but not yet commenced. Leased occupancy had been 81.5% at June 30 and 82.3% at March 31. Occupied occupancy was 77.0% at June 30 and 77.6% at March 31. Excluding Kilroy Oyster Point Phase 2, the portfolio was 80.7% occupied and 84.8% leased.

Revenues were $271.6 million, down from $279.7 million a year earlier. Net income available to common stockholders was $15.5 million, or $0.13 a share, versus $156.2 million, or $1.31 a share, a year earlier. Funds from operations were $104.6 million, or $0.88 a share, versus $130.6 million, or $1.08 a share. FFO had been $109.3 million, or $0.92 a share, in the second quarter.

Net operating income margin compressed to 63.8% from 66.2% in the second quarter.

In July the company repaid $200.0 million of 4.350% Private Placement Senior Notes Series B due October 2026 at par. In August it agreed, subject to a non-refundable deposit, to sell the land at Kilroy East Village in San Diego for $19.5 million in gross proceeds, with the transaction anticipated to close in the fourth quarter.

The board declared and paid a regular quarterly cash dividend of $0.54 a share, an annual rate of $2.16 a share, on October 14, 2026.

Kilroy updated full-year 2026 Nareit FFO per share guidance to $3.55 to $3.59 from the prior range of $3.49 to $3.63. Average full-year occupancy assumptions narrowed to 77.00% to 77.50%, and 80.75% to 81.25% excluding KOP 2. Same-property cash NOI growth was set at 0.75% to 1.00%. GAAP lease-termination fee income was cut to $1.1 million to $1.5 million from $3.0 million to $4.5 million. General and administrative and leasing costs were raised to $89.5 million to $90.5 million. Gross interest expense was lowered to $207.5 million to $208.5 million. Operating-property disposition guidance remained $347.5 million to $500.0 million.