Our earnings release and supplemental package have been filed on a Form 8-K with the SEC, and both are also available on our website. Eliott will provide an update on our recent transaction activity, and Jeffrey will discuss our financial results and provide you with updated 2025 guidance. Return to office continues to improve, supported by evolving workplace norms, shifting employer expectations, and recognition of the office as a driver of culture, collaboration, and innovation. These trends, in combination with improving quality of life dynamics, are driving enhanced vibrancy, a resurgence in leasing activity, and a meaningful increase in institutional investor interest in high-quality West Coast commercial assets.

Importantly, the growth in demand statistics has persisted even as the pace of lease executions has significantly increased, with San Francisco leading all U.S. Our SoMa assets continue to outperform, with over 95,000 sq ft of new and renewal leases executed this quarter and a growing forward pipeline, with tour activity in our SoMa assets up 170% year-over-year. MBC BioLabs is the Bay Area's leading life science incubator, and has helped launch more than 500 companies, collectively raising over $20 billion in capital. The future pipeline at KOP 2 is robust, and we're actively engaged with a variety of potential tenants, including several with larger format requirements.

From a capital allocation perspective, we continue to be active and disciplined as we recycle capital with a focus on long-term cash flow and cash flow growth and value creation. With respect to future development pipeline, we continue to work through additional land parcel monetization and expect to have further announcements in the coming quarters. As we continue to evaluate dispositions, our strategy remains the same: monetize properties in lower conviction locations at values that imply forward returns less than our cost of capital. On the acquisition side, during the quarter, we bought Maple Plaza in Beverly Hills.

What went well
  • Signed over 550,000 sq ft of new and renewal leases, the company's highest third-quarter leasing volume and strongest year-to-date performance in six years, with San Francisco leading all U.S. metros in office leasing growth over the trailing 12 months.
  • Reported FFO of $1.08 per diluted share (including roughly $0.03 of one-time items) and raised full-year 2025 FFO guidance to $4.18-$4.24 per share, a $0.01 midpoint increase.
  • Occupancy improved modestly to 81% (from 80.8% at the end of Q2) as roughly 200,000 sq ft of rent commitments arrived earlier than expected, even as recently stabilized redevelopment projects entered the pool.
  • Life science leasing at Kilroy Oyster Point Phase 2 accelerated to 84,000 sq ft signed to date (Color, a 44,000 sq ft MBC BioLabs incubator lease, and Acadia Pharmaceuticals), positioning the project to exceed its 100,000 sq ft year-end goal.
  • Executed disciplined capital recycling, closing $405 million of dispositions year-to-date including a $365 million four-building Silicon Valley campus sale, and acquiring Maple Plaza in Beverly Hills for $205 million (about $670 per sq ft versus roughly $1,200 replacement cost).
What went wrong
  • Cash same-property NOI growth was only 60 basis points, and roughly 150 basis points of that came from one-time real estate tax appeal wins, leaving underlying growth negative.
  • The bankruptcy-related October move-out of NeueHouse, a 95,000 sq ft tenant at Columbia Square, was added to the occupancy outlook, and management guided that any Q4 occupancy improvement would be modest.
  • SCAN was expected to vacate most of its roughly 220,000 sq ft at Aero in Long Beach at the end of its extended term, and the pool of remaining 2026 renewal opportunities had become much more limited, requiring a greater emphasis on new leasing.
  • The Flower Mart project's interest and expense capitalization was now expected to cease around June 2026, with the possibility of an indefinite suspension short of a demand-driven development.
  • Management flagged that Kilroy Oyster Point Phase 2 would become a near-term earnings drag once it entered the stabilized pool in January 2026, with roughly $5 million of quarterly operating expenses and taxes plus about $10 million of quarterly capitalized interest beginning to flow through the income statement.

More on Kilroy Realty Corp

Reported 2025-10-28 · figures from the Kilroy Realty Corp Q3 2025 earnings call.

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