Manus Ibek — Analyst, Evercore ISI
Perfect. Thank you. Just wanted to say thanks in the beginning for the additional disclosures and the supplements. They're very helpful. My question was just along for Los Angeles and San Diego to see if you could maybe elaborate a little bit further on the leasing demand that you see there and how far along we are there on the recovery. Obviously, we understand, and it's great to see how positive San Francisco has responded recently.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Yeah. Hi, Manus Ibek. This is Rob Paratte. I'll just kind of continuing on the theme that Angela Aman mentioned. Across our entire company portfolio, we're seeing an increase in activity, including tours, proposals, and done deals, and Los Angeles is no exception. In Q1, we signed 24 deals in L.A., and we're seeing quite a bit of activity at our Long Beach project, Maple Plaza, and we're starting to see a pickup in activity here at Westside Media Center on the west side of L.A. and one of our other assets here. Our pipeline continues to grow in the L.A. market. We have, sort of following on to the 24 deals I mentioned. We have more deals that are in the pipeline in leases actually, but I'm not gonna quantify all that until they're done.
You know, it just is improving. Again, I'd say this across our entire portfolio that what we're seeing is this continued flight to quality. There's the world of haves and have-nots. The recovery is not the same for all owners or all properties. We're benefiting from having these high-quality assets in L.A., San Diego, et cetera. At, you know, at Nautilus, which I'll really focus on because that's our newest acquisition, we've had 400,000 sq ftt of tours since January 1. We have several tenants that are looking to grow in the project. We continue to entertain tours and just the other normal activity that goes with leasing. Couldn't be happier with that. The amenities are really showing well now.
Now that it's spring, everything looks great at the site. Very happy with that. At Kilroy Center Del Mar, we're seeing an exceptional amount of activity. Our spec suite program there is really paying off as it is in other markets like Austin. We're gonna continue on that front, being very strategic in bringing spec suites to market, but providing what the market wants.
Manus Ibek — Analyst, Evercore ISI
Perfect. Thank you.
Anthony Paolone — Analyst, JPMorgan
Great. Thank you. My first question's on 1,900 Broadway and wondering if you could talk about the expected yield you expect to make on that and where rents need to be for the unleased space to kind of achieve it.
Elliot Trencher — EVP and Chief Investment Officer, Kilroy Realty
Anthony, it's Elliot. In my prepared remarks I mentioned that we're expecting stabilized yields in the low to mid 9% range. You know, we've obviously leased 60% of the building and have a good rent comp for where market rents are. If we replicate that, we'll be in really good shape.
Angela Aman — CEO, Kilroy Realty
Yeah. I'd just also emphasize, you know, as we sort of talked about 1900 Broadway sits really just a few blocks away from our Crossing 900 asset, where we've leased 80,000 sq ft over the last couple of years at rents that are up on average 60%. We have a lot of data points in the market in addition to the Cooley lease that really point us to the direction of where rents should be in this market. Elliot mentioned in his prepared remarks earlier as well that 1900 Broadway sits just adjacent to Restaurant Row in this sub-market, so it is highly walkable, highly amenitized, and really should drive premium rents as we think we saw in the transaction that's already been executed.
We're really excited about having additional supply to lease in what has been, and continues to be one of the strongest sub-markets in the entire Kilroy portfolio.
Anthony Paolone — Analyst, JPMorgan
Okay. Thanks for that. Just, maybe I missed this, but did you give cap rates on the two resi sales?
Elliot Trencher — EVP and Chief Investment Officer, Kilroy Realty
We gave cap rates for all the sales that we've done to date, which was in the mid-single digits, but the resi sales were around in the 4% range.
John Kim — Analyst, BMO Capital Markets
Thank you. Thanks for the new disclosure on that signed leases not commenced. I was wondering what was driving most of the leases 86% to net leases. I know that KOPT is a big part of that. Assuming 1900 Broadway is as well, it would suggest the yield on that could be closer to 13% versus 9%. I'm wondering if I've my math right and if there's any conservatism in that number.
Angela Aman — CEO, Kilroy Realty
I would say there's not much to point to in terms of why the population that signed but not commenced side is skewed so much to net leases. It really is just a mix issue and the properties and markets that make up the signed but not occupied pool at this point in time. On the yield, I'd just reiterate what Elliot mentioned in his prepared remarks and in response to the last question. Stabilized yield on this project we think is in the low to mid 9% range, which we think is very compelling. There's gonna be good growth at this project over time as well. Again, in one of the strongest submarkets in the Kilroy portfolio.
We feel like the, you know, sort of development upside here, is worth what's a relatively small amount of leasing still to complete at this project.
John Kim — Analyst, BMO Capital Markets
Okay. At Flower Mart, I know you talked about extending the capitalized interest. I'm wondering what's the possibility that you keep this development going forward. I know that you're committed to one Paseo, and this looks like this could be another mixed use development with a big multi-family component. Just wanted to get your latest thoughts on the Flower Mart as far as keeping it as a development project.
Angela Aman — CEO, Kilroy Realty
Yeah. You know, look, we're watching the San Francisco market really closely and how things evolve in addition to, you know, sort of where we're able to take the process we're going through right now in terms of design and entitlement, flexibility and optionality. There's still a lot for us to sort out as we move through this process, and we have, you know, time as this process continues to unfold to watch what happens with both commercial and residential rents within the City of San Francisco. We'll continue to monitor it. We're committed to making sure that whatever we do in terms of next steps in 2027 beyond at the Flower Mart project maximizes value for shareholders.
As I think we've been honest before, certainly the company had a very strong plan to develop this on the commercial side prior to the pandemic. We're exploring a broader mix of uses that would allow us, as you mentioned, to add more residential into the project. We just have to see how the market continues to evolve and what the project ultimately looks like to decide what the right or optimal execution path is. Maintaining a lot of flexibility and prioritizing optionality as a way to create additional economic value at the Flower Mart.
Seth Bergey — Analyst, Citi
Hi. Thanks for taking my question. You know, as you think about kind of the revised disposition guidance, you know, what would kind of get you to the higher end? Is it? Are you just evaluating kind of the depth of buyer pool and kind of any changes you've seen in terms of office or demand for assets? Are there any kind of submarkets you would look to kind of exit within that revised disposition range?
Elliot Trencher — EVP and Chief Investment Officer, Kilroy Realty
Hey, Seth. The revised disposition range at the low end implies that we kind of stop with what we've done to date, and then we have about $150 million of dispo's that, you know, at the high end of the range beyond what we've done.
That clearly has some room to execute, and our approach is gonna be consistent with what we've talked about in the past, which is if we can find compelling opportunities, then we're gonna pursue them. We wanted to reflect that with an adjustment to the disposition range. There's not a particular market or submarket that we're focused on exiting. We're really just looking for the way to maximize proceeds on good execution on assets that we think are gonna be mispriced given our forward-looking view.
Angela Aman — CEO, Kilroy Realty
Yeah. I mean, the only thing I'd add to that is to just, you know, echo some of what Elliot mentioned in his prepared remarks. In addition to healthy demand that we've seen over the last couple of years, particularly from owner users looking to acquire assets, we've really seen a resurgence in institutional demand and interest across our West Coast markets. Where there are opportunities, as Elliot just mentioned, you know, to take advantage of that, you know, renewed demand for West Coast commercial assets, we certainly wanna make sure we allow ourselves enough room within the guidance range to be able to capitalize on that.
Seth Bergey — Analyst, Citi
I think in the prepared remarks you mentioned AI as in technology as a demand driver for some of the L.A. submarkets. Do you think L.A. will, you know, kind of have a spillover effect from San Francisco and be a large component of kind of recovering that market? Or how do you kind of quantify the impact that AI can have on a market like Los Angeles?
Angela Aman — CEO, Kilroy Realty
Yeah, I don't think we're mentioning it to suggest it's gonna be a huge driver of demand in the L.A. market. We've certainly seen a lot more San Francisco native companies or AI native companies leasing space, particularly in the Pacific Northwest, where you've got a much larger kind of resident talent pool in the tech sector. We've certainly seen the spillover benefits in that market. I think we're seeing some of it in the L.A. market. It's pretty concentrated in a few specific submarkets. We had called out to your question, Culver City in particular in the L.A. market. I think it's, you know, interesting to note that we're seeing some of those tenants pop up.
I think it's great from a marginal demand standpoint, but we're certainly seeing much broader demand even in markets such as Culver City across different industry categories as well.
Andrew Berger — Analyst, Bank of America
Great. Thank you. Sounds like the first quarter was a very strong quarter for leasing. Could you just talk a bit about where the pipeline is today? If there's any way to quantify, you know, how big it is going forward. I think last quarter you said it was up about 65% year-over-year. Just any color you're able to provide would be helpful. Thank you.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Yeah, Andrew. It's honestly, you know, the change in San Francisco is so dramatic over the last 12 to 18 months, and it's actually hard to pinpoint the pipeline because it continues to grow. You know, just to add some color to what Angela was talking about with the three consecutive quarters of positive absorption, there were 13 deals done in Q1 over 100,000 ft, and that's a very big number for the city. Another really important note I want to point out is that 5 million sq ft of availability has been absorbed since its peak in mid-2025, and that's very meaningful because that availability rate was really the headline that had everyone across the country concerned.
The third point that I think is really important is that these deals, the 100,000 ft plus other parts of that 3 million ft that we mentioned are expansionary, and that's also a very positive indicator, I think. You look at our deal with Harvey, for example, where they took an additional 60,000 ft. The pipeline for us keeps growing. Our team has done a terrific job at 201. As Angela pointed out, we're focused on 360 Third and 303 Second. We're talking to folks about 345 Brannan. South of Market itself was the strongest submarket of the San Francisco market, and that is Kilroy is a direct beneficiary of that because that's where all of our assets are.
We're poised and ready to start, you know, executing on these. Things are looking really good, and the momentum, not only for us but others in the market, is quite strong.
Andrew Berger — Analyst, Bank of America
Thank you. It sounds like speed to occupancy is becoming more important. Can you just talk a little bit more about this? How much of the comments around speed to occupancy are related to the AI types of tenants versus just, you know, tenants more broadly? You mentioned spec suites. Can you talk a little bit more about, you know, which markets you're really leaning into spec suites more and what type of results that's creating for.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Um-
Andrew Berger — Analyst, Bank of America
for your leasing teams?
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Sure. This is Rob again. I guess I'll use the Olema example. They're in two different spaces in San Francisco. One was a space that was not, I would say, current or modern enough for what their uses were. The other one is a space where they got pushed out by an AI company, that created immediate need for space, and we were ready to execute on that because they're taking a portion of our spec labs, and then they're taking to-be-built space. That's a very good example of what's happening. You either have rapidly growing AI companies that just organically need the space, or others are getting displaced by larger AI companies.
You know, one point I'd like to raise also about San Francisco is that the FIRE category in San Francisco was quite active in Q1, you're still seeing a lot of venture capital leasing and banking and finance. You know, San Francisco is really hitting on all cylinders from both the traditional as well as technology front. I think, you know, in terms of our spec labs and strategy, or excuse me, spec suites in general and strategy, you know, it's case by case and market by market. If we have a spec suite or two in a building and they haven't leased, we're not gonna build more until we've got activity on that. We've been really judicious about how we apply it.
The markets that we've seen a lot of traction with the spec suites are clearly San Francisco, Seattle, Austin, San Diego, and parts of L.A.
Angela Aman — CEO, Kilroy Realty
Yeah, it's been an interesting dynamic. We mentioned at 303 Second. We built out 5 spec suites on 1 floor with some shared common space, amenity, conference center. Having all five of those spec suites leased before we had completed construction was really telling in terms of where demand is, particularly in the SoMa sub-market from some of those earlier stage companies, and the degree to which they are really prioritizing speed to occupancy. We've seen that there in markets like Austin. As Rob mentioned, we've seen a similar dynamic over a longer period of time. Where every time we begin building out the spec suites, we have a different level of interest in some of the vacancy than we had from pure shell conditions.
We've really tried, as Rob said, and I think this is an important point, to be thoughtful and disciplined about how we're building out the spec suites, both in terms of making sure we don't get over our skis and build out, you know, specific suites with specific sizes when the market demand may shift and change. Also making sure that we have inventory at these projects really at all times. As they're getting leased up or as we're seeing incremental interest, you know, being prepared and willing to lean in and to replicate some of the success we've had in earlier phases of the spec suites program. Really across most of our markets, it's been highly effective and certain driven both a higher lease rate and, you know, faster occupancy commitment, commencements over the last couple of years.
Nicholas Yulico — Analyst, Scotiabank
Oh, thanks. Yeah, I had a couple questions on specific buildings. In terms of West Eighth, I know you've done a lot of leasing traction there. Can you just maybe talk a little bit more about the dynamic of, you know, sort of taking market share in Seattle, which it seems like you've done, versus, you know, pulling tenants that are maybe looking at Seattle and Bellevue. Secondly, on 360 Third, San Francisco. I think you have an expiration there, a little over 100,000 sq ft this year. If you could just talk about the traction on that and remind us when that expiration is.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Yeah. Hi, Nick. It's Rob. On West Eighth, I think it's, you know, two factors are in play here in terms of the absorption we've done. Both SoFi and General Motors are new to market. I think that what's really played into that is the renovation that we did at West Eighth, and the traction that we've built with Databricks and other tenants that are in the market. I think what we're seeing both with the earlier law firm deal we did, SoFi and GM, is that this part of town, the Denny Regrade, which is just right on the edge of the traditional CBD, is where people are wanting to be, and it's where the talent is either living or very close by, and it's got the type of amenities that the tenants want.
That's what's really causing that absorption and what we're able to capitalize on. In Bellevue, we expect to see, but we haven't seen, I'd say, a direct correlation between the higher rates in Bellevue and more absorption in Seattle. Most tenants are pretty focused on they either want to be in one or the other. But, you know, we expect over time that we may see some tenants that flow from Bellevue to Seattle. At 360 Third, we do have that expiration coming up. We've been marketing the space. We've had different levels of conversations, some larger tenants that are over 100,000 ft and some that are 50,000 ft.
We're pretty focused on the asset right now and trying to really reach into the market to, you know. The proximity of 360 Third between the Bay Bridge and BART, and Muni is really strategic for a lot of companies, and that's why it always did well in the past, and we expect the same going forward.
Jeffrey Kuehling — EVP, CFO, and Treasurer, Kilroy Realty
Hey, Nick. It's Jeffrey. Just to clarify, the 360 Third expiration is a little over 100,000 sq ft in Q2.
Nicholas Yulico — Analyst, Scotiabank
Okay, thanks. That's a known vacate?
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Yes.
Nicholas Yulico — Analyst, Scotiabank
Okay. Thank you. Thanks, guys. Then just I guess second question is on DirecTV. Just sort of any latest thoughts there on, you know, a renewal possibility. If it's not a renewal, I think you were contemplating some other uses for the assets or a potential sale. If you could just give some thoughts there. Thanks.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Yeah. I don't wanna give too much color, but, you know, DirecTV is a possibility. We have some other activity. The project is a really, you know, well amenitized, really terrific outdoor spaces, landscaping, and that kind of thing. We've really been pushing the marketing of that. We do have some conversations going on.
Angela Aman — CEO, Kilroy Realty
Yeah. Remember, it's only a little bit less than 50,000 sq ft in the 2026 expiration pool. A larger portion of that lease doesn't expire till the fourth quarter of 2027. We've got some time to work through that.
Blaine Heck — Analyst, Wells Fargo
Great. Thanks. I was hoping you could talk a little bit more specifically about the forward leasing pipeline at KOPT. Just wondering how much of the demand is for spec suites versus larger spaces. Anything you could tell us about tenant profiles and whether the mid-5% yield forecast is still intact.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Hey, Blaine. It's Rob. The pipeline is similar to what we've executed on, you know, in Q4 and Q1. Basically life science focused right now, primarily, almost exclusively. The tenant ranges in size down in South San Francisco right now are the bulk of them are in the probably 10,000 sq ft to 50,000 sq ft. That's probably 50% of the demand in the market right now, and there are quite a few. There are over four requirements over 100,000 sq ft in the market, and there are some that are significantly above 100,000 sq ft.
As Angela alluded to, you know, we're working on filling the rest of building F, which is our multi-tenant building, and we're in conversations on the vacant building, which again, is the most prominent of the three buildings in the campus and really has terrific signage opportunities and prominence for tenants that want that.
Angela Aman — CEO, Kilroy Realty
Yeah, I just confirmed the yield expectations we shared last quarter in the mid 5% range. Those are still fully intact.
Blaine Heck — Analyst, Wells Fargo
Great. Thank you both. Switching gears to capital allocation, can you give us an update on your thoughts on share repurchases going forward, just given where the stock is trading, and how do you think about their attractiveness relative to acquisitions or development?
Angela Aman — CEO, Kilroy Realty
Yeah, I mean, you know, look, I think what we've demonstrated over the last couple of quarters is a real desire to make sure that as we're thinking about capital allocation, we're number one, prioritizing balance sheet strength and flexibility as we make decisions. We're employing a really balanced approach to looking at sort of all of our options and making the best decision or determination we can at the time. You've seen us be active going back several quarters on the acquisition side. You saw us this quarter with operating property disposition proceeds realized during the quarter to pair those with debt repayment for, again, a really balanced approach and executing any share repurchases, just like we told you we would, in a leverage neutral or de-leveraging way.
I think as we look at all of our, you know, right now, we continue to see, I think, you know, good value in the stock. We also recognize and appreciate that we're sitting at a period in time in which there's been significant capital markets volatility and specifically, quite a bit of volatility with respect to our sector. We want to make sure that we are, again, as we prioritize the balance sheet, keeping enough financial flexibility to be able to really step in when we see some of that volatility materialize, and we see periods of significant or extreme dislocation. You know, as we discussed earlier, we increased the operating property disposition guidance.
We feel like the land sale proceeds we've already announced are kind of earmarked for the 1,900 Broadway project. That's effectively fully funded from an equity standpoint. Additional operating property disposition proceeds will be available for, you know, balance redeployment based on how we see the full set of alternatives at that point in time.
Brendan Lynch — Analyst, Barclays
Great. Thank you for taking my questions. You've managed our expectations on churn this year. Maybe you could give us your current expectations on the retention rate for the remaining 740,000sq ft that are set to expire.
Angela Aman — CEO, Kilroy Realty
I mean, we had shared going back, I think, a couple of quarters now that we expected even when that pool was larger, probably around 1 million sq ft at the time, that we expected the vast majority of those lease expirations would in fact be move-outs. You go all the way back sort of two years ago, you look at what was in totality in the 2026 pool, which was about 2 million sq ft. We did successfully during the course of 2025, renew a number of those spaces early. The blended retention rate on that initial, I would think it was almost 2 million sq ft pool of 2026 expirations, was about like 40%, maybe a bit better than 40%, relatively in line with kind of historical pre-pandemic averages.
That said, when we're looking at the lease expiration schedule right now for 2026, we do expect there are probably a few opportunities for us to continue to work through some renewals, but they are reasonably limited. When you think about reported retention stats, though, you're also gonna see us begin renewing early some of the 2027 expiration pools. It's a little bit harder to tell you exactly in any given quarter what the retention rate would look like from a reported standpoint. We do think that just from a modeling standpoint, the bulk of the 2026 remaining expirations will be move-outs.
Brendan Lynch — Analyst, Barclays
Okay. Thank you. That's helpful. Maybe just another modeling question. Are you still anticipating that occupancy trough in the second quarter?
Angela Aman — CEO, Kilroy Realty
Yes. Yeah. Just given the pace of move-outs, you can see that on the lease expiration page. Q2 is by far our biggest move-out quarter during the course of 2026. That's certainly currently our expectation.
Upal Rana — Analyst, KeyBanc Capital Markets
Great. Thank you. On dispositions, appreciate the details already provided so far. Just curious, do you anticipate elevated dispositions or being a net seller to continue to 2027, or will 2026 be the bulk of it or the tail end of it? Just trying to get a sense of how much more there is to do on your end.
Elliot Trencher — EVP and Chief Investment Officer, Kilroy Realty
I think it's a little too early to talk about 2027. The way we've approached dispositions to date is to just try to be flexible and dynamic and look at what the market is telling us, take those signals, and do what we think is in the best interest of shareholders. You know, we gave guidance on what we thought dispositions would be to date in 2026. We executed beyond that, and we're adjusting, and we're gonna continue to take that approach. To the extent that we still see appealing opportunities, we're gonna continue to sell. If not, we won't.
Angela Aman — CEO, Kilroy Realty
Yeah. I mean, that's, I think, really the right way to frame it. This has been an opportunistic exercise. I wouldn't frame it as how much do we have to sell, especially when you think about what we did during the quarter or what we announced last night in terms of the residential sales. Those certainly weren't have to sell transactions. There was a real opportunity there to raise some very attractively priced capital on behalf of our shareholders, and we took advantage of that. We will continue to be opportunistic as we evaluate the disposition pool. As we talked about before, really prioritizing balance sheet strength and flexibility, prioritizing making the cash flow stream of this company more durable and, you know, faster growing over the medium to longer term. Again, very opportunistic execution.
Upal Rana — Analyst, KeyBanc Capital Markets
Okay. Great. That was helpful. Angela, you mentioned Maple Plaza seeing some strong broad-based demand there. You know, could you provide more detail there and any update you could provide on Beverly Hills broadly, just given there has been some recent transactions there as well?
Angela Aman — CEO, Kilroy Realty
Yeah. I mean, I'll turn it over to Rob in a moment, but I just reiterate, you know, my comments from earlier. We have seen great traction there overall. I think the lease up there and our retention experience with respect to some tenants we had originally underwritten to vacate has just been much better than we expected. And the demand is from a complexion standpoint, sort of exactly what we had hoped for. It's pretty broad based. It's not overly tied to any one sector or any one industry. We've got great demand from media and entertainment certainly, but also financial services, professional services, a much broader mix of uses. We're encouraged about the momentum we're seeing there and, you know, long term potential for Beverly Hills overall.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Yeah. I don't have much to add to Upal. Angela hit the nail on the head. You know, we're really happy with the leasing momentum we have. We're leading the market right now at Maple Plaza. You know, there's a lot of media, private wealth and financial services, as Angela pointed out. I think in these cases, like Maple and at 201 Third, you start building momentum and leasing, and that attracts other activity, and I think that's what we're seeing. We've really worked hard since taking the project over to, you know, really buff up the lobbies and landscaping. It's really showing well right now, and that's what we're seeing is just activity from that.
We're really happy with the rental rates based on the underwriting. We're exceeding underwriting in all cases.
Elliot Trencher — EVP and Chief Investment Officer, Kilroy Realty
Upal, on the capital side, I think all that we've seen in the market since we've acquired has just reaffirmed that capital really wants to be in Beverly Hills, and we've seen a wide array of capital really focus on Beverly Hills. We feel really good about when we bought the building.
Tom Catherwood — Analyst, BTIG
Thank you, everybody. Maybe Rob starting with you. From a leasing kind of strategy perspective, over the last year or so, you've put some tenants into shorter term leases with the hope that some could grow into more space or convert into longer term leases. For some of the demand that you're talking about today, is some of that, those shorter term leases actually converting longer term?
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Some is, but, you know, a lot of it is also, I think, just a trend in the market as tenants are willing to commit with conviction, meaning longer term leases. In the case of Olema, it's a longer term lease. In some of the other cases, it is a, you know, a short term deal that we've extended. We're, we're hitting it on both fronts.
Angela Aman — CEO, Kilroy Realty
I mean, I just to add to that a little, specifically in the San Francisco CBD where we've talked about this trend, you know, in some ways being most pronounced. I think the execution with Harvey this quarter really underscores why we thought it made sense to do that original deal last year, which was a shorter term deal, as we talked about at the time, it had very little capital spend, where they were effectively reusing existing improvements left over by the last tenant. Very positive NAR deal, a shorter term deal.
That made a ton of sense in our minds because the reason they wanted flexibility wasn't that they necessarily wanted out at the end of the term, but it was that they didn't know what their full space requirements were gonna be over time and wanted the flexibility to make sure that they could meet those growth objectives as effectively as possible. Where we've worked with tenants like that and been willing to go a little bit shorter term, it has been with a view to making sure that we are thoughtful about our ability to accommodate their future growth down the road. The Harvey example this quarter leasing 93,000 sq ft last year and another 62,000 ft this quarter, I think really speaks to why that strategy in certain submarkets and for certain kinds of tenants can and has been highly effective.
Tom Catherwood — Analyst, BTIG
Perfect. That was exactly what I was looking for. Then Angela, apologies if you mentioned before and I missed it. As you work through a revised program for the Flower Mart, is there a potential outcome where capitalization carries beyond December, or is that more of a hard stop?
Angela Aman — CEO, Kilroy Realty
At this moment in time, I think we feel like that's a pretty hard stop. That's, you know, with a view of the process we have in front of us, to finish up the revised sort of design and entitlement process with the City and getting to the point where we feel like we have done everything we've been talking about in terms of the redesign and reimagining of Flower Mart Project, and we have more flexibility around the mix of uses and greater ability to ultimately phase the projects, you know, whatever those uses really look like. Once we're at the completion of that project, we're sort of waiting for demand to be sufficient in the market at rents that will justify new construction.
Right now, we think there's a gap between those two things that would necessitate us stopping capitalization probably in the fourth quarter, late in the fourth quarter of this year. The only thing I will say is we're watching the San Francisco market very closely. I think you've heard around this table today a lot of enthusiasm for what we're seeing in terms of rent demand. There are very few large contiguous blocks of high quality space in the city remaining available. It is a low probability, I think, but not a 0% probability, that there is more work to do or something demand driven and actionable as we get into 2027. Again, right now I'd say it's a low probability, but it's not a 0% probability.
Caitlin Burrows — Analyst, Goldman Sachs
Maybe just to follow up on that specific topic you were just talking about. On Flower Mart and trying to figure out how it could potentially work in the future. If you were to stop capitalizing at the end of 2026, kind of put pause on the project and then resume, whether it's six months or multiple years later, would that like full capitalization come back or does it work that you then start capitalizing on like the incremental spend, if that makes sense?
Jeffrey Kuehling — EVP, CFO, and Treasurer, Kilroy Realty
Hey, Caitlin, it's Jeffrey. In the event that we do have a great outcome where we can start capitalizing in the near future, it would be on the full kind of cost accrued balance. It wouldn't be the marginal spend. It would be the same way that you're seeing today.
Caitlin Burrows — Analyst, Goldman Sachs
Okay, got it. Maybe just back to the leasing pipeline today versus a quarter ago. I think a while ago, somebody else asked exactly that question, and Rob Paratte mentioned it's hard to tell. Maybe phrasing it differently, do you think the leasing pace of over 550,000 sq ft is sustainable or what is required in order to meet the low versus high end of the occupancy guidance this year?
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Caitlin, I would love to be in the prediction business, but I've said what I said and we've in the script we outlined, but I can just tell you that the demand that we're seeing is real and all of our teams, I couldn't be happier with our whole leasing team and the people that support them in getting these things executed. We're really busy and, you know, more to come.
Dylan Burzinski — Analyst, Green Street
Hey, guys, thanks. Not to sort of ask you another question that's sort of geared towards predicting anything, but going to do so anyways. I mean, obviously things continue to be firing on all cylinders in San Francisco. Do you guys have any sort of sense for, you know, how far behind L.A. and Seattle CBD is relative to what you're seeing in San Francisco? In the broader Bay Area, I guess.
Angela Aman — CEO, Kilroy Realty
Yeah. It's a good question. You know, I'd start, I guess, with talking about the Pacific Northwest. I think Bellevue has been, as we've talked about for the last couple of years, very strong, but the availability of remaining space available in Bellevue has just continued to compress, and I think rents have performed very well in the Bellevue market as a result. The, that market from a fundamental condition standpoint feels very tight right now. I think that's encouraging. I do think over the last couple of quarters, as we've pointed out, our assets in Seattle, which are not in the Seattle downtown, but really in Denny Regrade, South Lake Union, have definitely seen increased momentum.
I think if I went back a quarter ago, I still wasn't prepared to say that we were seeing a full trend there. We did have one tenant, in one example, move out of the CBD and into Denny Regrade. We had one tenant move from over the last couple of years, I guess, move from Bellevue over to Denny Regrade as well. I think now, you know, with 150,000 sq ft, give or take, signed over the last, you know, couple of quarters, we do feel like there's a lot more momentum on the Seattle side. Again, I think from very high quality tenants and a broader mix of uses. I think that's been across the board really encouraging to see.
L.A., you know, as we pointed out, feels like it's gradually improving, I would, you know, candidly admit that I think that that improvement is in fact gradual. The reason, you know, we're pointing to such a, an improvement in our pipeline in the L.A. market and, our executed productivity has been both because of that gradual improvement in the market overall, but really importantly, in the portfolio reallocation work we've done within the L.A. market over the last couple of years. I think our portfolio is better positioned than it was two or three years ago to capture what has been, you know, slowly improving market on the L.A. side. There are pockets that we're interested in L.A. that are actually performing better, where there are some changing and industry dynamics going on.
We talked about Arrow and Long Beach benefiting from a resurgence in kind of local defense and aerospace requirements. You're seeing that not just in Long Beach, but really up through the South Bay and seeing some of that activity in El Segundo as well. That's encouraging. L.A. is gonna be a story where it's not one industry driving the narrative, but it has to be, you know, sort of a broader aggregation of industries moving in the right direction. We're seeing reasons to be, you know, I think cautiously optimistic there. Without question, it's gonna be, you know, a step behind.
Dylan Burzinski — Analyst, Green Street
That's incredibly helpful detail, Angela. I really appreciate that. Then just one more, if I could. You know, not sort of trying to get into any sort of 2027 guidance, but as you sort of look at lease expirations next year, I think they're largely Q1 weighted if we exclude the DirecTV lease expiration in 2027, which sounds like it's, you know, in flux. You know, as you guys sort of reach out and get a sense for, you know, renewal possibility for next year, I mean, are tenants more receptive than maybe they were coming into 2026 and 2025? Just sort of curious, you know, any comments you have around that.
Angela Aman — CEO, Kilroy Realty
Yeah, I mean, you know, we got a couple of things going for us in 2027. You know, overall, even at this point, you know, in that expiration window, it's a considerably smaller expiration year than 2026 was a year ago. As you point out, the largest expiration next year is AT&T, DirecTV, which is a fourth quarter expiration. Outside of that, the pool is very, very granular. There's nothing above 100,000 ft. There's only really one lease between 50,000 sq ft and 100,000 sq ft. It's a much more granular execution. You know, we're beginning some of those conversations, you know, as we speak.
I think we've got some expirations happening in some pretty strong markets where we're already having conversations either about renewal, or significant interest in potential backfill tenants. We really just need to put our heads down and execute as it relates to the 2027 pool. Again, the overall size and the granularity of that pool outside of AT&T, DirecTV is encouraging.
Michael Carroll — Analyst, RBC Capital Markets
Yep, thanks. I wanted to circle back on Rob's comments regarding the leasing pipeline. I know you kind of highlight there's a lot of volatility, so it's hard to say how that has trended over the past 12 to 18 months. Has that pipeline continued to build and grow? I mean, is it bigger today than it was in the beginning of the fourth quarter of 2025?
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
Absolutely. I mean, it's continued to grow throughout 2025, and its pipeline is increasing now. You know, there's a pending transaction that's relatively significant that's gonna happen South of Market, at probably in Q2, not with us. You know, it's just another indication that the market is, you know, thriving and particularly South of Market is on, you know, a tear right now.
Michael Carroll — Analyst, RBC Capital Markets
That's helpful.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
I'd say the real, you know, the real upswing started kind of mid 2025 and really, you know, took on steam for the rest of the year and into Q1.
Michael Carroll — Analyst, RBC Capital Markets
Okay. Is this volatility that you're highlighting, is that mainly driven by the San Francisco market? I mean, is it just tenants are leasing space, so they're kind of getting taken out of the pipeline? Or is it a part of where tenants are delaying decisions or it's hard to kind of quantify what their space needs are?
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
I mean it on the positive end that it's hard to pinpoint because literally, you know, every week there's new demand that's coming from tenants.
Angela Aman — CEO, Kilroy Realty
Yeah, some significant demand. You know, like larger format tenants. I think if anything, not size of the pipeline certainly up materially on a year-over-year basis. We've also seen an increase in average size requirements, more larger tenants kind of coming into the pool. A greater propensity of tenants or a greater concentration, I guess I should say, of tenants between 50, 000 sq ft and 100,000 sq ft. You've seen that kind of come through the execution stats as well. The pipeline over the last two quarters being, you know, over the last quarter or two being marginally up while we've had substantial executions, I think is a really good sign.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
The last thing I'd say, Michael, is that rolling 12-month leasing totals have returned as historical averages in San Francisco, so they're about 9 million sq ft. That gives you more color on the pipeline.
Peter Abramowitz — Analyst, Deutsche Bank
Yes. Thank you. I guess just one on software tenants in the portfolio, potential tenants. I guess could you just give some color on kind of the tone of conversations with software tenants these days, particularly in the Bay Area? It's, you know, it seems so far this year that the equity markets are kind of pricing these companies as if there's an existential threat to their business. Kind of curious, what's the tone of in conversations with them? Have there been any meaningful additions to the sublease market from that portion of the portfolio?
Angela Aman — CEO, Kilroy Realty
No, I mean, that's sort of the point I was going to make, Peter. I think if you go back over the last several years, you know, that software category is a category where we had seen, you know, this is going back several years, sort of the height of the pandemic. Some of the largest blocks of sublease space coming out of that portion of the population. Thankfully, a lot of those blocks have been spoken for, right? We've got, you know, while it might look one way on the lease expiration schedule or something else, you know, we've got a much more granular tenancy within some of that space and tenants that we do believe, especially in the San Francisco market, are high likelihood of renewing or going direct with us down the road.
A lot of that, you know, sort of pressure or tension or headline impact has already been, you know, felt in the portfolio. It was felt several years ago. That space was successfully re-leased in many circumstances. I'm not aware of any conversation we've had in the portfolio over the last, you know, probably six months where the tone or tenor from those tenants has changed in any material way. I'll let Rob jump in as well.
Rob Paratte — EVP and Chief Leasing Officer, Kilroy Realty
No, I agree with that, Peter. It's just, you know, we have software companies we're talking to that need more space. The news is national, but what's happening on the ground, I can only speak to what we're seeing, which is no pullbacks and increased demand.
Peter Abramowitz — Analyst, Deutsche Bank
All right. That's all for me. Thanks for the time.