The analyst price target for Kilroy Realty has shifted slightly lower to $42.00. Analysts cite moderated profit margins and mixed leasing trends, despite some recent improvements in key markets.

Analyst Commentary

Recent analyst actions reflect both improved optimism and ongoing concerns regarding Kilroy Realty’s performance and outlook. These views are shaped by observed shifts in market fundamentals, leasing activity, and valuation trends across Kilroy’s core markets.

• Bullish analysts point to noticeable improvements in the San Francisco office market, including better conditions in key submarkets. These factors support an upgraded outlook and a higher price target.
• Progress on resolving upcoming lease expirations through 2027 is seen as a positive sign of management’s execution and ability to maintain occupancy.
• Anticipation of continued leasing momentum, particularly in recovering urban cores, leads to expectations for steady growth in rental revenue and cash flow generation.
• Recent upgrades and price target increases suggest that analysts see potential for further recovery if leasing volumes outside the Bay Area begin to accelerate.

• Bearish analysts caution that new leasing volume outside the core San Francisco region remains below expectations, which limits the upside for total occupancy and revenue growth.
• Investor concerns persist regarding the high availability of office space and low tenant retention rates in West Coast markets. This challenges the company’s longer-term growth trajectory.
• Despite some fundamental improvements, several analysts downgrade their outlook based on valuation and note that recent share gains have already priced in much of the positive news.
• Forecasts for the next three years suggest pressure on funds from operations due to structural headwinds in the broader office market. This contributes to more cautious stances from certain major research houses.

What's in the News

• Goldman Sachs downgraded Kilroy Realty to Sell from Neutral and maintained a $33 price target. The decision was based on a projected 7% annual decline in funds from operations over the next three years, attributed to low tenant retention and high office space availability in West Coast markets (Goldman Sachs).
• Kilroy Realty closed the acquisition of Maple Plaza, a 293,000-square-foot Class A office campus in Beverly Hills, for $205 million. This marks the company's first acquisition in this supply-constrained submarket. The property is 75% leased and has reported strong leasing activity, with 45,000 square feet signed over the past year.
• The company announced a 24,000-square-foot lease at Kilroy Oyster Point Phase 2 in South San Francisco with life sciences company Color. The lease is part of a spec suite initiative in the purpose-built life science campus and is expected to accelerate lease-up velocity and attract high-profile tenants.

Valuation Changes

• Consensus Analyst Price Target has moved slightly lower from $42.13 to $42.00.
• Discount Rate has increased marginally to 8.40% from 8.40% previously.
• Revenue Growth forecast has increased substantially, now projecting 0.80% compared to 0.15% earlier.
• Net Profit Margin has declined from 5.60% to 4.84%.
• Future P/E ratio has risen from 99.83x to 113.92x, indicating a higher valuation multiple on projected earnings.