Persistent Remote Work And Tenant Downsizing Will Undermine Office Assets

Analysts modestly raised Kilroy Realty’s price target to $40.93 amid improved leasing momentum in San Francisco but remain cautious due to weak broader office demand and limited occupancy gains outside the Bay Area.

Analyst Commentary

• Bullish analysts noted a healthy improvement in the San Francisco Financial District and SoMa, boosting confidence in Kilroy's ability to address remaining lease expirations through 2027.
• Despite local progress, concerns remain over Kilroy's lack of improved new leasing volume outside the San Francisco Bay Area, limiting the potential for overall occupancy gains.
• Bearish analysts cite overall weak office demand on the West Coast, high availability of office space, and low tenant retention as headwinds likely to constrain funds from operations and future growth.
• Several price target adjustments reflect updated occupancy and interest expense assumptions after Q2 results, as well as broader sector-wide changes in office REIT expectations.
• Analysts highlighted that recent share price outperformance means valuation is now fair or risk premiums are high, reducing upside potential in the near term.

What's in the News

• Goldman Sachs downgraded Kilroy Realty to Sell from Neutral with an unchanged price target of $33, citing expectations of a 7% decline in annual funds from operations over the next three years, driven by low tenant retention and high office space availability in West Coast markets (Goldman Sachs research note, 2025-08-21).
• Kilroy Realty acquired Maple Plaza, a 293,000-square-foot Class A office campus in Beverly Hills, for $205 million, marking its first entry into this supply-constrained submarket; the asset is 75% leased and has experienced strong leasing activity, particularly among private equity, professional services, and entertainment tenants (Business Expansion, 2025-09-18).
• The Maple Plaza property features modern amenities, is LEED Gold and Fitwel certified after a 2017 renovation, and was funded with cash on hand and disposition proceeds (Business Expansion, 2025-09-18).
• Kilroy Realty executed a 24,000-square-foot lease with genomics company Color at its Kilroy Oyster Point Phase 2 life sciences project in South San Francisco, with Color expected to occupy in early Q2 2026; the KOP 2 campus is part of an 875,000-square-foot development aimed at high-growth tenants in innovation and biotech (Client Announcement, 2025-09-17).
• Kilroy Realty did not repurchase any shares between April 1 and June 30, 2025, with zero activity under its buyback program announced in March 2024 (Buyback Tranche Update, 2025-07-29).

Valuation Changes

Summary of Valuation Changes for Kilroy Realty

• The Consensus Analyst Price Target has risen slightly from $39.93 to $40.93.
• The Future P/E for Kilroy Realty remained effectively unchanged, moving only marginally from 95.51x to 97.04x.
• The Discount Rate for Kilroy Realty remained effectively unchanged, moving only marginally from 8.43% to 8.42%.