Kilroy Realty Reports San Francisco Leasing Gains Amid Future Risks

Kilroy Realty reports a recovery in its portfolio leasing, driven by a turnaround in the San Francisco office market. Management remains cautious about upcoming lease expirations and capital costs.

At the BofA NY Global Real Estate Conference 2026, CEO Angela Aman noted that the San Francisco market is seeing consistent interest from a variety of industries. This shift marks a change from the stagnation that affected many coastal office markets during the pandemic.

"We are seeing really good demand in San Francisco, with activity spanning across AI, technology, financial services, and professional services sectors," said Angela Aman, Chief Executive Officer, Kilroy Realty, in a statement at the conference.

Operational Recovery and Pipeline

The recovery is visible at specific assets like 201 Third Street in San Francisco. According to a transcript of the conference, occupancy at the property rose from approximately 20% in the fourth quarter of 2024 to about 90% as of September 2026.

The company is using its current leasing pipeline to maintain this progress. Kilroy Realty has approximately 1.1 million square feet of space under signed leases that have not yet been occupied. These leases should contribute to stabilized occupancy levels in the coming quarters.

Near-Term Headwinds

Despite positive leasing trends, the company faces a structural challenge in late 2027. A 500,000-square-foot lease held by DIRECTV in El Segundo is expected to downsize or be vacated, creating a vacancy gap that the company must backfill in a competitive environment.

This risk occurs as the firm manages the impact of refinancing costs on its balance sheet. As of September 18, 2026, Kilroy Realty Corporation (KRC) stock was priced at $34.23.

What Is at Stake for Office REITs

The ability of major office real estate investment trusts (REITs) to stabilize their portfolios depends on their success in diversifying tenant bases beyond traditional tech firms. With the 2027 expiration cycle approaching, the company's performance will indicate whether current demand in San Francisco and other core markets can offset the contraction of legacy corporate footprints.