Kilroy Realty is a US Real Estate Investment Trust (REIT) that focuses on the West Coast markets of Seattle, San Francisco, Los Angeles and San Diego. Kilroy owns and leases 112 office and mixed use buildings totaling 13.4 million sqft (1.2 million sqm) of lettable area with a 97% occupancy rate. This focus on the West Coast is a deliberate strategy which allows Kilroy to access the best tenants in the highest productivity sectors, namely technology and health sciences. 55% of KRC’s tenant base is classified as technology and only start-ups making up just 2% of the total tenant base. Life science and healthcare tenants compose 14% of the tenant base with the balance of tenants coming from more traditional sectors such as professional services, real estate and finance.
Kilroy is also an industry leader in maintaining and developing sustainable real estate with 100% of developments receiving a Gold or Platinum LEED rating and receiving the Energy Star Partner of the Year award six years running as well as being the NAREIT Leader of the Light Award for six consecutive years. Most recently, Kilroy received NAIOP, the Commercial Real Estate Development Association 2020 Developer of the Year stating, “Kilroy is a true visionary in commercial real estate, advancing the work environment and creating places of innovation and workplace satisfaction for tenants that span from technology to media to life sciences and beyond.”
COVID-19 has impacted almost every business in almost every part of the globe. Working from home and the challenges office markets will face coming out of a post virus world will be substantial, however Kilroy is well positioned to survive and thrive. Their West Coast and technology bias has proven to be a resilient strategy with consistently high rent collection in April and May of 2020 (96% and 92% respectively). Whilst employers weigh the benefits from working from home such as cost savings, lower commute time for employees and larger geographic access to workers, the costs of working from home are also very real. Corporate culture development, mentoring and career advancement opportunities are hidden costs which may compound over time.
It is also instructive that many technology companies already have flexible working arrangements and therefore do not see smaller office uptake or shrinking campus sizes as a priority to their business.