Highwoods Sees Demand Recovery, Reports Strong Leasing Activity
Highwoods Properties HIW recently announced that the company has signed 738,000 square feet of second-generation leases since July 1, 2024. This also includes new leases spanning more than 400,000 square feet.
A part of the above-mentioned leases comprises a long-term lease with a new client at Two Alliance Center in Atlanta’s Buckhead best business districts (BBDs) for 104,000 square feet. This lease, set to begin in 2026, will backfill a major part of the building vacated by a customer in the third quarter of 2024.
It marks a solid recovery in demand for the company’s properties. Since the beginning of the year 2024 through Sep. 9, this real estate investment trust (REIT) has signed 37% more new deals than the whole of 2023.
Per Ted Klinck, president and CEO, “Leasing activity continues to be robust across our portfolio as office users are gravitating towards the highest quality buildings with the best capitalized landlords. This volume of work will largely benefit the Company starting in mid-2025 and thereafter.”
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 25.1% compared with the industry's upside of 16.6%.
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Highwoods Properties Sees a Recovery in Demand
A large part of Highwoods’portfolio is concentrated in high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to continue experiencing above-average job growth. This is likely to support Highwoods’ top-line growth over the long term.
Highwoods is seeing a recovery in demand for its high-quality, well-placed office properties, as highlighted by a rebound in new leasing volume. The company leased 909,000 square feet of second-generation office space in the second quarter of 2024, including 352,000 square feet of new leases. During the same period, the company also signed 61,000 square feet of first-generation leases.
Highwoods has been undertaking measures to expand its footprint in the high-growth BBD markets. The company is focused on development projects in key markets, which are likely to generate considerable annual net operating income upon completion and stabilization. As of June 31,2024, Highwoods’ development pipeline aggregated $505.6 million (at the company’s share) and is 45% pre-leased.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Paramount Group PGRE and Lamar Advertising LAMR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Paramount Group’s 2024 FFO per share has been raised marginally northward over the past three months to 78 cents.
The Zacks consensus estimate for Lamar Advertising’s current-year FFO per share has been revised marginally upward over the past month to $8.09.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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