It’s been a tumultuous few years for the office market, and the volatility is being felt by publicly traded real estate companies that have made their name developing and acquiring office properties. Looking at office REITs in particular, many of the firms with the largest portfolios are down significantly from highs early last year. Still, these investors seem to be sticking with their premier office buildings and in some cases, developing new ones. At the same time, while office remains their core asset class, some REITs are exploring adjacent sectors like life sciences, where demand has continued to be strong, and the nicely-rebounded retail sector, and even casinos.
Office REITs are also rethinking their geographic strategy. Some companies are expanding their footprint in new cities while others continue to focus on New York City, the country’s biggest office market. To help understand how the largest office REITs are spread out across the country, we have mapped out their portfolios.
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Boston Office Properties
Boston-based office REIT Boston Office Properties (BXP) owns 194 properties totaling 54.1 million square feet as of December 2022. Of the total portfolio, 5.6 million square feet is life sciences space, which makes since their hometown of Boston is the largest life science real estate market in the country. In the company’s 2022 fourth quarter earnings call, BXP President Doug Linde said he doubted that the company’s portfolio would see positive absorption in 2023, admitting that overall, the number of companies growing their space footprints has fallen. Meanwhile, BXP has multifamily development in the works, with 2,000 residential units planned in East Coast markets and millions of square feet of life sciences space currently being developed.
Los Angeles-based office REIT Kilroy Realty has a portfolio of more than 16 million square feet across its 52 properties. Most of its assets are offices, but it has a growing number of life sciences properties, like the sprawling Kilroy Oyster Point development in South San Francisco. Most recently, the company made its entry into the Austin market with the $580 million purchase of Indeed Tower, the city’s tallest building. Kilroy followed up that purchase with the acquisition of a development site in north Austin, where it is planning a Class A office building with nearly 500,000 square feet. Just last week, Kilroy CEO John Kilroy, Jr. announced he will retire at the end of 2023, and the search is currently on to find a successor.
Vornado Realty Trust
New York-based Vornado has the vast majority of its assets in Midtown Manhattan, where it owns close to 20 million square feet of office space. On the West Coast, Vornado owns three office properties in San Francisco, one of which is 555 California Street, formerly known as the Bank of America Tower, a 52-story skyscraper with nearly 2 million square feet. In Chicago, Vornado owns the largest privately-owned commercial building in the U.S., known as THE MART. While Vornado has mainly stuck to office, the company first veered into the multifamily space in 2013 when it broke ground on the luxury condo building 220 Central Park South. Later, the firm developed a luxury rental building in Queens. Vornado’s most recent project, the massive Penn Station redevelopment plan, is on hold at the moment due to worsening economic conditions.
Headquartered in Raleigh, North Carolina, Highwoods’ 27.6 million-square-foot office portfolio is spread across 9 markets, primarily in the Sunbelt, with the exception of Richmond, Virginia, and Pittsburgh. Its trophy properties include the Bank of America Tower at Legacy Union in Charlotte, which the REIT purchased in 2019 for $436 million, and McKinney & Olive, an office tower in Dallas that it purchased late last year in a venture with Granite Properties for $400 million. The company said last year it was looking to continue expanding into the Charlotte market, and with its recent Dallas acquisition, the company could also be eyeing expansion there as well.
New York-based SL Green is the largest office landlord in Manhattan, where its entire office portfolio, about 33.1 million square feet, is located. The REIT fully owns at least 34 office properties but holds interests in 61 buildings throughout the borough. One of the company’s most recent developments was One Vanderbilt, the towering skyscraper built next door to Grand Central Terminal that is co-owned by National Pension Service of Korea and Hines. While known primarily as the city’s largest commercial owner, the REIT has owned a few residential properties, including 7 Dey Street in Lower Manhattan. SL Green’s most recent venture has been partnering with Caesars Entertainment and Jay-Z in a Times Square casino proposal.