Douglas Emmett Exceeds Leasing Expectations, Shows Resilience Amid Market Volatility
Los Angeles, CA - Douglas Emmett, a real estate investment trust (REIT), has reported a successful first quarter of 2025, exceeding leasing expectations and demonstrating resilience in the face of market volatility.
According to Jordan Kaplan, President and CEO of Douglas Emmett, the company's office portfolio saw positive absorption, with over 300,000 square feet of new leases signed. This is well above historical averages, particularly for Class A offices which maintained stable in-place and asking rental rates despite a higher vacancy market. The conversion of Studio Plaza to a multi-tenant office building has also exceeded expectations.
In addition to the strong leasing performance, Douglas Emmett's multifamily portfolio enjoys very full occupancy and robust revenue growth, driven by the appeal of high-end residential communities and the affluence of coastal submarkets where demand for quality housing only seems to accelerate.
However, higher interest rates remain a drag on income, with Stuart McElhinney, Vice President of Investor Relations, noting that the company's cost of debt is expected to increase between 100 and 200 basis points from its pre-COVID average of 3%. Despite this, Kaplan remains optimistic, expecting rental income growth as the economy recovers.
The company is also making progress on various redevelopment projects, including the conversion of Studio Plaza into a multi-tenant office building and the redevelopment of the 712-unit Barrington Plaza residential property. Kevin Crummy, Chief Investment Officer, highlighted the successful closing of a $127.2 million nonrecourse interest-only loan secured by one of its residential properties.
Douglas Emmett's diversified tenant base, focus on supply-constrained markets, and conservative financing strategy are expected to provide a strong foundation for managing periods of turbulence. The company is keeping a close eye on national policies affecting public markets, which could pose additional challenges if they lead to a slowdown in office leasing or tip the economy into recession.
With its operating platform built to weather storms, Douglas Emmett appears well-positioned to navigate market fluctuations and drive long-term growth.
