Highwoods Properties Achieves Strong Q1 2025 Results Despite Challenging Macro Environment
Highwoods Properties, a leading REIT in the office and industrial space, has reported strong financial results for its first quarter of 2025. The company's Chief Executive Officer, Ted Klinck, led the earnings call, where he highlighted key highlights from the quarter.
Despite concerns over the macroeconomic outlook and choppiness in capital markets, Highwoods Properties continues to execute on its key priorities, delivering solid financial results while improving portfolio quality. The company's investment activity was robust during Q1 2025, with $145 million of noncore disposition proceeds recycled into the acquisition of Advanced Parts Tower, a Class AA office building in Raleigh.
This strategic move illustrates Highwoods Properties' investment objective of selling older capital-intensive properties in non-BBD locations and rotating into high-quality buildings where people want to live, work, and play. The acquisition has meaningful long-term growth potential, with existing rents below market for the North Hills BBD area, where market rents are expected to accelerate over the next several years.
Additionally, Highwoods Properties placed in service 227 Peachtree, a 79,135,000 square foot development in Atlanta's Buckhead BBD. The company holds a 50% interest in the joint venture that developed and owns the property, which is now 94% leased and 88% occupied.
The company also signed 97,000 square feet of first-gen leases in its development pipeline, bringing the $474 million pipeline to 63% leased. This represents a 5% increase from last quarter, with solid interest garnered in these best-in-class projects that are expected to drive $30 million of incremental NOI above their 2025 outlook.
Furthermore, Highwoods Properties leased 700,000 square feet of second-gen office space during Q1 2025, including over 250,000 square feet of new leases and 43,000 square feet of net expansion leases. Leasing economics were strong, with net effective rents more than 20% higher than their prior 5-quarter average.
According to Ted Klinck, the company's Chief Executive Officer, these results demonstrate Highwoods Properties' ability to execute on its key priorities and deliver solid financial results despite challenging market conditions. The company remains optimistic about its future prospects, driven by growth drivers such as lease-up efforts at core buildings and development deliveries that have not yet stabilized.
With the current level of activity across their portfolio and executed lease deals, Highwoods Properties is well-positioned to navigate any macroeconomic uncertainties and achieve meaningful long-term growth. The company's focus on delivering high-quality office and industrial space in strategic locations has positioned it for success in a rapidly evolving market.
