Kilroy Realty, the owner of office and residential properties in California, Washington and Texas, sees more momentum among companies in having their staffs return to the workplace.
The prediction comes after remote work job postings have fallen and major companies from Amazon to JPMorgan Chase are telling its workers to return to the office after the pandemic popularized working from home. Average usage from 10 U.S. cities grew 3.3% between April 12 to April 19 to nearly 50%, according to Kastle Systems, a security firm that tracks this data.
CEO and Chairman John Kilroy Jr. said Thursday on a first-quarter earnings call many companies are realizing the inefficiencies of remote work. Kilroy also said he couldn’t find parking the last time he was visiting a Kilroy office property in San Francisco, another sign workers may be coming back.
“There’s going to be a quantum jump in the next three months or so in getting back to work,” Kilroy said. “I have a feeling we’re going to see material improvements with return to office.”
That said, some investors don’t appear to be as positive as Kilroy. The company’s stock is down more than 20% year to date as office real estate investment trust share prices have fallen amid concerns about leasing office properties. The nation’s office vacancy rate is 12.9%, the highest recorded in the past decade, according to CoStar data.
Even so, Kilroy said the office industry faces headwinds, adding that the market is nuanced.
“It’s not all down and it’s not all up,” Kilroy said.
Beyond mulling office market trends, Kilroy has been thinking about what’s next for him at his firm.
The CEO and chairman revealed in March he was planning to step down from the CEO role at the end of the year after serving in the position for nearly 30 years. Kilroy said Thursday he will remain chairman “for now” and plans to continue serving on the board.
Kilroy didn’t say much when asked what he and the company are looking for in its next CEO. He said that some of the CEO candidates may be in the room where he was hosting Kilroy’s conference call.
Asked about the next CEO’s attributes, he replied: “Someone smarter than me.”
Kilroy decided to announce his retirement before naming a successor in an effort to be transparent. The CEO said the announcement gave the company plenty of time to go through the process to find the next chief executive.
Plus, Kilroy wanted to make sure the company announced his retirement before news leaked.
“Probably the fastest way to get something around is to say it’s a secret,” Kilroy said.
Kilroy reported net income attributable to common shareholders of $56.6 million in the quarter ended March 31, up 6.6% from the $53.1 million reported in the year-earlier quarter. Revenue was $292.8 million in the most recent quarter, up roughly 10.3% from the year-earlier $265.5 million.
Kilroy owns about 16.2 million square feet of office and life science space and more than 1,000 residential units, according to the statement.