Highwoods Properties owns, develops, acquires, leases and manages properties primarily in BBDs (Best Business Districts) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa.
Strong end to a strong year
Ted Klinck (pictured left), president, CEO and director of the real estate investment trust, detailed the fourth quarter performance to shareholders during an earnings call this week. “We had a strong end to a strong year for Highwoods. In the fourth quarter, we enjoyed solid leasing in terms of both volume and economics; acquired a best-in-class property in Uptown Dallas; placed in service our highly successful Midtown West development in Tampa; announced Midtown East, our second development in Midtown Tampa,” he said.
Klinck noted the strong performance in the commercial real estate market emerged in spite of inflation: “Our healthy leasing during the fourth quarter is somewhat contradictory to the broader macro environment, with interest rates up sharply, limited capital availability, and widespread concerns of a pending recession. We continue to believe that, to be resilient, our portfolio must be diversified and not be overly reliant on any single customer, market, submarket, industry, or lease size. This diversification is a core component of our long-stated, simple, and straightforward goal to generate attractive and sustainable returns over the long term. Our largest market, Raleigh, is less than 22% of revenues.”
He provided a client breakdown: “Our largest customer, Bank of America, is less than 4%. Our top 20 customers account for less than 30%. Our largest industry, the highly diversified professional, scientific and technical services category, is less than 30%. And our average lease size is under 15,000 square feet.”
Company tactics led to strong performance
The top executive also detailed tactics that led to the strong fourth quarter performance: “We believe this purposeful diversification, our high-quality portfolio, and continued strong population and job growth across our markets has driven our strong leasing since the onset of the pandemic, including throughout last year. In 2022, we signed 1.5 million square feet of new leases, the most in any year since 2014. We ended the year on a positive note with 337,000 square feet of new leasing and 924,000 square feet of total second-gen leasing. In the fourth quarter, we signed 28 expansions, nearly half of our renewal count, with expansions outpacing contractions by a ratio of 3.5 to 1.0, equating to 81,000 square feet of net expansions.”