Highwoods Properties Q2 2025: Navigating Contradictions in Acquisition Strategies and Market Conditions

Acquisition and disposition strategy, capital market conditions, expectations for tenant behavior, and occupancy levels are the key contradictions discussed in Highwoods Properties' latest 2025Q2 earnings call



Strong Financial Performance and Leasing Activity:
- Highwoods Properties reported FFO of $0.89 per share for Q2, with occupancy at 85.6% and lease rate increasing by 80 basis points to 88.9%.
- The growth was driven by significant second-generational leasing activities, totaling 920,000 square feet, with 370,000 square feet of new leasing.

Development Pipeline and NOI Growth Potential:
- The company has over $55 million of annual NOI growth potential from core operating properties and development pipelines, with over $33 million secured with signed leases.
- This potential is attributed to ongoing stabilization of development properties like 23 Springs and Dallas Midtown East, with expected NOI contribution upon full occupancy.

Market Dynamics and Demand:
- Highwoods' markets, particularly Nashville, Charlotte, and Dallas, continue to outperform due to strong demand and low vacancy levels.
- The demand is driven by factors such as limited supply, lower competitive supply, and strong demographic trends.

Acquisition Strategy and Capital Markets:
- The company is actively reviewing potential acquisitions as capital markets are showing signs of improvement, with more high-quality assets coming to market.
- Attractive opportunities are being evaluated, with a focus on risk-adjusted yields and potential returns based on expected returns from acquisitions.