Scotiabank downgrades Kilroy to Underperform on challenged leasing

Scotiabank downgraded Kilroy Realty (KRC) to Underperform from Sector Perform with an unchanged price target of $38. The firm expects Kilroy’s valuation to remain discounted due to its view that occupancy will remain under pressure in 2025 and 2026, leading to negative annual funds from operations growth. Scotiabank estimates the company’s new leasing volume would need to meaningfully improve off recent levels in order to stabilize occupancy, given the low tenant retention rate of the portfolio.