Highwoods Properties Stock Up 8.3% in Three Months: Will It Continue?

Highwoods Properties (HIW) shares have outperformed the industry, rallying 8.3% in the past three months, driven by strong second-generation leasing activity totaling over 750,000 square feet, including over 300,000 square feet of new leases, signaling robust demand for high-quality office spaces in Sun Belt markets; analysts have marginally revised upward the 2025 FFO per share consensus estimate to $3.41. HIW's strategy of capital recycling and focus on high-growth Sun Belt markets supports long-term rent growth, though competition and a high debt burden remain key risks.

Analysis

Highwoods Properties (HIW) has demonstrated notable resilience, with its shares rallying 8.3% over the past three months, contrasting sharply with a 0.2% decline in the broader industry. This outperformance is substantially underpinned by robust leasing activity, exemplified by the signing of over 750,000 square feet of second-generation leases from the beginning of the second quarter through June 2, 2025, which included a significant 300,000 square feet of new leases. This leasing success, building on the 700,000 square feet (252,000 new) leased in Q1 2025, signals recovering demand for high-quality office assets, particularly in HIW's strategically chosen Sun Belt markets. Analysts reflect a cautiously optimistic outlook, with the Zacks Consensus Estimate for 2025 funds from operations (FFO) per share revised marginally upward to $3.41. The company's focus on high-growth Sun Belt markets, benefiting from inbound migration and corporate expansion, is anticipated to drive long-term rent growth, evidenced by current net effective rents being 20% above the previous five-quarter average. HIW's disciplined capital-recycling strategy, involving the disposition of non-core assets—such as the $145 million sale of three Tampa office buildings and $1.3 million in land in Q1 2025—and accretive acquisitions like the Advance Auto Parts Tower in Raleigh, further refines its portfolio quality. Financially, HIW maintains a solid position, with over $700 million in available liquidity, no consolidated debt maturities until the second quarter of 2026, and 84.3% of its Q1 2025 net operating income being unencumbered. Despite these strengths, potential headwinds include competition from other developers, a significant development outlay, and an existing high debt burden.

Key Decisions for Investors

• Investors should recognize HIW's recent share price appreciation and strong leasing volumes as indicators of improving fundamentals in its target office markets, particularly given its Sun Belt concentration.
• Careful consideration should be given to HIW's capital recycling strategy and balance sheet strength, including no consolidated debt maturities until Q2 2026 and over $700 million in liquidity, as positive differentiators, though the stated risks of competition and high debt burden warrant ongoing monitoring.