Highwoods Properties, Inc. Reports Strong Second Generation Leasing Activity with Over 750,000 SF Signed in Q2 2025

Highwoods Properties (HIW) reported strong second-quarter 2025 leasing activity, signing over 750,000 square feet of second-generation leases, including over 300,000 square feet of new leases, according to CEO Ted Klinck. This leasing volume, along with a healthy pipeline, positions the REIT for potential occupancy growth later in 2025; however, the company acknowledges potential risks related to economic conditions and leasing challenges, as well as recent significant portfolio adjustments by institutional investors like PGGM Investments and Massachusetts Financial Services Co.

Analysis

Highwoods Properties (HIW) reported robust leasing activity for the initial two months of the second quarter of 2025, securing over 750,000 square feet in second-generation leases, of which more than 300,000 square feet constituted new leases. This performance, emphasized by CEO Ted Klinck, alongside a healthy leasing pipeline, underpins expectations for increased occupancy towards the end of 2025, driven by the perceived attractiveness of its portfolio in key business districts. While the strong second-generation leasing demonstrates demand for existing spaces, the balance with leasing in newly constructed properties will be an important ongoing performance indicator. Institutional investor activity presents a mixed picture: Massachusetts Financial Services added approximately $84.6 million (2.85 million shares) and Cohen & Steers added roughly $41.8 million (1.41 million shares) to their HIW positions in Q1 2025. Conversely, PGGM Investments divested its entire $88.4 million stake (2.89 million shares) in Q4 2024, and Franklin Resources and BlackRock reduced their holdings by $35.4 million and $27.0 million respectively in Q1 2025. Overall institutional flows showed 183 investors adding shares versus 168 decreasing them in their most recent reported quarter. Minor congressional trading activity involved two purchases by a single representative in early March 2025, totaling up to $100,000. The company acknowledges standard forward-looking risks for REITs, including potential economic downturns, tenant financial stability, and rising operating expenses, which could impact future financial outcomes despite current positive leasing momentum.

Key Decisions for Investors

• Investors should view the reported 750,000 SF of Q2 leasing to date, including a significant 300,000 SF in new leases, as a positive short-term indicator, but must monitor upcoming full-quarter results for sustained momentum and actual conversion to increased occupancy as projected for late 2025.
• Carefully assess the divergent institutional capital flows, where substantial Q1 2025 investments by firms like Massachusetts Financial Services and Cohen & Steers are counterbalanced by PGGM's complete Q4 2024 exit and notable Q1 2025 sales from Franklin Resources and BlackRock, suggesting varied conviction levels among large holders.
• Incorporate the company's explicitly stated risks—particularly concerning economic conditions, tenant financial health, and operating expense pressures—into any investment thesis, as these factors could moderate the positive impact of current leasing activity.
• Monitor future leasing updates for details on the performance of newly constructed properties versus second-generation space to gain a comprehensive understanding of Highwoods' overall market positioning and growth sustainability.