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

Highwoods Properties (HIW) has outperformed its industry, with shares up 8.3% in the last three months, driven by strong leasing activity in Sun Belt markets; the company secured 750,000 square feet of second-generation leases through early June, including 300,000 square feet of new leases. HIW is executing a capital-recycling strategy, selling $146.3M in non-core assets and acquiring a Class AA office tower in Raleigh, while analysts have marginally increased the 2025 FFO per share estimate to $3.41.

Analysis

Highwoods Properties (HIW) has demonstrated notable stock performance, rallying 8.3% over the past three months, contrasting with a 0.2% decline in its industry. This outperformance is substantially driven by robust leasing activity, evidenced by the securing of over 750,000 square feet of second-generation leases from the beginning of the second quarter through June 2, 2025, which included more than 300,000 square feet of new leases. This follows a strong first quarter in 2025 where HIW leased 700,000 square feet, with 252,000 square feet being new. The company's strategic focus on high-growth Sun Belt markets, characterized by favorable demographic trends and anticipated above-average job growth, is supporting this leasing strength and has contributed to net effective rents being 20% higher than the previous five-quarter average. Furthermore, HIW is actively managing its portfolio through a disciplined capital-recycling strategy; in Q1 2025, it divested $146.3 million in non-core assets ($145 million from three Tampa office buildings and $1.3 million from land) and acquired the Class AA Advance Auto Parts Tower in Raleigh in March 2025, a 346,000 square foot property. Financially, HIW maintains a healthy balance sheet with over $700 million in total available liquidity as of March 31, 2025, and no consolidated debt maturities until the second quarter of 2026. Analysts reflect a cautiously optimistic outlook, with the Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share being marginally revised upward to $3.41, though the stock holds a Zacks Rank #3 (Hold). Key risks include competition from other developers and operators, significant development outlay, and a high debt burden.

Key Decisions for Investors

• Investors should acknowledge Highwoods Properties' strong recent leasing momentum and strategic positioning in Sun Belt markets, which has driven share outperformance, while also noting the neutral 'Hold' rating from Zacks which suggests a balanced risk/reward profile at current levels.
• Carefully monitor the ongoing execution of HIW's capital recycling strategy, particularly the integration of new acquisitions like the Raleigh Class AA tower and the impact of non-core asset disposals on future FFO generation and portfolio quality.
• Remain vigilant regarding potential headwinds from competition within the office property sector and the company's existing debt levels, as these factors could impact sustained growth and profitability despite current positive operational trends.