Highwoods Properties Demonstrates Resilience in Challenging Office Market

While the broader office real estate sector continues to grapple with vacancies and valuation pressures, Highwoods Properties has emerged with a surprisingly strong performance. The REIT’s strategic focus on Sun Belt markets and strengthened financial position appear to be key differentiators in navigating current market turbulence.

Strategic Moves Strengthen Financial Foundation

Highwoods recently executed two significant financial maneuvers that enhance its stability:

• Credit Facility Extension: On August 12, 2025, the company successfully extended a $200 million term loan, pushing its maturity from May 2026 to January 2029. The revised arrangement carries an interest rate of SOFR plus 95 basis points, incorporating a sustainability-linked incentive feature.

• Strategic Acquisition: In a $111.5 million transaction, Highwoods acquired the Legacy Union Parking Garage in Charlotte, adding 3,057 parking spaces to its portfolio. The property is projected to generate approximately $8 million in both Cash and GAAP Net Operating Income during its initial four quarters of ownership, with 70% of revenue secured through long-term lease agreements.

Quarterly Performance Exceeds Expectations

Defying sector-wide headwinds, Highwoods posted robust Q2 2025 results. The real estate investment trust reported Funds from Operations (FFO) of $0.89 per share alongside net income of $0.17 per share.

Should investors sell immediately? Or is it worth buying Highwoods Properties?

A particularly strong leasing performance saw the company execute 923,000 square feet of leasing activity, which included 371,000 square feet in new leases. The occupancy rate climbed sequentially by 80 basis points to reach 88.9%, while the operational occupancy held steady at 85.6%. Leasing for second-generation space was especially impressive, achieving GAAP rent growth of 17.6% and cash rent growth of 3.6%. The only soft spot was a 2.4% decline in same-property cash NOI.

Development Pipeline and Revised Outlook

The company’s current development pipeline is valued at $474 million and boasts a substantial 64% pre-leasing rate. Only $106 million (on a proportional share basis) remains to be funded, providing significant visibility into future cash flow generation.

This operational strength prompted management to raise its full-year 2025 FFO guidance. The new forecast range is $3.37 to $3.45 per share, with a midpoint of $3.41—representing a 2-cent increase over the previous outlook.

Institutional Sentiment and Liquidity Position

Despite these positive operational and financial metrics, some institutional investors remain cautious. Advisors Asset Management reduced its stake by 49.6% in Q1 2025, selling 21,645 shares. Nevertheless, institutional ownership remains dominant at 96.31% of all shares.

Highwoods enters this uncertain period from a position of strength, with over $700 million in available liquidity and no significant debt maturities due before the second quarter of 2026. This substantial financial flexibility is expected to be a critical advantage as market conditions continue to evolve.