Kilroy Realty Corporation (KRC) signed about 815,000 square feet of office leases in the third quarter, the Los Angeles landlord said in its results release on Thursday. Its leased rate rose, while the share of space with tenants actually in place barely moved.

That split runs through the whole quarter. Funds from operations (FFO, the standard REIT earnings measure that adds back property depreciation) fell to $0.88 a diluted share from $1.08 a year earlier, a decline of 18.5% as calculated by Trend & Ticker.

Kilroy's third quarter in figures

• Revenue was $271.6 million, down from $279.7 million, a 2.9% drop as calculated by Trend & Ticker.
• Net income available to common stockholders was $0.13 a share, against $1.31 a year earlier, when Kilroy booked $110.5 million of gains on property sales.
• The stabilized portfolio was 83.0% leased and 76.9% occupied at September 30, versus 81.5% and 77.0% at the end of June.
• Interest expense rose to $39.4 million from $32.2 million, an increase of 22.5% as calculated by Trend & Ticker.
• Net debt was 7.2 times the company's share of EBITDAre (earnings before interest, taxes, depreciation, amortization and real estate items), up from 6.4 times a year earlier.

Signed leases have not reached the income statement

The gap between leased and occupied space widened to 6.1 percentage points from 4.5 points in June, as calculated by Trend & Ticker. Space in that gap is signed, but the tenants have not moved in yet.

Kilroy Oyster Point Phase 2 in South San Francisco is the clearest case. The 871,738 square foot campus, with a total estimated investment of $1.175 billion, was 49% leased but only 7% occupied at quarter end, according to the company's supplemental report.

Excluding that project, the portfolio was 84.8% leased and 80.7% occupied.

Leased rates rose in all five regions from June. Austin led at 90.4% leased, and the Bellevue submarket in Seattle climbed to 80.7% from 75.6%. Chief Executive Officer Angela Aman said in the release, "Momentum in our West Coast markets continued to accelerate in the third quarter."

Box, Inc. made up most of the 343,000 square feet of renewals, extending about 243,000 square feet at Crossing 900 for 12 more years. Cash rents on second-generation leases rose 9.7%, and GAAP rents rose 30.6%.

A tighter 2026 FFO range

Kilroy narrowed its 2026 FFO forecast to $3.55 to $3.59 a diluted share, from $3.49 to $3.63 in July. The midpoint moved up one cent to $3.57, as calculated by Trend & Ticker.

The quarterly dividend of $0.54 a share equals 61% of third quarter FFO per share, as calculated by Trend & Ticker.

Land sales are the next source of cash. Kilroy has four parcels under contract for a combined $184.5 million, and the $19.5 million East Village sale in San Diego is set to close in the fourth quarter.

The other three wait on residential entitlements, with closings planned in phases starting in early 2027.