Highwoods Properties (HIW) Q3 2026 Earnings Report

The call was strongly constructive. Highlights included accelerating occupancy, strong leasing spreads, constrained office supply, raised FFO guidance, substantial disposition progress, improving leverage, ample liquidity, and positive development and renewal opportunities. The main challenges were elevated leasing CapEx, cash flow below normalized levels, slower acquisition activity, higher interest rates delaying transactions, and the delayed contribution from development. Management nevertheless expressed confidence in improving cash flow, occupancy, and long-term FFO growth.

Highwoods updated its 2026 FFO outlook to $3.51-$3.70 per share, including the possibility of $0.14 per share of land sale gains at the high end and none at the low end; excluding all land sale gains, the midpoint implies FFO of more than $0.90 per share for the fourth quarter. The company expects to sell an additional $100 million-$250 million of non-core assets by the end of the year, include $100 million-$400 million of new development announcements for the remainder of the year, and stabilize 23 Springs by the second quarter of next year. Year-end occupancy is expected at 87.0%-88.0%, with the midpoint remaining 87.5%, while new leasing volumes are expected to moderate; achieving occupancy of around 88.5% by the end of next year would require around 250 a quarter, give or take. Normalized leasing CapEx is expected to moderate into the low $100 million range, probably $110 million, $115 million, maybe $120 million, with 2027 an okay year from a cash flow perspective and normalized levels more likely in 2028 and thereafter. Debt to EBITDA is expected to be modestly lower at year-end and continue to decline throughout 2027, assuming otherwise leverage-neutral investment activities, and same-property NOI growth next year on a cash basis, probably in all likelihood, on a GAAP basis, is expected to be above trend levels.