Kilroy’s High-Quality Portfolio Should Hold Up Better Than the Overall West Coast Office Market

No-moat-rated Kilroy Realty reported a decent set of numbers in the fourth quarter amid a very challenging West Coast office market environment. The macroeconomic slowdown has severely affected the tech industry, with most firms focused on controlling their expenses. This has directly impacted the West Coast office market, which was already reeling with record-high vacancy rates. In our opinion, economic booms and recessions are part of every economic cycle and investors should value Kilroy’s premium real estate from a long-term perspective. The company owns tangible real estate at prime locations in highly supply-constrained markets that can be liquidated at a price that is substantially higher than the current stock price. The heart of our investment thesis for the company remains the same after analyzing the latest developments in the office market, but we think that the recovery may be longer. Kilroy’s superior-quality office portfolio should hold up considerably better than the overall West Coast office market in the upcoming quarters.