Jefferies upgrades Kilroy Realty stock rating to Buy on San Francisco AI boom

Investing.com - Jefferies upgraded Kilroy Realty (NYSE:KRC) from Hold to Buy and raised its price target to $45.00 from $33.00, citing the company’s significant exposure to San Francisco’s growing artificial intelligence sector. The stock, currently trading at $39.55, has already shown strong momentum with a 36.73% gain over the past six months. According to InvestingPro analysis, the company maintains a GOOD financial health score of 2.54.

The real estate investment trust, with a market capitalization of $4.72 billion, holds approximately 42% exposure to the San Francisco market, which Jefferies identifies as "developing into the epicenter of AI activity." This positioning gives Kilroy Realty strategic advantages as the local commercial real estate market shows signs of improvement. The company has demonstrated stability through its impressive 29-year track record of maintaining dividend payments, currently offering a 5.46% yield.

Active tenant demand in San Francisco has approximately doubled since 2023, now reaching around 7 million square feet, according to the research firm’s analysis. Jefferies also noted that Kilroy management is observing "a material slowdown in Big Tech space givebacks" in the area.

With San Francisco properties currently at 84.8% occupancy, Jefferies sees "an attractive lease-up opportunity" for Kilroy Realty to improve its performance metrics in the coming years.

Jefferies’ financial projections for Kilroy Realty exceed consensus estimates, with the firm’s fiscal year 2026 and 2027 forecasts running 4.5% and 2.4% above street expectations, respectively.

In other recent news, Kilroy Realty Corporation reported impressive financial results for the second quarter of 2025, with earnings per share reaching $0.57, significantly higher than the expected $0.32. Revenue also exceeded projections, coming in at $289.9 million compared to the forecasted $270.28 million. Additionally, Kilroy Realty has signed a 24,000 square foot lease with Color at its Kilroy Oyster Point Phase 2 development, with occupancy expected in the second quarter of 2026.

In terms of analyst activity, Scotiabank upgraded Kilroy Realty from Sector Underperform to Sector Perform, citing confidence in the company’s leasing progress and the potential impact of AI demand. Conversely, Barclays downgraded Kilroy Realty to Equalweight after the stock’s 25% outperformance relative to the RMZ index. Goldman Sachs also downgraded the company to Sell, expressing concerns over weak office market conditions and predicting a decline in funds from operations per share over the next three years. These developments highlight the mixed analyst perspectives on Kilroy Realty’s future prospects.

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