Kilroy Realty CEO Says COVID Accelerating Obsolescence of Older Office Assets

The coronavirus crisis is increasing the divide between office properties that are staying ahead of tenant safety and wellness concerns, and those that aren’t, according to John Kilroy, Jr., chairman, president, and CEO of Kilroy Realty Corp. (NYSE: KRC).

“I’ve long spoken about the obsolescence of the office stock in the United States…this is simply accelerating that,” Kilroy said Sept. 2 during an NYU Schack REIT Leadership Workshop webinar.

In addition to the increased demand for buildings with larger floor plates and higher ceiling heights, Kilroy also noted that the crisis has sped up the move towards a touch-free office environment. “You need to have the physicality and capacity in your buildings to accommodate these ongoing trends,” he said.

Kilroy added that large tenants increasingly want to have control of their own space due to health and security protocols. In addition, he said he expects to see increased flexibility for employees in response to growing attention to quality-of-life issues.

Meanwhile, Kilroy also commented on the future of gateway cities.

“I don’t buy the fact that there’s going to be a mass exit, but I also think there are forces at work that need to be addressed beyond COVID, that may have been accelerated by COVID, that our big cities have to deal with,” Kilroy said. These issues include “getting the homeless situation under control,” as well as addressing security concerns. He also called for wholesale improvements to the nation’s public transportation systems.