BTIG analyst Thomas Catherwood reiterated a Neutral rating on Highwoods Properties Inc. (NYSE: HIW).

The analyst comments "Highwoods reported 3Q24 FFO/sh of $0.90, $0.03 higher than our estimate and $0.02 higher than the Street, and raised FY 2024 FFO/sh guidance by $0.03 to $3.61 at the midpoint. Exactly one year ago (give or take) we fretted over the office demand quandary that HIW faced in its Sunbelt markets; office using job growth had been on tear for five years, but incremental demand for office space remained stubbornly inactive (the company's 3Q23 new leasing volume of 152k SF was the lowest level since the depths of the pandemic, Link). Fast-forward to today, and everything has changed; HIW reported 906k SF of leasing in 3Q24, 530k SF of which was new leases (the highest level since 2Q14), GAAP and cash leasing spreads of 22.4% and 10.4%, respectively, were the highest since the onset of the GFC, and the company's active development pipeline is now 55.5% pre-leased (up from 18.8% in 3Q23). While this 180 degree shift validates what we wrote a year ago - "over time, we expect well-run, forward thinking, low-levered landlords to garner a larger share of office leasing as tenants make a 'flight to stability'" - there remains upside for HIW in terms of operating fundamentals and value creation. Indeed, occupancy declined another 50 bps sequentially to 87.8% in 3Q24 and is likely to decline further in 2025 as known move-outs impact results. Additionally, while development leasing has been strong, especially in North Dallas, HIW's land bank can support another 7.7M SF of new office and mixed-use projects. As such, during tomorrow's call we look for commentary on when robust leasing could result in higher occupancy (and earnings) and whether this demand is likely to accelerate the timeline for new development starts. Our estimates are under review."

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Shares of Highwoods Properties Inc. closed at $35.59 yesterday.