Piedmont Office Realty Trust Inc (PDM) Q3 2025 Earnings Call

Investor webinar replay

Replay transcript excerpt

the upward trend in leasing volume signals that tenants still have a strong appetite for office space. With the supply pipeline contracting and prime availabilities becoming scarce, more demand continues to chase a rapidly reducing supply landscape. According to JLL, the cycle of footprint reductions is tapering off as today's users of over 25,000 square feet are cutting just 2.2% of their footprint at renewal. Inventory for high-quality space, either new or renovated, is increasingly scarce, and office construction has been reduced by an additional 20% from the second quarter, with new supply not a factor in most of our markets. These market dynamics of limited high-quality supply and growing demand are allowing Piedmont to materially increase rental rates across its portfolio. And with asking rents still ranging from 25 to 40% below the rates required for new construction, we believe existing high quality office has a long, long runway for rental rate growth. Within the Piedmont portfolio, which comprises newly renovated, highly amenitized buildings paired with our hospitality driven service model, we are experiencing multiple tenants competing for full floor spaces. providing the backdrop for Piedmont to increase rental rates at our projects by as much as 20% during the year. By way of example, at our Gallery in the Park project in Atlanta, we executed our first $40 per square foot gross rental rate at the end of 2024. In this quarter, we completed numerous transactions in the mid 40s and have increased rents now to $48 per square foot. Across our portfolio, Our hospitality-driven environments have allowed us to increase rental rates to such an extent that we now estimate that more than half the portfolios in place rents are at least 20% below market. Our strategy...