Piedmont Realty Trust Q1 Earnings Call Highlights

Key Points

• Management said the U.S. office market is stabilizing with a “flight to quality”—leasing activity rose 7.6% YoY, net absorption was positive for a third straight quarter, supply is constrained and vacancy is increasingly concentrated in older buildings, supporting rent escalation for top-tier assets.
• Piedmont executed over 430,000 sq ft across 50 deals in Q1, delivered strong rent roll‑ups (about 11% cash and 18% accrual) with net effective rents up to $22.03/sq ft, and holds a >700,000 sq ft pipeline plus redevelopments that lifted out‑of‑service leasing to >80%.
• Guidance raised: management narrowed 2026 Core FFO to $1.49–$1.54 and boosted Same‑Store NOI guidance, while the balance sheet is positioned with roughly $526 million revolver capacity, no final debt maturities until 2028 and potential refinancing tailwinds; the dividend remains suspended and likely won’t be reconsidered until 2027.

Piedmont Realty Trust NYSE: PDM reported first-quarter 2026 results that management said reflected continued improvement in office market fundamentals and strong tenant demand for “top quartile” space. Executives pointed to record rent levels, favorable leasing spreads, and a strengthening balance sheet as drivers behind higher full-year guidance.

Management cites stabilizing office fundamentals and “flight to quality”

President and CEO Brent Smith said the U.S. office market continued to recover in the first quarter, citing JLL data showing leasing activity up 7.6% year-over-year and net absorption positive for a third consecutive quarter, “primarily driven by large occupiers.” Smith also noted that, despite office-using employment still being down 2% from 2022 levels per the Bureau of Labor Statistics, leasing demand has remained “very resilient.”

Smith attributed the trend to companies bringing employees back to “a compelling office environment that builds culture, collaboration, and creativity,” and said Piedmont expects demand to remain resilient for high-quality assets even if job growth stays muted. He also highlighted constrained supply conditions, saying total inventory declined by 9 million square feet in the first quarter and that the national development pipeline is at its “lowest level on record.”

Vacancy, Smith said, is increasingly concentrated in older buildings, with “10% of office buildings now comprising more than 60% of national vacancy.” In that environment, Smith argued that landlord leverage is improving for high-quality space and that rent escalation is continuing.

Leasing activity remains elevated; rent roll-ups stay strong

Co-COO George Wells said Piedmont executed more than 430,000 square feet of leasing across 50 transactions in the quarter, with new deal activity accounting for roughly 70% of total volume. He said the weighted average lease term for new transactions was about nine years, and expansions exceeded contractions for the seventh consecutive quarter, “largely to accommodate clients’ organic growth.” The company’s retention rate was approximately 70%, Wells said.

On pricing, Wells said the portfolio delivered 11% and 18% rent roll-ups during the quarter on a cash and accrual basis, respectively, and that the average accrual base roll-up over the last eight quarters was 17%.

Wells also said net effective rents increased to $22.03 per square foot, up nearly 5% from the prior quarter, and management expects further rental rate growth given limited new development in Piedmont’s submarkets.

Leasing costs were lower than recent averages. Wells said leasing capital spend was $5.18 per square foot per year, below the trailing 12-month average of $6.20, and noted leasing commissions were also lower due to a greater number of direct deals without brokers.

Smith said tenant demand carried over from late 2025, with tour and proposal activity above historical averages. He added that two-thirds of first-quarter leasing was tied to new tenants, and said the second-quarter pipeline included more than 700,000 square feet of leases either executed or in legal stage.

Market highlights: Dallas and Atlanta; New York City lease process continues

Wells said Dallas led the company’s markets in the quarter with 14 deals totaling 123,000 square feet, with new transactions representing a majority. In Dallas, he said Piedmont agreed to extension terms with Epsilon at the Las Colinas connection project for roughly half of the tenant’s current footprint and that the pipeline to backfill the remaining space is “deep and at improving rents.”

Atlanta was the second most active market, with 12 deals for 88,000 square feet. Wells said the company signed an 11-year new lease with a global accounting firm at 999 Peachtree in Midtown to backfill another Eversheds floor. He added that, while Piedmont’s supplemental report showed Eversheds with 180,000 square feet expiring during the quarter, the company had already backfilled about half of that space at 40% cash roll-ups and was seeing “strong activity for the balance.”

On 60 Broad Street, Wells reiterated that Piedmont had agreed to terms with the new administration of the City of New York for substantially all of the space, but said the transaction requires internal city reviews and a public hearing process before it can be fully executed. He said the city is “steadily progressing” but that it is “likely the process will not conclude until later this year.”

Redevelopment leasing and occupancy outlook

Wells said Piedmont’s redevelopment projects generated more than 100,000 square feet of new transactions during the quarter, lifting the lease percentage from 62% to 76% at quarter-end. Including leases executed in the second quarter or in the legal stage, the out-of-service portfolio was “greater than 80% leased,” he said.

Piedmont anticipates placing 222 Orange Ave back into service in the second quarter, and Wells said management remained confident the remainder of the out-of-service portfolio would reach stabilization “around the end of the year.”

Looking across the full portfolio, Wells said 9% of leases expire in 2026, with most occurring in the second quarter and largely tied to the Eversheds, Epsilon, and New York City leases. “Aside from those three leases, there are negligible expirations remaining for 2026,” he said. Management reiterated its guidance to end the year with total portfolio leased percentage of 89.5% to 90.5%, including operating and out-of-service redevelopment assets.

Guidance raised; balance sheet positioned for potential refinancing tailwinds

Chief Financial Officer Sherry Rexroad said Core FFO per diluted share for the first quarter of 2026 was $0.36, “in line with consensus” and consistent with the first quarter of 2025, noting higher economic occupancy and rental rate growth were offset by the sale of two projects during 2025. She said AFFO in the quarter was approximately $23.8 million.

Rexroad said Piedmont had about $526 million of revolver capacity at quarter-end and emphasized that the company has “no final debt maturities until 2028.” She added that the weighted average cost of debt continues to decrease, and that based on the forward yield curve, Piedmont expects unsecured debt maturing over the remainder of the decade could be refinanced at lower interest rates, which management views as a tailwind to FFO per share growth.

For 2026, Rexroad said Piedmont increased and narrowed Core FFO guidance by $0.01 to a range of $1.49 to $1.54 per diluted share, and raised Same-Store NOI cash and GAAP guidance by 100 basis points to 4% to 7%. She noted the guidance excludes “any speculative acquisitions, dispositions, or refinancing activity.”

On capital recycling, EVP of Investments Chris Kollme said office sales volume in the first quarter was the strongest since 2020, reflecting improved liquidity. He said Piedmont has two land parcels under contract, including one in Las Colinas that “went hard” during the quarter and is expected to close later in 2026, generating about $12 million of net sale proceeds. The other parcel is in a lengthy rezoning process and is expected to close in the first half of 2027.

During Q&A, Smith said the company has about $30 million under contract, with $12 million “hard and in the held for sale bucket,” and expects those to close in the third quarter, while other activity is expected in early 2027. He said Piedmont is marketing one building and evaluating a few others, with an emphasis on monetizing stabilized assets and “cull[ing] that bottom 10%.” He also said the company has discussed monetizing its New York asset after concluding the New York City lease process, which he characterized as “likely now an early 2027 event.”

Smith also addressed the company’s suspended dividend, saying the board reviews the issue quarterly but that management has indicated it would not likely be evaluated again until 2027, contingent on taxable income needs and the company’s ability to generate excess cash flow.

About Piedmont Realty Trust NYSE: PDM

Piedmont Realty Trust is a real estate investment trust (REIT) headquartered in Atlanta, Georgia, that focuses on the ownership, acquisition and management of office properties. The company's portfolio comprises a mix of multi-tenant and single-tenant buildings, with a particular emphasis on small- to mid-size office campuses and urban infill properties. Piedmont Realty Trust structures its leases and property services to support a diversified base of tenants, including professional services firms, government agencies and technology companies.

The company's operating model combines property management, leasing and strategic capital allocation to enhance asset value and drive income stability.

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