Highwoods Properties, Inc. (NYSE:HIW) Q4 2022 Earnings Call Transcript

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Ted Klinck: No, I think it has Rob. That’s a great point and question. I think the big firms they’re not necessarily making decisions about moving or expanding. Some are putting stuff on the sublet market, if they’re contracting. They have a plan to get their people back in the office. They have their rhythm for the hybrid. And I think you all have seen a number of leaders, CEOs be pretty definitive on this. We’re a work-from-work company. It’s hard to manage by Hollywood squares things like that. And if you look at the again the makeup of our customer base, if you kind of go ahead and capture the small and medium customers, as I mentioned our bread and butter, which makes up a great majority, they have been back and they are back.

And then you look at the bigger users the corporates, the publicly traded, the folks in the financial services or what have you, they have their plan and we absolutely have seen it. I mean so much so as we’re working on how to exit the garages faster because now what we’ve done is we’ve been deliberately engaged with our customers, how do we kind of help them that Jerry Maguire scene help me help you, how do we help them with their return to work policy because they are committed that they are better together and they want to see their productivity increase. Their productivity increases when they’re in the building. So that’s kind of what we’re doing. We have kind of a campaign where we’re literally partnering with them specifically on recruiting and bringing their teammates back to the office.

Rob Stevenson: And where is utilization midweek for you across the portfolio these days?

Ted Klinck: Peers have been weak. I mean, I think those places that have the — you’ve heard the term commute worthiness that we talk about. And so those places that might have the higher commute burden to overcome, right? So interesting enough, while it’s considered itself the heart of the Sunbelt even Atlanta because of its greater commute times and distances is probably trailing the likes of Nashville. Pittsburgh, for sure, is a more traditional hub-and-spoke kind of commute model. But I would say, just Atlanta to some extent has kind of plateaued between 50% and 75%. Again, Monday — Tuesday, Wednesday, Thursday, we’ve absolutely noticed it. We look at the restaurant sales, the deli sales, the cafes; they’re much busier back to kind of pre-pandemic levels in terms of that activity.

Rob Stevenson: Okay. Thanks, guys. Appreciate the time.

Operator: Next question is from the line of Dave Rodgers with Baird. Please, go ahead.

Dave Rodgers: Yes. Good morning, everybody. Brian, I wanted to talk about rent a little bit and you talked about economic or effective rents earlier. Maybe they’re not where you’d love them to be, but they haven’t been terrible, but your average deal size has been about 10,000 square feet. So as you roll forward, is there any good evidence that you have now or that you’re starting to have negotiations on, were these bigger deals, say 50,000 to 100,000 or north of 100,000 square feet are getting done, where you’re seeing a substantially greater amount of pressure on rents or effective rents. It just feels like that comp could start to come out and maybe surprise us, but I’d love to know what you’re seeing on that front.

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