Douglas Emmett Office Leasing Improves as Apartment NOI Rises 4.4%

Douglas Emmett Inc. (NYSE: DEI) reported firmer office leasing indicators and continued apartment growth in the third quarter of 2026, with its same-property office leased rate rising to 80.7% from 79.8% a year earlier and same-property apartment net operating income increasing 4.4%.

The real estate investment trust, which owns premium office and residential properties in West Los Angeles and Honolulu, signed 3.8 million square feet of office leases over the four quarters through September. Its overall office leased rate was 80.4%, 3.7 percentage points above physical occupancy, reflecting tenants that had signed leases but had not yet moved in. The company said those tenants should contribute to occupancy as their leases commence.

Douglas Emmett owns 18.2 million square feet of office space, which generates 78% of its rent, and 4,410 apartments accounting for the remaining 22%. West Los Angeles represents 66% of annual rent, followed by the Los Angeles Valley at 20% and Honolulu at 14%.

Small tenants underpin office leasing strategy

The office portfolio includes about 2,800 leases with a median size of roughly 2,400 square feet. About 96% of leases cover less than 20,000 square feet, limiting exposure to any single large tenant. Legal services represent the largest industry concentration at 19.9%, followed by financial services at 16% and real estate at 13.5%.

Tenant retention has averaged approximately 70% by square feet since the company’s 2006 initial public offering. Lease expirations are also distributed across multiple years, with the largest annual share—12.8%—scheduled for 2028.

Douglas Emmett said contractual annual rent increases of 3% to 5% are included in almost all of its office leases. Its clustered portfolio also allows leasing, property management, legal, design and construction functions to be handled internally across nearby buildings. The company signed about 900 office leases over the past four quarters, while the average period from agreed terms to tenant move-in was less than four months.

Apartments provide growth and development capacity

The apartment portfolio has maintained an average leased rate of about 99% since 2009 and has never fallen below 98% during that period. Same-property apartment NOI has grown by an average of approximately 4% annually over the past 15 years, including the 4.4% year-over-year increase in the latest quarter.

Douglas Emmett has more than 1,000 apartments in development, equivalent to about 23% of its current unit count. The Landmark Residences redevelopment in Brentwood is planned to include 712 units, with Towers A and B scheduled for completion in 2028. The project has an estimated cost of about $400 million.

At 10900 Wilshire in Westwood, the company is developing a mixed-use property by converting office floors to apartments as they become vacant. Converting all eligible floors could create as many as 323 units at an estimated cost of $200 million to $250 million, although no fixed mix of office and residential space has been established.

The company also identified entitled sites with potential capacity for 8,000 to 10,000 additional apartments. Douglas Emmett cautioned that development in its markets is lengthy and complex, and that project costs, unit counts and timing remain estimates subject to uncertainty.

Debt profile and risks

Douglas Emmett ended the quarter with $311 million in cash. About 86% of its debt was fixed-rate or swap-fixed, carrying an average interest rate of 5.04%, while 14% was floating-rate. Its loans are secured by separate groups of properties on a non-recourse basis and do not carry corporate covenants.

The company reported no debt maturities in 2026, though its share of scheduled maturities includes $338 million in 2027, $607 million in 2028, $428 million in 2029 and $2.38 billion in 2030.

Douglas Emmett identified office demand, interest rates and refinancing, geographic concentration, and tenant departures as key risks. Its assets are concentrated in West Los Angeles and Honolulu, while office occupancy remains below the leased rate. The company also noted that forward-looking development plans and operating expectations could differ from actual results because of the uncertainties described in its regulatory filings.