HIW: Legacy Union Footprint Will Support Future Cash Flow Resilience

Analysts have inched their price target for Highwoods Properties lower by about $0.28 to roughly $29.22, reflecting updated assumptions for fair value, discount rate, revenue growth, profit margin, and future P/E.

Analyst Commentary

Analysts are adjusting their views on Highwoods Properties in light of the updated fair value work that now points to a price target around $29.22. While the specific research item cited focuses on another office REIT, the themes that drove that target cut, such as reassessing fair value and discount rates, are similar to what is influencing sentiment on Highwoods.

Bullish Takeaways

Bullish analysts see the revised target of about $29.22 as still supported by the underlying asset base. Current assumptions are intended to reflect a more measured stance on future cash flows rather than a change in the core business profile.
The modest $0.28 trim signals to upbeat analysts that their prior framework around revenue, margins, and P/E remains broadly intact, with estimates fine tuned rather than rebuilt from scratch.
Some constructive views point out that updating discount rates and fair value inputs can reduce the risk of future sharp target swings, which they see as helpful for setting expectations.
Optimistic voices argue that a clearly defined fair value estimate gives investors a reference point when comparing Highwoods with other office focused peers covered in recent research.

Bearish Takeaways

Bearish analysts view the lower target as a signal that underlying assumptions around growth, profitability, or valuation multiples may face ongoing pressure, even if the adjustment is relatively small in dollar terms.
The need to revisit discount rates and future P/E assumptions is seen by more cautious analysts as a reminder that Highwoods could remain sensitive to shifts in required returns that already influenced other office REIT targets.
Some cautious views highlight that, while the reduction is incremental, repeated small cuts over time can weigh on investor confidence in the long term earnings and valuation framework.
Bearish analysts also point to the broader office REIT research, such as the recent price target reduction for SL Green Realty, as an example of how sector wide concerns can influence Highwoods valuation even without company specific news.

What's in the News

Closed the acquisition of 6Hundred at Legacy Union, a 24 story, Class AA office tower in Charlotte's Uptown CBD, for a total expected investment of US$223 million. This includes US$8.5 million of planned near term building improvements and anticipated leasing capital expenditures, net of US$15.7 million of free rent and other rent related credits received at closing (Key Developments).
Added a 411,000 square foot Class AA tower that is currently 84% leased, with a weighted average lease term of over 12 years and planned LEED Gold certification. This expands the company's presence in Charlotte's Uptown CBD (Key Developments).
Acquired an office building with in building parking for 832 vehicles that is directly adjacent and connected to existing Highwoods owned properties Bank of America Tower at Legacy Union and SIX50 South Tryon at Legacy Union, further concentrating the Legacy Union footprint (Key Developments).
Since October 1, 2025, completed US$37 million of non core asset sales, reallocating capital toward the Legacy Union investment (Key Developments).

Valuation Changes

Fair Value: The price target has been adjusted slightly from about US$29.50 to around US$29.22 per share.
Discount Rate: The assumed discount rate has moved marginally from roughly 8.18% to about 8.19%.
Revenue Growth: The modeled annual revenue growth rate is now about 3.97%, compared with the prior 3.95%.
Net Profit Margin: The assumed net profit margin has increased from roughly 9.89% to about 10.42%.
Future P/E: The forward P/E multiple has been reduced from about 48.05x to roughly 45.17x.

Reliance on traditional office demand faces challenges from remote work trends, technological shifts, and potential oversupply, limiting occupancy and rent growth prospects.
Elevated capital expenditures for modernization and market concentration increase earnings volatility while restricting improvements in margins and cash flow.
Strategic focus on high-demand Sunbelt markets, limited new supply, and proactive asset management position the company for sustained occupancy, rental growth, and long-term earnings expansion.

Catalysts

About Highwoods Properties

Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE: HIW), fully-integrated office real estate investment trust (“REIT”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa.What are the underlying business or industry changes driving this perspective?

The ongoing shift to remote and hybrid work remains a structural headwind, and management's optimism on in-office momentum may overstate the sustainability of recent leasing trends; if physical office demand fails to fully rebound, Highwoods could face higher long-term vacancy and stagnant or declining rental revenue.
Aging buildings and the need for continual asset modernization, including sustainability retrofits and elevated tenant improvements, will keep capital expenditures high over the next several years, putting sustained pressure on net margins and limiting growth in cash flows.
Portfolio concentration in Sun Belt and a handful of high-growth secondary markets such as Nashville, Charlotte, Dallas, and Tampa exposes Highwoods to greater volatility should local economies weaken, potentially causing swings in occupancy rates and regional earnings performance.
Technological adoption and workplace automation may further reduce the necessity for traditional office environments, capping future occupancy gains and, over time, impacting both topline revenue growth and the ability to support premium rents.
Structural oversupply, persistent excess office inventory, and slow absorption of newly delivered space-despite recent supply constraints-may prevent meaningful long-term rent growth, limiting the company's ability to realize projected increases in net operating income and earnings.

Highwoods Properties Earnings and Revenue Growth

Highwoods Properties Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Highwoods Properties's revenue will grow by 3.5% annually over the next 3 years.
Analysts assume that profit margins will shrink from 15.5% today to 7.7% in 3 years time.
Analysts expect earnings to reach $69.7 million (and earnings per share of $0.67) by about September 2028, down from $126.5 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 65.3x on those 2028 earnings, up from 27.1x today. This future PE is greater than the current PE for the US Office REITs industry at 37.8x.
Analysts expect the number of shares outstanding to grow by 1.94% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.45%, as per the Simply Wall St company report.

Highwoods Properties Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Strong leasing activity and a high volume of signed but not yet commenced leases indicate a substantial pipeline of embedded occupancy and NOI growth in coming quarters, supporting future revenue and earnings.
The company's strategic focus on high-quality, Sunbelt business districts-markets benefiting from robust population/job growth and limited new supply-positions Highwoods to capitalize on secular migration trends, driving above-average demand and rental rate increases, thus improving net operating income (NOI).
Persistently low construction pipelines and elevated replacement costs across key Sunbelt markets are likely to result in limited new office deliveries; this supply constraint supports rent growth and higher occupancy for modern, Class A assets, underpinning revenue and margin expansion.
Ongoing portfolio upgrades and recycling-selling older, CapEx-intensive properties and reinvesting into higher-yield, more efficient assets-enhance capital allocation and long-term earnings power, aiding the company's ability to sustain and grow net margins.
Robust balance sheet management, evidenced by ample liquidity, manageable debt maturities, and access to both equity and debt capital, strengthens Highwoods' resilience and flexibility, reducing financial risk and enabling the pursuit of value-accretive investments to drive future earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $30.75 for Highwoods Properties based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $34.0, and the most bearish reporting a price target of just $23.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $903.7 million, earnings will come to $69.7 million, and it would be trading on a PE ratio of 65.3x, assuming you use a discount rate of 8.5%.
Given the current share price of $31.79, the analyst price target of $30.75 is 3.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Aging Assets And Remote Shift Will Undercut Office Fundamentals