The 1633 26th Street creative office project represents Kilroy’s strategic shift away from development amid market uncertainty
Kilroy Realty Corporation has entered into an agreement to sell 1633 26th Street, a three-story creative office development in Santa Monica, for $41 million, or around $216 per square foot, marking another strategic asset disposition as the real estate investment trust repositions its portfolio in response to challenging market conditions.
The transaction, announced in Kilroy’s second-quarter earnings report, is subject to a non-refundable deposit and is anticipated to close upon receipt of entitlements, which is expected to occur in 2026. The sale represents a significant development asset in Santa Monica’s professional and entertainment district.
The company did not disclose the buyer.
The 1633 26th Street property encompasses approximately 190,000 square feet of creative office space designed for Santa Monica’s evolving professional market. Located in the city’s professional and entertainment district, the three-story building offers easy access to freeway connections and public transportation, positioning it for tenants seeking modern workspace solutions in one of Los Angeles County’s most desirable submarkets.
According to Kilroy’s property listings, the development represents part of the company’s creative office portfolio, designed to attract tenants from the entertainment, technology, and professional services sectors that have historically driven demand in the Santa Monica market.
The project features contemporary design elements, including courtyard entrances and balcony spaces, reflecting the modern workplace amenities that have become standard in competitive West Coast office markets.
The planned sale of 1633 26th Street represents Kilroy’s broader strategy of monetizing development assets amid uncertainty in the office development market. With the transaction contingent on entitlement approvals expected in 2026, the deal structure reflects the complex regulatory environment for commercial development in Santa Monica.
“We were active on the capital recycling front, with significant progress recently made on both the monetization of land in our future development pipeline and on dispositions of non-strategic operating properties,” said Angela Aman, Kilroy’s CEO, in the company’s earnings announcement.
The sale follows other recent dispositions, including the completed $40 million sale of 501 Santa Monica Boulevard and the pending $365 million sale of a Silicon Valley campus, as Kilroy focuses on optimizing its portfolio composition.
The Santa Monica office market has experienced significant shifts as companies reassess their real estate needs in the post-pandemic environment. While the submarket benefits from its proximity to Los Angeles International Airport, beach amenities, and entertainment industry concentrations, it has also faced challenges from changing workplace patterns and economic uncertainty.
Kilroy’s broader Los Angeles portfolio, which includes Santa Monica properties, was 74.4 percent occupied at the end of the second quarter. The company has been actively managing its West Los Angeles assets to maintain competitiveness while pursuing strategic dispositions where appropriate.
The agreement to sell 1633 26th Street underscores the challenging environment facing office development projects across major metropolitan areas. Rising construction costs, elevated interest rates, and uncertain tenant demand have prompted many real estate investment trusts to reconsider their development pipelines.
For Kilroy, which has historically been active in development and redevelopment projects, the sale represents a shift toward more conservative capital allocation as the company prioritizes maintaining its dividend and financial flexibility.
While Kilroy did not provide specific financial details about the development costs for 1633 26th Street, the $41 million sale price will contribute to the company’s capital recycling program. The proceeds will provide additional financial flexibility as Kilroy navigates market uncertainties while maintaining its existing development pipeline.
The company currently has one major development project in the tenant improvement phase, totaling approximately 875,000 square feet with a total estimated investment of $1.0 billion, along with two life science redevelopment projects totaling approximately 100,000 square feet.
For potential buyers, the property represents an opportunity to acquire a modern creative office asset in a prime Santa Monica location, though the extended timeline for entitlement completion adds complexity to the transaction structure.
As Kilroy continues its portfolio optimization strategy, the 1633 26th Street sale demonstrates the company’s ability to find buyers for development assets even in a challenging market environment, providing capital for reinvestment in its core stabilized portfolio and strategic initiatives.
