Office landlord Kilroy Realty Corp. expects its occupancy to decline in 2023 due to two big tenants moving out.

"We expect occupancy for the full year to average between 86.5% and 88%, a 400-basis-point decline from the fourth quarter [of 2022]. Most of this decline can be attributed to the Amazon and DIRECTV move-outs," Kilroy Chief Investment Officer Eliott Trencher said on the real estate investment firm's fourth-quarter 2022 earnings call Feb. 2.

Anchor tenant Amazon.com Inc. will not renew its office lease on Kilroy's West 8th tower in Seattle and will vacate the office in April, citing adoption of remote work, the Puget Sound Business Journal reported Jan. 19. The tech giant occupies about 70% of the 539,000-square-foot building, which Kilroy bought in 2021 for $490 million.

Kilroy also took back in January about 150,000 square feet of space from DIRECTV LLC in El Segundo, Calif., leaving the satellite video provider with roughly 530,000 square feet of rented space.

"We're going to see occupancy dip in the first half of the year because that's where the majority of the large move-outs happen, and then we think it will stabilize towards the back half of the year," Trencher said.

The REIT also factored into its occupancy projection its Indeed Tower project in Austin, Texas, which is scheduled to come into service in the fourth quarter, Trencher added.

The company bought the roughly 730,000-square-foot office tower development for $580 million in 2021 in an off-market deal. The project is currently 71% leased.

Kilroy reported a $52.6 million net income attributable to shareholders in the fourth quarter of 2022, up from $47.6 million in the same period in 2021. As of Dec. 31, 2022, its stabilized portfolio was 91.6% occupied and 92.9% leased.