DEI Real Estate · Office REIT · Multifamily · Los Angeles · Thesis updated July 2, 2026

Great locations, weak office demand

Q1 2026 FFO fell 6.2% as higher interest expense and weaker office occupancy hit results.
Office occupancy slipped to 77.5%, and cash rents on new and renewed office leases were down 7.7%.
Multifamily is still healthy, with 98.1% occupancy and 2.7% Same Property NOI growth in Q1.
The portfolio is concentrated in Los Angeles and Honolulu, so local rules and demand matter a lot.
The bull case needs office leasing to stop getting worse while apartment projects add more weight.

01 Running thesis

A good portfolio under pressure

Douglas Emmett owns strong real estate in hard-to-build markets. That is the bull case. Los Angeles and Honolulu have limited land, high-end housing nearby, and office districts where good buildings can still matter over a long period.

The problem is that the office business is still weakening. In Q1 2026, FFO fell 6.2% from the prior year. FFO means funds from operations, a common profit measure for REITs. Office Same Property NOI fell 2.1%, and office occupancy moved down to 77.5%. Same Property NOI means building-level income from properties owned in both periods.

Apartments help, but they do not fully fix the story. Multifamily Same Property NOI grew 2.7% in Q1 2026, with 98.1% occupancy. That is good, but the growth rate slowed from the full-year 2025 pace of 6.0%.

The stock needs proof that office rents and occupancy are near a bottom. The clearest warning sign is the Q1 office cash rent roll, where new and renewed leases were 7.7% below the expiring rents. If that stays negative, the apartments may not be enough to offset lower office income and higher interest costs.

May 2026▼Q1 2026 reinforced the bear case. FFO fell 6.2%, office Same Property NOI fell 2.1%, office occupancy slipped to 77.5%, and cash rent roll was negative 7.7%.

Feb 2026▼The 2025 10-K showed a deeper decline. Full-year FFO fell 14.5%, office occupancy ended at 78.0%, and the office Same Property NOI decline made the prior Q3 improvement look temporary.

Nov 2025→Q3 2025 was mixed. FFO fell 20.3% and office occupancy was 77.5%, but office Same Property NOI rose 2.2%, creating a short-lived question about stabilization.

Aug 2025▼Q2 2025 showed faster office deterioration. Office Same Property NOI fell 5.0%, occupancy dropped to 78.0%, and quarterly FFO fell 19.0%.

May 2025▼Q1 2025 confirmed the negative pattern. FFO fell 10.1%, office occupancy fell to 78.6%, and office Same Property NOI declined 1.7%.

Feb 2025▼The 2024 10-K showed full-year FFO down 8.4% and office occupancy at 79.2%. It also added a specific Los Angeles Measure ULA risk for transactions and valuations.

Nov 2024▼Q3 2024 kept the same pattern in place. Office occupancy moved down to 79.4%, while multifamily occupancy stayed high at 97.4%.

Aug 2024→Initial thesis set DEI up as a high-quality but challenged REIT. The office portfolio was much larger than multifamily, while falling office occupancy and higher interest expense were already pressuring FFO.

02 Business model

Rent checks, parking, and recoveries

Douglas Emmett is a self-managed REIT. It owns, buys, develops, and manages Class A office buildings and premier apartment communities. It makes money from rent, tenant recoveries, parking, and other building income. Tenant recoveries are costs that tenants repay, such as parts of taxes or building expenses.

For Q1 2026, total portfolio revenue was about 80% office related and 20% multifamily. The office side includes office rent, tenant recoveries, parking, and other income. That mix matters because the weaker segment is still the larger one.

The model works best when office tenants renew, new tenants fill empty space, and apartments stay nearly full. It breaks when office demand falls, tenants negotiate lower rents, or debt has to be refinanced at higher rates.

03 Product portfolio

Two property types, one main problem

Cash cow

Class A office buildings

The office portfolio had 70 properties and 18.0 million rentable square feet at year-end 2025, including one property under development. This is the core business, but in-service office occupancy was 77.5% at March 31, 2026.

Steady

Multifamily communities

The multifamily portfolio had 15 properties and 5,445 apartment units at year-end 2025, including 1,035 units under development. The in-service portfolio stayed strong, with 98.1% occupancy at March 31, 2026.

Cash cow

Parking and tenant recoveries

Parking and tenant recoveries add income on top of base office rent. In Q1 2026, office parking and other income rose 6.4%, helped by higher parking rates.

Option

Development and repositioning projects

Projects such as Studio Plaza, The Landmark Residences, and 10900 Wilshire could change the mix over time. They also require time and capital before they help results.

Option

Joint ventures

Douglas Emmett also uses joint ventures for some properties. In March 2026, it entered a new consolidated JV to acquire medical office properties in Beverly Hills and kept a 13% ownership interest.

04 Business segments

The office-heavy mix

Office and parking80%declining

Multifamily20%modest

Segment shares use Q1 2026 Total Portfolio revenue from the 10-Q. Office includes office rental revenue, tenant recoveries, parking, and other office income, so the company remains heavily tied to office demand.

05 Risk factors

What could go wrong

Office demand keeps fading

High impact · High odds

Office occupancy fell to 77.5% in Q1 2026, down from 78.0% at year-end 2025. New and renewed office cash rents were 7.7% below expiring rents. That points to weaker pricing power, not just empty space.

We watchOffice occupancy and cash rent roll on new and renewed leases.

Interest costs squeeze FFO

High impact · Medium odds

Q1 2026 FFO fell 6.2%, and management cited higher interest expense as a main reason. Higher refinancing rates can cut cash flow even if buildings perform the same. This is a larger issue for a REIT because debt is a normal part of the model.

We watchInterest expense, debt maturities, swap expirations, and FFO.

Los Angeles concentration

High impact · Medium odds

Douglas Emmett is focused in Los Angeles County and Honolulu. That gives it local scale, but it also raises risk if one region weakens. Los Angeles office demand, local taxes, and housing rules can have an outsized effect.

We watchLos Angeles leasing trends, local office vacancy, and any change to Measure ULA.

Big projects run long or cost more

Medium impact · Medium odds

The Landmark Residences reconstruction is expected to take a number of years and cost several hundred million dollars. Studio Plaza and 10900 Wilshire also need leasing, construction, or conversion work. Delays can keep capital tied up while revenue stays low.

We watchProject budgets, completion dates, tenant move-outs, and lease-up progress.

Apartment growth slows too much

Medium impact · Medium odds

Multifamily is the offset to office weakness, but Q1 2026 Same Property NOI growth slowed to 2.7% from 6.0% for full-year 2025. If apartment rent growth cools further, the company loses one of its main cushions.

We watchMultifamily occupancy, rent roll, and Same Property NOI growth.

06 Quick answers

In one breath

Is Douglas Emmett mainly an office REIT?

Yes. In Q1 2026, about 80% of total portfolio revenue came from office rent, tenant recoveries, parking, and other office income. Apartments are important, but they are still the smaller piece.

Why is FFO important for DEI?

FFO, or funds from operations, is a common REIT profit measure. DEI's Q1 2026 FFO fell 6.2%, which shows that higher interest expense and weaker office results are reaching the bottom line.

What would make the thesis better?

The biggest positive signal would be office occupancy stabilizing and cash rent spreads turning less negative or positive. More progress on apartment development projects would also help shift the company toward the stronger segment.