Douglas Linde
President & Director at Boston Properties
Thanks and good morning, everybody. So I'm going to pivot the discussion this morning to our 2023 earnings guidance. We expected and saw a number of notes last night. So obviously, this is of critical importance to everybody. And I think we outlined a bunch of the critical variables in the press release and Mike is going to provide some commentary on the most significant components in his remarks. I am going to focus my remarks on our in-service operating portfolio which is really driving our same property expectations. But I'm going to start with what happened in the third quarter because I think the trends that I'm describing are going to be relatively relevant to our forward assumptions as we think about 2023.
So the third quarter was another really good leasing quarter for BXP. It's now the sixth straight quarter of strong overall leasing activity in the portfolio. Just to remind everybody, beginning in the second quarter of '21, we signed 1.2 million, 1.4 million, 1.8 million, 1.2 million, 1.9 million and this quarter, 1.4 million square feet of leases. So that's about 6.3 million over the last 12 months. Obviously, it's a deceleration between the second -- the third quarter from the second quarter.
We have successfully executed leases with clients in the midst of the delta variant, the Omicron variant, remote work fits and starts, significant labor market headwinds and now what is surely a pullback in business activity. The Boston CBD led our activity this quarter with about 260,000 square feet of leases, including some renewals expansions and the addition of new clients into the portfolio. The mark-to-market on the previously leased space and again, giving you data on the leases that were signed this quarter, not leases that are in our supplemental which may have happened 2 or 3 or 4 years ago but the mark-to-market on the spaces this quarter was 15% positive. The lease of 300 Binny Street dominated our Cambridge activity this quarter and because we are moving from a 2011 office lease to a 2024 Lab lease, the markup is over 250%. So it's a very, very significant increase. The suburban 128 workspace market remains slow with all of our leasing under 10,000 square feet other than a 55,000 square foot renewal that we did, there, the markup was about 3%. This was also an unusually busy quarter for our retail space, including the 118,000 square feet at 750 Boylston, we completed 181,000 square feet of retail leasing in the Boston region this quarter. We didn't complete any new life science leasing in the Waltham, Lexington portfolio, where we have our buildings under construction.
The life science market has seen a significant slowdown. We have available space of both of these developments that we are aggressively marketing. As we discussed at our Investor Day, there are a number of other suburban buildings that we have been vacating in order to be in a position to redevelop them as lab buildings. These buildings are not yet under development, so they reduced the portfolio occupancy that we're showing. At the present time, we have not made any commitments to begin any additional developments that these assets but we are vacating these buildings intentionally.
In New York City, we completed 250,000 square feet of leasing, much like Boston, in Manhattan, we saw a number of renewals, expansions and new clients join the portfolio. the mark-to-market on the second-generation space that was recently occupied was down about 4%. New activity in New York City was off in September but we have seen a meaningful pickup during the month of October. As a case in point, on September 30, we had no active discussions on our 120,000 square foot block of space at 599 Lexington Avenue. Today, we have 3 active proposals covering over 70,000 square feet of that space. We completed another lease at Dock 72 this quarter but WeWork relinquished space on October 1 that will mute the contribution to occupancy as you look at it next quarter.
In Princeton, we completed 6 transactions with professional and financial firms totaling 40,000 square feet with an increase of rent of 3.5%. In D.C., we completed 4 leases for about 100,000 square feet. This is in CBD including 1 lease renewal with a markdown of about 12%. Now remember in D.C., the lease structure has 2% to 3% annual increases for leases that are generally 10 to 15 years. So in virtually every renewal, the last year of a 10- to 15-year-old lease with a 2.5% to 3% increase is less than the starting rent of the new lease. So that's typically what we see all the time there. Small financial and professional service firms made up the activity in Northern Virginia, where we saw about 50,000 square feet of activity and the largest lease was only 15,000 square feet. The markdown was about 3.5% on that portfolio. We continue to make progress at 2100 Penn, where we have 90,000 square feet of leases under negotiation that will bring that asset to 80% leased.
Finally, in San Francisco, the story is the same as the other markets though the lack of technology demand is more impactful on overall market segments. We completed 8 CBD leases all under 11,000 square feet with professional services and financial clients. The markup was flat with an average starting rent of about $100 a square foot. Down in the Valley, we did 92,000 square feet with 3 renewals and added 1 client. The 60 basis points of occupancy loss this quarter was in line with our comments and expectations from last quarter. These 3 assets were removed from the portfolio. 601 Massachusetts Avenue, obviously which was sold and 100% leased, 140 Kendrick Street Building A which is 100% leased is in redevelopment and our large box at the Prudential Center, 760 Boylston which is 100% leased and in redevelopment. Shearson, 350,000 square foot 20-year lease renewal at 599 lex commenced this quarter and they relinquished 120,000 square feet, the block I was describing.
Biogen moved out of the first portion of 300 Binny Street which will eventually grow by 40,000 square feet when it's converted to lab and is fully preleased. The partial termination is reflected in our statistics not the new lease. Biogen will vacate the rest of this 195,000 square foot building in the first quarter of 2023. So we're going to lose occupancy on that as we redevelop it for the long-term addition of a liability. At Santa Monica Business Park, we had a post-movie operation that completed their use of space this quarter and they moved out. Our second-generation release synthesis for the quarter, if you look at our FAD in particular, include the Shearman transaction at 599 Lex. They converted a bunch of their free rent to TI and the entire cost for that 20-year 350,000square foot is in the Fed this quarter which is why the Fed looks unusual.
The global central bank tightening has resulted in softened demand in all the markets, while tours continue and leases under construction move forward under negotiation move forward, there is less urgency from clients to make new commitments. We have conversations with potential clients during space tours who acknowledge that economic uncertainty is impacting space decisions as we consider our expectations for leasing completions in '23 and we're factoring the impact of a materially slower economy, softer business performance and reduced demand for space. We expect the bulk of our leasing will continue to come from small- and medium-sized professional and financial services firms.
So as we think about '23, let's start with what we know. We have signed leases on more than 886,000 square feet of in-service on vacant space that are not in our occupancy figures. Approximately 700,000 will commence in 2023, the remainder in '24. At the end of the third quarter, we had active leases under negotiation in the in-service portfolio of about 800,000 square feet, 270,000 of that would currently cover currently vacant space that will go into service in 2023. The rest is on our near-term expirations.
In sum, we have visibility on about 1 million squares feet of currently vacant space and about 500,000 square feet of expiring leases. The remainder of '22 and '23 totals about 3 million square feet of expirations. This would mean we need to lease about 1.8 million square with 2023 commencements to remain flat. We typically leased more than 1 million square feet on a quarterly basis. Obviously, I described what happened over the last 6 quarters where the lowest was about 1.2 million. The issue is the timing of these commitments on vacant space, that's the big wildcard. We just don't know if we sign a lease, whether the space is going to be in a shell condition or an as-is condition and whether that lease is going to commence in 2023 or 2024. What we said last quarter remains true. We will see a slight decline over the next few quarters as we wait for all signed leases to commence but in spite of our less robust leasing expectations, we still anticipate an improvement as we move into 2024.
Tour activity continues to be strongest in the Boston CBD and New York City markets where the concentration of technology users is the least pronounced and the weighting of market occupancy leads more heavily towards financial and professional services firms. Consistent with my earlier remarks on the third quarter, small and medium-sized financial and professional services firms continue to be the active portion of our portfolio as those tenants clients look for premier workspaces. These users are also active, though to a lesser extent, in D.C., San Francisco and Reston.
We have all seen the announcements regarding higher increases, job reductions through attrition and explicit job cuts that are occurring on a consistent basis from many of the large technology employers. In some cases, these announcements coincide with decisions to put space on sublet market. It's hard to envision much technology-related demand growth in 2023. Owen described the stark divergence between premier workplaces and everything else. When clients do make space decisions, we expect them to gravitate to premier workplaces that we have at BXP. I want to make a few more points about the same property portfolio before I hand the speaker over to Mike.
The elimination of income from 300 Binney Street as we redeveloped this fully leased building into a lab building is about $10 million in 2023 relative to '22. The reduction in income from the Boston suburban assets as well as building a Carnegie Center and Shady Grove properties in Maryland that we are now enabling for life science constitutes a reduction of about $10 million in 2023 from 2022. This positions us to add life science portfolio properties over time.
We expect our parking income to be about 90% of the 2019 level and up about 6% from '22 estimates. Our retail portfolio has come back in Boston, New York City and D.C. where we have a significant number of new spaces under construction with 23 openings. The West Coast continues to be a laggard. We expect little change in contribution from retail in San Francisco in '23. The daily traffic in our West Coast portfolio continues to be dramatically lower than the East Coast. We continue to provide extensive subsidies to many of our retail tenants in San Francisco. In spite of the challenges with the new lease at 760 Boylson, we expect the overall contribution from retail to return to 2019 levels by the middle of '24 when the lease of 760 commences.
In summary, we have reduced our total leasing expectations in '23 due to the issues stemming from the aggressive battle against inflation and the ensuing slowdown in the economy. We still expect occupancy improvement in '23, though at a reduced rate. Our flat same-store guidance is based on these variables. Mike, take it away.
