BXP Q1 Earnings Call Highlights

Key Points

• BXP reported Q1 FFO of $1.59 per share, modestly beating guidance and consensus, and nudged 2026 FFO guidance higher by lifting the bottom end to $6.90 while increasing termination income and same-property NOI assumptions; management also raised average occupancy outlook to 88.25% while acknowledging higher interest expense and a flat SOFR assumption for the year.
• Leasing momentum—boosted by AI-related demand—was strong with more than 1.1 million square feet leased in Q1, in-service occupancy up 70 bps to 87.4%, and a pipeline of ~1.7 million square feet in negotiation plus 1.44 million square feet of executed vacant-space leases that could lift occupancy toward ~89% by year-end.
• BXP is pursuing portfolio optimization and growth, targeting about $1.9 billion of net disposition proceeds by 2028 (with ~$360 million generated so far in 2026) while advancing a 3.4 million sq ft development pipeline (~$3.6 billion of investment) including progress at 343 Madison; the company is not repurchasing shares as it prioritizes lowering leverage (roughly 8× net debt/EBITDA).

BXP NYSE: BXP executives highlighted what they described as a strong start to 2026, driven by leasing momentum, continued disposition activity, and progress on the company’s development pipeline. On the company’s first-quarter earnings call, management said funds from operations (FFO) exceeded expectations and full-year guidance was modestly increased, while demand for “premier workplaces” remained “healthy and very active,” with artificial intelligence-related leasing a key tailwind across several markets.

First-quarter results and updated 2026 guidance

Chief Financial Officer Michael LaBelle said BXP reported first-quarter FFO of $1.59 per share, which was $0.02 above the midpoint of guidance and $0.01 ahead of consensus estimates. LaBelle attributed the outperformance primarily to stronger portfolio results, partially offset by higher net interest expense.

“The performance of our portfolio exceeded our expectations by $0.03 per share and was partially offset by $0.01 of higher net interest expense,” LaBelle said. He said outperformance included $0.02 of better rental revenues and $0.01 of higher termination income, citing faster-than-expected commencements at 535 Mission and 680 Folsom, and additional leasing activity in the company’s Urban Edge properties in Boston.

Termination income in the quarter totaled $12.8 million, LaBelle said, and was tied mainly to two situations: BXP took back 25,000 square feet from a Washington, D.C. client and subsequently leased 58,000 square feet to the Washington Commanders at 2200 Pennsylvania Avenue, and BXP received a $6.25 million termination payment from a client that had previously defaulted.

LaBelle also detailed the full-year update: BXP lifted the bottom end of 2026 FFO guidance to $6.90 per share while maintaining the top end at $7.04, raising the midpoint by $0.01. The company increased its assumption for termination income by $8 million related to “several credit issues” affecting about 200,000 square feet of space expected to be recovered in 2026, with more than half in joint ventures. He said the termination income would be “in lieu of approximately $5 million of lower rental income in 2026,” but management expects the spaces to be “readily leasable.”

BXP also increased its 2026 average occupancy outlook by 25 basis points to 88.25% and raised its assumption for same-property NOI growth (excluding termination income) to a range of 1.4% to 2.4%. Interest expense expectations rose, LaBelle said, reflecting early delivery of 290 Binney Street (ending capitalized interest sooner) and updated rate assumptions. The company now assumes SOFR rates are flat for the remainder of 2026 as the “likelihood for Fed rate cuts later this year has diminished.”

Leasing strength and occupancy gains, with AI demand a key theme

Chairman and CEO Owen Thomas said BXP completed more than 1.1 million square feet of leasing in the first quarter. In-service portfolio occupancy rose 70 basis points to 87.4%, while the spread between leased and occupied space widened to 3.5%, which Thomas characterized as a “precursor to more occupancy gains ahead.”

Thomas said AI-related demand is benefiting BXP’s leasing activity both directly and indirectly, including leasing to AI companies in San Francisco, New York, and Seattle, and to firms serving the AI industry. President Doug Linde similarly emphasized that incremental demand is being driven by newer AI-focused companies rather than the largest technology firms that expanded heavily in the prior cycle.

Linde pointed to CBRE data showing 3 million square feet of positive absorption in San Francisco over the last seven quarters, including 1.4 million square feet in the first quarter of 2026. He said BXP’s first-quarter leasing totaled 1.14 million square feet, including 700,000 square feet of vacant-space leasing, and 235,000 square feet of renewals or backfills tied to 2026 and 2027 expirations.

As of after March 31, Linde said BXP had:

• 1.7 million square feet of leases in negotiation (covering roughly 500,000 square feet of vacancies and 500,000 square feet of 2026–2027 expirations)
• 1.44 million square feet of executed leases on vacant space expected to commence over the next three quarters
• Remaining 2026 expirations reduced to 770,000 square feet

Based on executed leases alone, Linde said BXP could “pick up 670,000 square feet or 150 basis points of occupancy and end the year at 89%” if nothing else changes.

Management also described market-by-market trends. Linde said Midtown Manhattan, Boston’s Back Bay, and Reston, Virginia, had the “tightest supply,” while activity accelerated in San Francisco’s South of Market, Santa Monica, and Washington, D.C.’s CBD. He highlighted leasing progress at several properties, including leasing at 360 Park Avenue South and 200 Fifth Avenue, and activity at 680 Folsom and 50 Hawthorne in San Francisco. In D.C., he pointed to an early 153,000 square foot extension at 6130 Connecticut and the Commanders lease tied to BXP’s move out of its regional headquarters space at 2200 Pennsylvania Avenue.

In response to questions about how quickly leases can move from discussion to signature, Linde said timing often depends on tenant legal counsel and can range “from a couple of days” to “six months.” On concessions, he said BXP has been “more conservative” in landlord-favorable markets like Back Bay, Midtown Manhattan, and Reston, with lower free rent and tenant improvement allowances, while the West Coast still requires “a pretty significant concession package” due to available space despite improved demand.

Dispositions and portfolio optimization

BXP reiterated its plan to sell land, residential, and non-strategic office assets for approximately $1.9 billion of net proceeds by 2028. Thomas said the company has generated $360 million of net sale proceeds so far in 2026 and $1.2 billion since its investor conference, including land sales, apartment sales, and “office lab retail” sales. He added that BXP had three assets under contract expected to generate about $40 million of net proceeds and is marketing other assets.

Thomas said projected net proceeds from 2026 dispositions could total up to an additional $400 million. Linde, discussing the likely mix of future sales, said residential dispositions are “largely complete,” and that BXP expects “more non-strategic office and some land” for the rest of the year.

A highlighted first-quarter transaction was BXP’s sale of its 50% interest in the Marriott headquarters in Bethesda, Maryland, to its partner. Thomas said the 743,000 square foot building, fully leased to Marriott, sold for a gross price of $430 million (about $589 per square foot) at a 6.8% initial cap rate. He said the project generated a $35 million gain on a $47 million investment. Thomas also described office sales activity more broadly, citing first-quarter office transaction volume of $14.1 billion, up 72% versus the first quarter of 2025.

Development pipeline, 343 Madison, and capital strategy

Thomas said BXP’s current development pipeline includes six projects across office, life science, and residential totaling 3.4 million square feet and $3.6 billion of BXP investment. He said office allocations are expected to favor development over acquisitions due to projected cash yields that are “roughly 150–250 basis points higher” than cap rates for lower-quality acquisitions with ongoing capital needs.

On multifamily, Thomas said BXP has three projects with over 1,400 units under construction, nearly 5,000 units in entitlement and/or design, and a project in Herndon, Virginia planned to commence in 2026, generally using financial partners to provide the majority of equity. Linde said BXP expects to close a venture with an institutional partner to start construction at Worldgate in Herndon in the second quarter, after re-entitling acquired office buildings into residential.

A major focus remained 343 Madison Avenue in New York City. Thomas said BXP has a lease commitment for 29% of the building and is negotiating leases for another 27%—which would bring the building to 56% committed. He said BXP has procured 83% of construction costs, achieved savings versus the original budget, and remains on track for a stabilized unleveraged cash return of 7.5%–8% upon delivery in 2029. Management said it is discussing equity partnerships and has an LOI with banks for construction financing, with the intention to complete a recapitalization in 2026. Asked about the recapitalization structure, Linde said BXP’s forecast is “we will probably have multiple partners instead of 1.”

On capital allocation, Thomas said BXP is not repurchasing shares due to its goal of lowering leverage, which he said is about 8 times net debt to EBITDA. He said the company is allocating capital to development opportunities “generating 8%+ yields” that management views as accretive.

About BXP NYSE: BXP

Boston Properties, Inc NYSE: BXP is a publicly traded real estate investment trust (REIT) specializing in the ownership, management, and development of Class A office properties across major U.S. markets. Headquartered in Boston, Massachusetts, the company's portfolio comprises high-quality office buildings, mixed-use developments and select retail assets designed to serve leading corporations in key metropolitan areas.

Established in 1970 by Mortimer B. Zuckerman, Boston Properties has grown through disciplined acquisitions and strategic ground-up developments.

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