BXP Q3 Earnings Call Highlights

BXP NYSE: BXP reported third-quarter results that exceeded its prior guidance and raised its full-year funds from operations outlook, citing stronger leasing activity, rising occupancy and improving rental conditions across much of its premier workplace portfolio.

Chairman and Chief Executive Officer Owen Thomas said third-quarter FFO per share exceeded guidance and consensus estimates by $0.08. The company raised the midpoint of its 2026 FFO guidance by $0.05 to a range of $7.06 to $7.08 per share, representing expected growth of 3.2% at the midpoint.

Occupancy surpasses prior expectations

BXP leased 1.2 million square feet during the third quarter and more than 4 million square feet year to date. Its in-service portfolio occupancy rose for a fourth consecutive quarter to 89.4%, above the company's previous forecast of 89% occupancy at year-end 2026.

President Doug Linde said the company expects to finish the year at about 90% occupied. BXP’s occupancy has improved by 270 basis points since the start of the year, including 100 basis points during the third quarter. About 240 basis points of the year-to-date gain came from leasing vacant space, while portfolio changes accounted for the remainder.

The company has 600,000 square feet of currently vacant space that is leased and expected to commence in the fourth quarter. Its lease-negotiation pipeline totals about 1.3 million square feet, while active discussions cover more than 2.8 million square feet.

Linde said BXP’s leasing momentum has been strongest in the Boston central business district and urban edge, Reston and Washington, D.C., San Francisco, Mountain View, Seattle and Midtown Manhattan. Demand has come from technology, defense and cybersecurity, asset management, financial services and professional-services tenants.

Portfolio leasing spreads were up 6.5% on a gross basis and 9.3% on a net basis during the quarter. Results varied by market, with strength in New York and Washington, D.C., while Boston and San Francisco recorded negative results in the reported period.

Rental conditions improve in premier buildings

Thomas said demand for premier workplaces is benefiting from investment in artificial intelligence and related infrastructure, limited new office construction and tenant preference for higher-quality buildings. BXP estimates direct vacancy in premier workplaces across its four major central business district markets is 8%, compared with 13% for the broader office market.

In New York, BXP said several properties, including 360 Park Avenue South, 200 Fifth Avenue, 399 Park, 510 Madison and the GM Building, were 99.9% leased. Linde said Midtown office transactions completed during the quarter showed net rental increases of 23% when excluding Princeton activity from the comparison.

In San Francisco, the company said rents on vacant space at 680 Folsom have increased from the mid-$60s per square foot to the mid-$80s over the past 12 months. At Salesforce Tower, BXP is negotiating initial lease expirations, where current market rents are 30% to 60% above expiring rents, according to Linde.

BXP also highlighted a 206,000-square-foot long-term lease with Google at 500 North Capitol in Washington, D.C., which will backfill space occupied by McDermott more than two years before its expiration. In Reston, the company said available space remains limited and taking rents have risen from the mid-$50s to the low $60s per square foot over the past nine months.

Asset sales and development plans

BXP said it has generated more than $520 million of net sale proceeds this year and $1.37 billion since its investor conference, progressing toward its target of $1.9 billion in aggregate net sale proceeds by 2028. Including four properties under contract, total dispositions could reach about $1.45 billion.

The company also said it has agreed on terms and is negotiating a contract to sell Times Square Tower in New York. Thomas said a completed sale, which depends on the buyer securing debt and equity financing, could occur in the first quarter of 2027.

During the third quarter, BXP sold Sumner Square in Washington, D.C., for $63 million and 1330 Connecticut Avenue for $102 million. Thomas described both as stabilized, older and non-strategic office assets. The sales were modestly dilutive but increased capital available for development and improved the quality of BXP’s remaining Washington portfolio.

The company’s largest development, 343 Madison in New York City, is now 56% leased after a two-floor lease with a business-services company. BXP is negotiating a lease for five additional floors that would bring the project to 70% leased. Construction remains on time and on budget, Thomas said.

BXP recently sold a 10.6% interest in 343 Madison to AVRS Partners at a price above its basis and continues to pursue sales of a total 30% to 50% interest in the project. Chief Financial Officer Mike LaBelle said the development’s yield could reach the higher end of BXP’s prior 7.5% to 8% target range, though he did not indicate a yield above 8%.

Financing and 2027 outlook

LaBelle said BXP completed a $700 million, 10-year bond offering in August at a 6.05% interest rate, ahead of the October maturity of a $1 billion bond. The company used liquidity to cover the remaining balance and said the transaction reduced annualized net interest expense compared with issuing a larger refinancing at later, higher rates.

BXP increased its expected 2026 same-property net operating income growth to a range of 2.35% to 2.75%. LaBelle said the outlook reflects occupancy gains pulled forward into the third quarter, partially offset by operating expenses expected to shift into the fourth quarter.

Looking to 2027, management said it expects FFO to grow again, although asset-sale dilution, refinancing activity, lower capitalized interest and normalization of termination income will affect results. LaBelle said BXP expects stronger same-property NOI growth next year as occupancy rises and recent leasing gains contribute for a full year.

About BXP (NYSE:BXP)

BXP, Inc NYSE: BXP, formerly known as Boston Properties, Inc, is a self-administered and self-managed real estate investment trust that develops, owns, manages and operates primarily office properties in the United States. The company focuses on high-quality commercial real estate in major gateway markets.

BXP's portfolio includes office buildings, mixed-use properties and life science facilities. Its activities span property acquisition, development, redevelopment, leasing and ongoing management.

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