BXP Exits West Coast Lab Market Amid Nationwide Asset Sell-Off
In a strategic sell-down, BXP has fully exited the life sciences market on the West Coast, selling its last remaining regional asset in that class as part of a strategy to focus capital on debt and new office and multifamily development.
The Boston-based office REIT sold its 50% interest in Gateway Commons, a 793K SF, five-building lab property in South San Francisco. The property was owned in partnership with Alexandria Real Estate Equities.
The sale was part of BXP’s broader $1.9B disposition goal to sell off select parts of its portfolio to pay down debts and fund new office and multifamily construction.
"Though we think South San Francisco is an attractive life sciences market longer term, given high vacancy rates and low net absorption, it will take some time to capture the upside, and we received a reasonable price from a logical buyer," BXP CEO Owen Thomas said on the company's Wednesday morning Q4 earnings call.
Piper Sandler analyst Alexander Goldfarb wrote in a note to investors after the call that the timing of BXP's exits in certain markets reflect the REIT's choice to employ an aggressive housecleaning strategy rather than wait things out.
"Exiting Gateway Commons (life science JV in South San Francisco) and Market Square North (JV in DC), for example, show BXP deciding it's time to move-on from uneconomic situations, rather than trying to hold out for a rebound," Goldfarb wrote.
Last quarter, BXP recorded a $145.1M impairments charge from write-downs associated with the property. However, as part of its larger office sale, it actually aggregated $65.6M in gains from this sale and the sale of 140 Kendrick St. in Needham, Massachusetts.
The REIT still has substantial lab holdings in the Greater Boston market, including its 573K SF 290 Binney St. project in Cambridge, Thomas said. The project is set to be completed in June and is fully leased to AstraZeneca.
Though the REIT’s leasing was positive, BXP narrowly missed earnings expectations, driven by two tenant defaults. The defaults resulted in $10M of missed rent. The tenants were an unnamed New York retailer and an unnamed Washington, D.C., office tenant.
Following the earnings call, the REIT's shares were down 1.6%, landing at $64.15 at close on Wednesday.
Overall, BXP secured more than 1.8M SF in leases in the fourth quarter.
The REIT saw its revenue increase 2.2% to $877.1M in the fourth quarter of 2025 compared to $856.6M in Q4 2024. It realized net income of $248.5M this past quarter, a $18.5M year-over-year gain from the same quarter last year. The transactions include $235M in aggregate gains.
Land sales in Boston, San Francisco and Washington, D.C., markets have been the most advantageous for BXP’s strategy to reallocate resources, Thomas said.
"To date, we have sold or are in the process of selling land to a corporate user, a municipal user, a light manufacturing developer, a utility and, most importantly, developers for residential use,” he said.
Thomas added that these types of sales help to balance the office sales that have sold at higher cap rates, like 140 Kendrick St., which sold at a 9.5% rate.
The sales continue to help the company's development of new office and residential projects, including the $2B, 930K SF 343 Madison Ave. office project in New York City.
The REIT began construction on the office tower in July. Since then, BXP has secured Starr Insurance Cos. as an anchor tenant, signing a 275K SF, 20-year lease. Thomas said the REIT is in talks with another tenant that could take up roughly 16% of the building.
Starr is set to pay roughly $1.3B in rent over the course of its lease, marking one of the most expensive leases in New York City signed last year, according to CompStak data provided to Bisnow.
The REIT is also in talks with potential equity partners for a 30% to 50% interest in the property.
BXP is ramping up efforts to begin construction on a 320K SF office building at 2100 M St. NW in Washington, D.C. The REIT had acquired the property for the future office for $55M. Construction is set to begin in 2028 and is expected to cost $380M, Thomas said.
Law firm Sidley Austin preleased the office, signing a 240K SF lease.
In addition, the company has three multifamily projects under construction with over 1,400 units in total. More are in the pipeline, Thomas said.
"We have received or are pursuing entitlements for over 3,500 residential units, which is creating significant value for shareholders and will be the backbone of both our apartment development and land sales activity," he said.
BXP President Doug Linde said the company plans to redevelop the office buildings at 2800 28th St. and 2850 28th St. in Santa Monica into 385 units of housing. The REIT has filed a project application and anticipates starting construction in 2027.
"We're going to build high-value, very accretive, exciting residential, multifamily projects there because we think that there's much more value in that asset class at that location than there is in hoping for a recovery in the office market in the short term," Linde said.
