BXP Says Office Leasing Rebound Poised To Continue Despite Uncertainty

Economic headwinds like tariffs, inflation and the threat of a recession aren’t affecting BXP’s office leasing activity, the REIT's executives said Monday on its first-quarter earnings call. 

BXP, previously known as Boston Properties, recorded strong leasing volume in Q1, with 1.1M SF signed across 91 leases. It has landed major deals in recent months in New York, D.C. and the Boston suburbs. 

The company's Q1 leasing volume was 25% above the same quarter last year and 35% above the average of the last five first quarters, BXP executives said. 

The momentum represents a positive sign for the Boston-based REIT that tenants are still willing to make moves amid economic uncertainty.

“For BXP, the primary drivers of leasing activity are corporate confidence and in-person work behavior,” BXP CEO Owen Thomas said. “Our primary concern has been that our clients may delay or terminate space requirements due to the more uncertain operating environment. This has not happened.” 

He said that out of the 1M SF of letters of intent the REIT has in hand, only one potential 8K SF user has “declined to move forward due to market conditions.” 

The REIT has 1.7M SF of leasing in the pipeline, which has the potential to fill 1M SF of vacant space it has coming with 2025 expirations.

Based on the activity and pipeline, BXP executives said the company is on track for its 2025 plan — 4M SF of leasing, including 3M SF of leasing on vacant space and known 2025 expirations.

The REIT’s total in-service office properties were 86.9% occupied at the end of the quarter, down from 87.5% during the same time last year. 

“The vast majority of what we're doing today is going to be in ’25 or ’26, so I am very confident of our occupancy build as we move into ’26, because all the things we're doing now will be in service by then,” BXP President Doug Linde said.

Even with the strong leasing activity, the REIT’s stock price dipped 3.3% as of 3 p.m. Wednesday. That was likely due to the company providing a full-year earnings guidance range of $1.60 to $1.72 per share, lower than the analyst consensus of $1.92. 

On the earnings call, BXP executives detailed conversations taking place with prospective tenants and recent lease executions that exemplify the environment the REIT is experiencing.

In D.C.'s Northern Virginia suburbs, the company was surprised to see a strong leasing appetite, despite recent cuts to the federal budget spearheaded by Elon Musk's Department of Government Efficiency. 

“In our Reston, Virginia, portfolio, where we have an embedded base of defense and security clients — where DOGE, we would think, has the most impacts — we are seeing renewals and incremental additional space needs, not downsizing and canceled requirements,” Linde said.

The REIT is in talks with a government contractor that wants to relocate to a block of between 50K SF and 60K SF at Reston Town Center.

“And at the moment, we're unable to accommodate them,” Linde said. 

In Manhattan, BXP said it has one 11K SF tenant putting expansion plans on hold, waiting to see how the financial markets pan out. But in the same building, another company of the same size and in the same industry is looking to double its space.

The REIT has landed several big leasing wins in recent months. 

In New York, BXP signed a 244K SF lease with law firm Goodwin at 200 Fifth Ave. for previously vacant space. 

In Waltham, Massachusetts, the REIT signed a full-building office lease with a defense contractor at a property that it had previously taken out of service for a planned life sciences conversion. The tenant is expected to move into the 162K SF property in Q3.

BXP also signed a 126K SF tenant to a yet-to-be-built trophy building in downtown D.C. Cooley is the second law firm to presign at 725 12th St. NW. That and McDermott Will & Emery’s 150K SF fourth-quarter prelease at the property brought it to 87% leased before it has started construction. 

Still, executives said BXP isn't immune to headwinds. 

In an already slow life sciences market, the REIT says it is cautious about upcoming challenges arising from research funding cuts from the federal government and uncertainty about the future of Food and Drug Administration approvals.  

These factors are presenting “significant concerns for the life science community and creating additional headwinds for life science leasing,” Linde said. 

U.S. GDP decreased at an annual rate of 0.3% in the first quarter, according to new Commerce Department data released Wednesday.

Thomas said that if a recession were to take place, leasing demand would “undoubtedly slow,” though interest rates would be lower and remote work would decrease.

BXP has an ownership position in 53.4M SF of real estate across 162 office properties, 14 retail properties, eight residential properties and a hotel.