One of the country’s largest office landlords has been hit with a credit downgrade as the sector struggles with the effects of remote work.

Boston Properties was downgraded one notch by Moody’s Investors Service, Moody's said in a rating action Monday. BXP's senior unsecured debt rating was lowered to Baa2, defined as "subject to moderate credit risk." The downgrade was first reported by Crain’s New York Business.

"The difficult leasing environment for office space due to the work-from-home trend, new supply in some markets and high tenant incentive packages have affected the REIT and its peers' leasing volumes and pricing," the rating rationale says. "Moody's expects the operating environment to remain challenging in 2024 and 2025."

At the same time, the credit analytics company changed the outlook for its ratings assigned to the REIT from "negative" to "stable."

Boston Properties' stable outlook was based on "the REIT’s modest lease expiration schedule, its portfolio quality, long track record, and its liquidity and capital access," the report says.

Boston Properties didn't respond to a request for comment on the report.

The report also says that newer, higher-quality properties that are better located will have an advantage in the market. Boston Properties is known for owning and operating Class-A and trophy properties in some of the most sought-after markets in the country.

Moody’s said that the REIT’s properties in New York and Boston are operating better than buildings in its other four markets: San Francisco, Seattle, Washington, D.C., and Los Angeles.

Boston Properties’ building occupancy is on average 5 percentage points higher than the overall market, the report says, and its "laddered" lease expiration schedule "reduces the risk of meaningful income decline in the near-term."

Moody’s rating says that 14% of Boston Properties’ annualized base revenue is related to leases expiring through 2025. Among other office landlords it rates, the average is 24%.

The report calls Boston Properties' liquidity "good," pointing to a $1.8B "undrawn unsecured credit facility," $882M in cash, $746M of proceeds from its Cambridge life sciences projects and an unencumbered asset ratio of over 80%.

As of the end of September, Boston Properties owned 190 commercial properties totaling 53.5M SF, according to its third-quarter report filed with the Securities and Exchange Commission. It also has 11 properties under development totaling 2.8M SF.

The company reported a third-quarter net loss of $112M. It also revealed in its Q3 report that it took a $272.6M impairment charge due to value reductions for four properties.

It reported five leases with coworking giant WeWork, which filed for Chapter 11 bankruptcy protection in November. The leases total 493K SF, or less than 1% of the REIT’s overall portfolio.