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    BXP
    Earnings call· Jun 2026(Q2 FY26)

    BXP Q2 FY26 earnings call BXP

    Jul 29, 2026 Source

    Executive summary

    BXP Q2 FY26 — Strong Operational and Financial Performance Driven by AI-fueled Demand and Strategic Dispositions

    BXP delivered a strong second quarter, exceeding FFO guidance and significantly improving portfolio occupancy, driven by robust leasing activity across its premier workplaces. The company is benefiting from AI-powered demand, leading to expansion and upgrades in space requirements, particularly in gateway markets. Strategic asset dispositions are ahead of schedule, funding new developments and debt reduction, while the development pipeline continues to create long-term external growth.

    Highlights

    5

    • FFO per share exceeded guidance and consensus by $0.08, reaching $1.78 per share.

    • Completed nearly 1.8 million square feet of leasing in Q2, 29% above the 10-year historical average for the quarter.

    • In-service portfolio occupancy increased by 100 basis points to 88.4% in Q2, marking the third consecutive quarterly increase.

    • Raised the midpoint of 2026 FFO per share guidance by $0.05 to a new range of $6.99 to $7.05 per share.

    • Generated over $1.2 billion in net sale proceeds since the last investor conference, with an additional $240 million under contract.

    Concerns

    4

    • Asset sales timing has a slightly more dilutive impact than prior guidance, reducing FFO by approximately $0.02 per share compared to prior assumptions.

    • Leasing CapEx is expected to increase from $400 million to closer to $500 million for the year, impacting AFFO in 2026.

    • West L.A. market continues to struggle from a demand growth perspective, showing an embedded loss for the portfolio.

    • Life science capital raising for the start-up sector (Series BCD companies) remains slow, impacting demand for proprietary lab space.

    Guidance & targets

    6
    CategoryTargetConfidence
    FFO per share
    $6.99 to $7.05
    high materiality
    High
    In-service portfolio occupancy
    closer to 90%
    high materiality
    High
    Average occupancy
    88.9%
    medium materiality
    High
    Occupancy expectation
    91%
    high materiality
    High
    Net sale proceeds from dispositions
    up to an additional $500 million, bringing total to $1.7 billion
    high materiality
    High
    Same-property portfolio NOI growth
    1.8% to 2.6%
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Boston CBD
    All leasing activity in Q2 emanated from the CBD portfolio. Back Bay has tight supply and landlord favorable market conditions.
    Leasing activity: 170,000 sq ft in Back Bay portfolioEmbedded market rent growth: 20-25% at 888 Boylston Street renewalsLeased: 97-98% (Boston)Leased: 98% (Cambridge)Leased: 100% (Cambridge Lab)
    		————
    New York Midtown Manhattan
    Midtown Manhattan properties were up 14% in leasing spreads. Strong pricing power, expanding geographically to Midtown South. 360 Park Avenue South is fully spoken for.
    Leasing spreads: up 14%Rent increases: 10-15% year-over-year at highest quality buildings and 343 MadisonRent increases: 20% year-over-year in lower stack of buildings
    		————
    San Francisco
    Most significant momentum at 680 Folsom and 50 Hawthorne. Soft spot in demand from traditional financial, professional, and legal firms. Embarcadero Center is a granular market for financial/professional services, with short-term opportunity to exceed projections.
    Positive absorption: 3 million sq ft (last 2 quarters)Embedded growth at Salesforce Tower: 30-40% (current market rents vs expired rents)Expirations at Salesforce Tower: 200,000-250,000 sq ft in '27 and '28
    		————
    Mountain View
    Significant markdown in rents, now $4-$5 per sq ft per month, down from $6 per sq ft per month.
    New lease rents: $45 triple netLeasing activity: 190,000 sq ft (50% vacant space)
    		————
    Seattle
    Modestly lower rents. Seeing AI demand with a company expecting to grow headcount four times in 2026.
    Leasing activity: over 100,000 sq ft of vacant spaceExpansion by Strike: 44,000 sq ft
    		————
    Washington D.C. (Reston)
    Activity concentrated in Reston, with leases to defense contractors, cybersecurity firms, and a financial firm.
    Leasing activity: over 125,000 sq ft of '27 expiring leases
    		————

    Operational metrics

    40
    Office transaction volume
    $12.6 billiondown 13% from Q1 FY26, flat from Q2 FY25
    Q2 FY26

    Significant office sales in private markets.

    FFO per share outperformance
    $0.08exceeded midpoint of guidance and consensus
    Q2 FY26

    Nearly all outperformance came from better portfolio NOI.

    Revenue outperformance
    $0.04
    Q2 FY26

    Robust leasing activity drove higher rental revenue and occupancy.

    Operating expenses outperformance
    $0.04
    Q2 FY26

    Lower repairs and maintenance expected to be deferred to later in 2026.

    FFO dilution from asset sales
    $0.02compared to prior assumptions
    FY26

    Slightly more dilutive impact than prior guidance due to accelerated sales timing.

    FFO impact from portfolio NOI growth
    $0.06
    FY26

    Increase in assumption for growth in BXP's share of portfolio NOI.

    FFO impact from lower net interest expense
    $0.03
    FY26

    From deploying sales proceeds to reduce debt.

    FFO impact from higher fee income
    $0.01
    FY26
    Total leasing volume
    1.14 million
    Q1 FY26
    Total leasing volume
    1.76 million29% above 10-year historical average for Q2
    Q2 FY26
    Total leasing volume
    over 3 million
    YTD Q2 FY26
    Signed but not occupied portfolio
    1.3 million
    Q3 FY26 start
    Remaining expirations
    300,000
    CY26
    Expirations
    1.77 million
    CY27
    Signed leases commencing
    250,000
    CY27
    Leasing pipeline (executed/negotiation)
    1.3 million
    post Q2 FY26
    Active leasing discussions
    1.7 million
    post Q2 FY26
    Leasing spreads
    up 14%
    Q2 FY26
    New lease rents
    $45
    Q2 FY26

    New leases reset at rents of about $45 triple net.

    New lease rents
    $4-$5down from $6 per sq ft per month
    Q2 FY26

    Significant markdown largely because we were getting somewhere in the neighborhood of $6 per square foot per month and now we're getting somewhere closer to $4 to $5 a square per month.

    Rent increases
    10-15%
    YoY

    At highest quality buildings and 343 Madison.

    Rent increases
    20%
    YoY

    In the lower stack of buildings where rents are slightly more affordable.

    Embedded market rent growth
    20-25%
    current
    Embedded market rent growth
    30-40%
    current

    Current market rents are 30% to 40% higher than expired rents.

    Initial cap rate
    low 7%
    Q2 FY26
    Initial cap rate
    6.75%
    Q2 FY26
    Unleveraged cash return
    8.9%
    stabilized
    GAAP return
    10.3%
    stabilized
    Stabilized unleveraged cash return
    7.5-8%
    upon delivery in 2029
    Initial cash return
    over 10%
    initial

    Includes an inferred value for the existing improvements.

    Construction loan pricing
    SOFR plus 250 bps
    current

    Interest expense will be capitalized until completion in 2029.

    Unsecured bond GAAP interest rate
    3.5%
    current

    For $1 billion bond expiring October.

    10-year credit spreads
    low 100s
    current
    New bond pricing estimate
    around 6%
    current

    Based on current 10-year treasury rate.

    Leasing Capital Expenditure
    closer to $500 millionup from $400 million
    FY26

    Due to additional leasing and increased occupancy projections.

    Leasing Capital Expenditure
    $330 million
    H1 FY26

    On pace to exceed prior full-year estimate.

    Net Debt/Adjusted EBITDA target
    lower 7x range
    future

    Goal to bring down leverage to create capacity for future investment activities.

    Tenant retention rate
    45-50%
    general

    As we get closer to a lease expiration, our retention rate comes down.

    Tenant retention rate
    60-65%
    last couple of quarters

    Due to larger lease renewals signed a year or two ago coming in.

    Tenant retention rate
    above 50%
    CY27

    Don't have much in the way of large users leaving for 2027 expirations.

    Industry KPIs

    7
    MetricValueDetails
    Occupancy rate88.4%%
    Development startsWorld Gate multifamily projectproject
    Disposition volume$370 millionUSD
    Same store noi growth1.8-2.6%%
    Leasing bookings volume signed1.8 millionsq ft
    Ffo core ffo normalized ffo per share$1.78USD
    Development pipeline under construction$3.2 billionUSD

    Orderbook & backlog

    5
    Signed but not occupied leasing backlog1.3 million sq ftQ3 FY26 start

    1.1 million sq ft expected to commence in 2026

    Leases in negotiation pipeline1.3 million sq ftpost Q2 FY26

    350,000 sq ft involves vacant space

    Active leasing discussions pipeline1.7 million sq ftpost Q2 FY26

    Could impact another 450,000 sq ft of current vacancy

    Investment volume under contract (acquisitions)9 million sq ftcurrent

    Pipeline of tenants in the market for Northern California

    Disposition volume under contract$240 millionQ2 FY26

    6 assets under contract for sale; $180 million scheduled to close in 2026

    Deals & partnerships

    7
    an equity partnerInvestment in 343 Madison Avenue project$80 million for 10% interest

    BXP aims to monetize 30-50% of the project over time.

    a financial partnerDevelopment of 359 wood frame residential unitsPartner to supply 80% of equity

    BXP reinvested its share of proceeds from apartment land contribution for a 20% interest. Project budgeted cost $132 million.

    a financial partnerSale of stake in 570,000 sq ft lab building45% stake

    Project fully leased to AstraZeneca.

    Boston DynamicsLong-term lease for 320,000 sq ft to create a state-of-the-art robotics and AI centerlong-term

    Facility will house Boston Dynamics advanced robotics and AI center, expected to deliver Q2 next year.

    McDermott Will & SchulteLease for 148,000 sq ft

    Located at the bottom of the high-rise bank of the building at 343 Madison Avenue.

    StarExpansion by 2 floors

    In the mid-rise of 343 Madison Avenue, bringing the project to 50% leased.

    variousSale of six assetsapproximately $240 million total net proceeds

    Includes two office buildings in Washington, D.C. scheduled to close this quarter.

    Capital programs

    4
    343 Madison Avenue Developmentunderway
    Spent to date: 94% of construction cost procured on budget
    Funding: $1.2 billion 5-year construction loan (60% loan-to-cost); $80 million equity investment from partner (10% interest)

    Benefit: Premier workplace tower

    BXP aims to monetize 30-50% of the project over time. Stabilized unleveraged cash return of 7.5-8%.

    World Gate Multifamily Developmentlaunched$132 million
    Funding: Financial partner to supply 80% of equity and construction financing; BXP reinvested proceeds for 20% interest
    Start: Q2 FY26

    Benefit: 359 wood frame residential units

    Located in Herndon, Virginia. BXP will earn a profit from total monetization of investment.

    Reservoir Place Retrofitunderway$87 million
    Funding: BXP investment
    Start: Q2 FY26

    Benefit: 320,000 sq ft state-of-the-art robotics and AI center

    Initial cash return over 10% including inferred value for existing improvements. Commenced redevelopment this quarter.

    290 Binney Street Developmentdelivered into service
    Funding: BXP investment; 45% stake sold to financial partner

    Benefit: 570,000 sq ft lab building fully leased to AstraZeneca

    Delivered $20 million below budget and 2 months ahead of schedule. BXP's $488 million investment yielding 8.9% unleveraged cash return and 10.3% GAAP return.

    Risks & headwinds

    5
    Higher FFO dilution from accelerated asset salesFY26

    approximately $0.02 per share compared to prior assumptions

    Mitigation: Proceeds used to reduce debt, creating capacity for future investments.

    Lackluster demand around lab space market due to slow capital raising for start-up sectorcurrent

    Series BCD companies that eventually move out of incubators into proprietary space that's still missing in the market

    Mitigation: Making progress at core assets, adapting to market needs (e.g., 100% office space for life science company).

    West L.A. market continues to struggle from a demand growth perspectivecurrent

    seeing still an embedded loss in that market

    Mitigation: Not material to overall portfolio (1-2% of portfolio).

    Increased Leasing CapEx impacting AFFOFY26

    closer to $500 million for FY26 (up from $400 million)

    Mitigation: Considered 'good news CapEx' as it's related to signing more leases; leases will become cash rent-paying in 2027, positively impacting AFFO.

    Long-term impacts of AI remain difficult to predictlong-term

    if AI comes off the boil, as you suggest, that will be negative

    Mitigation: Primary benefits to BXP's leasing are indirect; focus on credit and letters of credit for direct AI leases; monitoring percentage of portfolio leased to start-up AI companies.

    What to watch in Q3 FY26

    5

    Occupancy rate

    End of 2026
    Current88.4%
    TargetCloser to 90%

    Why it matters

    Continued occupancy gains are a key driver for FFO growth and validate the strength of premier office demand.

    We've increased our expectations for average occupancy for the year by 65 basis points to 88.9% and we now expect to end 2026 at closer to 90% [indiscernible].

    Q&A highlights

    6

    How will asset sales impact 2027 earnings, especially with back-half weighted sales, and is there excess capital for buybacks?

    Mike LaBelle stated that 2026 dilution from asset sales is higher than initially planned ($0.11 vs. $0.06-$0.09), but 2027 will be lighter on sales. The goal is to reduce leverage to the lower 7x range, creating capacity for future investments including new developments or stock buybacks. No specific 2027 guidance was given.

    “The total asset sales that we project are still $1.9 billion by 2028. And as Owen described, we'll have $1.7 billion done potentially by the end of this year, which means that next year will be lighter.”

    asked by Nicholas Yulico · answered by Michael LaBelle

    2 min read5 chapters

    Detailed Narrative

    01

    AI Impact on Office Demand

    BXP highlights AI as a significant driver for leasing activity, with current and prospective clients expanding and upgrading space. The company believes premier workplaces in gateway markets are best positioned to benefit from or be most immune to AI impacts, citing an 8% vacancy rate for premier workplaces versus 13.5% for the broader market in their core CBDs. This demand is seen across various industries, including technology, AI, defense, cybersecurity, asset management, financial services, and professional services.

    02

    Strategic Asset Dispositions

    The company is well ahead of its target to generate $1.9 billion in net sale proceeds by 2028, having already raised over $1.2 billion since the investor conference and an additional $240 million under contract. This capital recycling strategy aims to fund developments and reduce debt, with potential for $1.7 billion in total net proceeds by year-end 2026. Management noted that office transaction volumes are recovering, with financing available, particularly in the CMBS market.

    03

    Development Pipeline Progress

    BXP successfully delivered 290 Binney Street, a 570,000 sq ft lab building fully leased to AstraZeneca, $20 million under budget and two months ahead of schedule. The 343 Madison Avenue project in NYC is 50% leased, with potential to reach nearly 70% leased, and secured a $1.2 billion construction loan. The World Gate multifamily project was launched with an equity partner, demonstrating capital-light growth. The current development pipeline comprises seven office and residential projects totaling 3.5 million square feet and $3.2 billion of BXP investment.

    04

    Market Conditions and Pricing Power

    New construction for office space has virtually halted, leading to higher occupancy and rent growth in most BXP submarkets. The company is seeing increasing pricing power, particularly in Midtown Manhattan and Boston's Back Bay, where market rents are significantly higher than expiring leases, driven by tight supply and strong demand for premier product. San Francisco is also experiencing strong momentum with 3 million square feet of positive absorption over the last two quarters.

    05

    Leasing Momentum and Occupancy Gains

    BXP achieved 1.8 million square feet of leasing in Q2, significantly above historical averages. This led to a 100 basis point increase in in-service portfolio occupancy to 88.4%, marking the third consecutive quarter of improvement. The company expects to end 2026 closer to 90% occupancy, reinforcing confidence in its 91% target for year-end 2027. The signed but not occupied portfolio stands at 1.3 million square feet, with 1.1 million expected to commence in 2026.

    AI-generated summary of the company’s earnings call. Not investment advice.