Has the ultimate stabilized occupancy rate and its timing changed given the faster ramp in occupancy?

Doug Linde stated they are sticking to the 91% target for end of 2027 but acknowledged that if current trends continue, they might be more aggressive. He expects the portfolio to max out at 94%-95% occupancy, potentially reaching that in 2028, with remaining vacancy concentrated in Embarcadero Center and tertiary markets. “My guess is that we sort of max out at somewhere between 94% and 95%, right? That's as good as it's going to get. And so I think that by the end of we're at 91% or maybe a little bit better, but we're not ready to say that yet.”

Clarify the 10% cash return for Reservoir Place (incremental vs. historical cost) and BXP's current hurdle rates for developments.

Owen Thomas clarified that the 10% cash return for Reservoir Place includes an inferred value for the existing building, meaning the yield on incremental capital is materially higher. He stated that BXP generally targets 8%+ yields on developments, citing 343 Madison (7.5%-8%) and D.C. projects (over 8%). “So the 10% that I mentioned includes an inferred value for the building that was taken out of service. So the cash yield on the incremental capital would be materially higher.”

Is the recovery becoming more rent growth oriented, and is pricing power increasing across all markets or just the strongest ones?

Doug Linde noted that occupancy is still more meaningful than mark-to-market for BXP. Hilary Spann (Manhattan) and Bryan Koop (Boston) confirmed strong and expanding pricing power in their markets, with rent increases of 10-15% year-over-year in Midtown Manhattan and 20-25% embedded market rent growth in Boston's Back Bay, driven by tight supply. “The pricing power in Manhattan remains quite favorable to landlords, and it is expanding geographically.”

BXP

BXP (BXP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Jul 29, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
FFO per share	$6.99 to $7.05 high materiality	FY26 · 2026	High
In-service portfolio occupancy	closer to 90% high materiality	end of FY26 · 2026	High
Average occupancy	88.9% medium materiality	FY26 · 2026	High
Occupancy expectation	91% high materiality	end of FY27 · 2027	High
Net sale proceeds from dispositions	up to an additional $500 million, bringing total to $1.7 billion high materiality	by year-end 2026	High
Same-property portfolio NOI growth	1.8% to 2.6% medium materiality	FY26 · 2026	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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	—	—	—	—

BXP operating KPIs by quarter

BXP operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Occupancy rate	87.4% Our in-service portfolio occupancy rose 70 basis points to 87.4%, and the spread between our leased and occupied square footage widened 80 basis points to 3.5%, a precursor to more occupancy gains ahead. Source: earnings call transcript	88.4% We ended 2025 at 86.7% occupied, we finished the second -- the first quarter at 87.4%, and as of 6/30, 26 were 88.4% occupied. Source: earnings call transcript	+1 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Signed but not occupied leasing backlog 1.3 million sq ft Q3 FY26 start

1.1 million sq ft expected to commence in 2026

Leases in negotiation pipeline 1.3 million sq ft post Q2 FY26

350,000 sq ft involves vacant space

Active leasing discussions pipeline 1.7 million sq ft post Q2 FY26

Could impact another 450,000 sq ft of current vacancy

Investment volume under contract (acquisitions) 9 million sq ft current

Pipeline of tenants in the market for Northern California

Disposition volume under contract $240 million Q2 FY26

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

Deals & partnerships

an equity partner Investment in 343 Madison Avenue project $80 million for 10% interest

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

a financial partner Development of 359 wood frame residential units Partner 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 partner Sale of stake in 570,000 sq ft lab building 45% stake

Project fully leased to AstraZeneca.

Boston Dynamics Long-term lease for 320,000 sq ft to create a state-of-the-art robotics and AI center long-term

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

McDermott Will & Schulte Lease for 148,000 sq ft

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

Star Expansion by 2 floors

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

various Sale of six assets approximately $240 million total net proceeds

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

Capital programs

343 Madison Avenue Development underway

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 Development launched $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 Retrofit underway $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 Development delivered 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

Higher FFO dilution from accelerated asset sales FY26

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 sector current

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 perspective current

seeing still an embedded loss in that market

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

Increased Leasing CapEx impacting AFFO FY26

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 predict long-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

Occupancy rate

End of 2026

Current 88.4%

Target Closer 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].

Find out whether BXP delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.