BXP Posts Strongest Post-Pandemic Leasing Quarter

The office leasing malaise caused by the pandemic looks like it’s starting to lift, and BXP’s fourth quarter of 2024 is proving that. BXP posted its strongest leasing quarter since 2019, with 83 deals closed in the final three months of 2024 totaling 2.3 million square feet.

BXP’s strong leasing quarter compares with 2.5 million square feet it achieved in the fourth quarter of 2023 and 1.1 million in the third quarter of 2024. 

The real estate investment trust’s fourth-quarter leasing activity helped its portfolio see an occupancy boost of 50 basis points to 87.5 percent, the firm announced during its quarterly earnings call Wednesday. And average lengths for new leases signed in the fourth quarter were 10.3 years, according to BXP.

All told, BXP (formerly called Boston Properties (BXP)) signed a total of 5.6 million square feet of leases in 2024, TK HIGHER than its leasing totals in 2023, according to the REIT. 

BXP’s central business district (CBD) portfolio finished the fourth quarter at 92.8 percent leased, up slightly from 92.7 percent a year earlier. CBD assets account for nearly 90 percent of the company’s revenues, according to Michael LaBelle, chief financial officer at BXP. 

Doug Linde, president of BXP, said leasing activity is strongest in its properties in Midtown Manhattan and the Back Bay area of Boston with “sparse” availability. It also has signs that negative absorption trends have stopped in San Francisco, Northern Virginia and the District of Columbia. 

He said while some technology companies are reducing their headcounts, the legal industry is displaying a strong interest in leasing more office space, particularly in New York and Boston. 

“We accomplished a lot of leasing and a lot of renewals in `24 and we expect `25 will be a year of modest leased square footage increases as we focus on leasing vacant space and known expirations,” Linde said on the earnings call. “When we get to `26 and `27 there is going to be very little expiration headwinds. If we lease at a pace anything like `24 and what we hope to accomplish in `25, we will see our lease percentage accelerate.”

Linde added that the company plans to take a few suburban office assets “out of service” and explore converting them to residential use. He said a proposal from BXP announced last summer to transform an office building at 17 Hartwell Avenue in Lexington, Mass., northwest of Boston represents an example of what it is looking to do more of across its suburban office portfolio.

Despite the strong leasing, BXP reported that it experienced a net income loss of $230 million, or $1.45 per share, compared with net income of $119.9 million, or 76 cents per diluted share, in the fourth quarter of 2023. The REIT attributed the loss largely to $341.3 million of  “non-cash impairment charges” on investments with “unconsolidated joint ventures” tied to the Colorado Center in Santa Monica, Calif., Gateway Commons in San Francisco, and Safeco Plaza in Seattle. 

Revenue for the quarter increased 3.6 percent to $858.6 million compared to $828.9 million for the same time last year. Funds from operations for the quarter finished at $284 million, or $1.79 per diluted share, a drop from $286.2 million, or $1.82 per diluted share, reported in the fourth quarter of 2023. 

Andrew Coen can be reached at acoen@commercialobserver.com.