- CEO Owen Thomas said development should beat acquisitions on returns, with cash yields near 8% in New York and above 9% in D.C., according to Bisnow.
- BXP has completed $1.37 billion of a $1.9 billion asset-sale target and is negotiating a $700 million to $750 million sale of 7 Times Square.
- Third-quarter revenue rose 4.6% to $911.4 million, and a possible five-floor lease at 343 Madison would lift the tower to about 70% pre-leased.
BXP is putting its money into building offices, not buying them. CEO Owen Thomas told analysts on the REIT’s third-quarter earnings call that development should beat acquisitions on returns, with cash yields of roughly 8% in Manhattan and better than 9% in Washington, Bisnow reported.
The logic is simple, Thomas said on the call. Those yields are hard to match on the quality of buildings BXP wants to buy right now, and BXP holds sites in each of its cities that could move forward once an anchor tenant signs.
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Anchors First
BXP’s development pipeline shows how the strategy works. The company has three trophy office projects underway or in planning. They include a 930,000 SF Midtown Manhattan tower and two 320,000 SF buildings in Washington. However, only one of the D.C. projects is under construction so far, Bisnow reported.
BXP is also pursuing another preleased D.C. development. Construction is scheduled to begin in 2028.
Pre-leasing remains a key measure of demand. According to Bisnow, 70% of BXP’s entire development pipeline is preleased. The Metro Center and West End projects in Washington stand at roughly 90% and 75%, respectively. Meanwhile, the Midtown tower at 343 Madison is 56% preleased.
That figure continues to rise. Earlier this month, 343 Madison Avenue reached its podium level. In July, BXP reported that the tower was about 50% preleased, with McDermott Will & Schulte and C.V. Starr already signed.
Thomas said BXP is now negotiating with another tenant for five floors. If completed, that lease would push the tower to roughly 70% preleased.
Selling to Pay for It
To fund its developments, BXP needs to sell assets. In September 2025, the company set a goal of raising $1.9 billion by 2028. It plans to sell land, residential holdings and offices it considers nonstrategic.
Thomas told Bisnow that BXP has completed $1.37 billion in sales so far. Additionally, four more deals under contract would bring the total to $1.45 billion.
This quarter, BXP sold two Washington office buildings, Sumner Square and 1330 Connecticut Avenue, for about $155.4 million. Commercial Observer reported the transaction. BXP is also pursuing a sale of 7 Times Square, a 1.2 million SF Class A tower in Midtown. The company is targeting a price of $700 million to $750 million.
BXP is also bringing in partners to support its plans. In October, it sold AVRS Partners roughly a tenth of 343 Madison. Meanwhile, according to Bisnow, BXP is seeking an equity partner for the D.C. tower now under construction.
A Busy Quarter
BXP also delivered solid quarterly results. Revenue reached $911.4 million, up 4.6% year over year and above estimates. Meanwhile, funds from operations reached $1.89 per share. That beat the midpoint of BXP’s guidance by 8 cents. Net income totaled $114.5 million.
Leasing activity helped drive those results. Thomas said BXP signed 74 leases covering about 1.2 million SF. Demand came mainly from AI, finance, legal and business services tenants.
Bisnow’s tally includes a 206,000 SF Google lease in Washington. It also includes law firm Davis Wright Tremaine’s 112,000 SF renewal in Seattle. Furthermore, another 1.3 million SF remains in the leasing pipeline.
Occupancy still has room to improve. In its downtown core, BXP is 91.8% occupied and 94.1% leased, according to Bisnow. Across the full portfolio, occupancy stands at 89.4%, while the leased rate is 91.9%.
Why It Matters
BXP is betting that limited supply will continue to reward new, well-located office space. President Douglas Linde offered an example during the earnings call. The General Motors Building is 99.9% occupied, yet its average rent remains below $150 per SF. Linde sees a substantial gap between that figure and current market potential.
This outlook aligns with trends reported over the summer. At the time, major landlords, including BXP, described premium office leasing gaining momentum amid limited new construction. BXP also cited rent increases of 15% over the prior year at some Manhattan properties.
Therefore, developing new buildings in supply-constrained markets fits the company’s strategy.
What’s Next
Two deals deserve attention. First, watch whether the proposed five-floor lease pushes 343 Madison toward 70% preleased. Second, monitor the planned sale of 7 Times Square, which would further advance BXP’s asset-sale target.
