Owen Thomas, CEO of Boston Properties, Inc. (NYSE: BXP), participated in a video interview in conjunction with Nareit’s REITworld: 2021 Annual Conference.
Thomas acknowledged that the return to the office has been measured, “but we remain highly confident that employers are going to return to the office” due to the need for direct interaction, innovation, and the onboarding of new employees, among other factors.
That optimism also stems from the fact that Boston Properties leased nearly three times as much space in the third quarter as in the first, and the third quarter total was just below the REIT’s long term average. New York leasing is at pre-pandemic levels, Thomas said, while the weighted average length of third quarter deals was 9.3 years. “Why would customers be leasing space at levels that occurred pre-COVID if they weren’t planning on using those offices going forward?” he asked.
Thomas also discussed new markets that Boston Properties has entered recently, including Seattle, midtown South, and the Shady Grove, Maryland life science market. He noted that the REIT is growing its life science business at a “very rapid clip.” Today, it’s about 6% of the company’s business and Thomas says that could double in the next five years.
Looking to 2022, Boston Properties is forecasting a 13% growth in FFO per share. Thomas noted that the REIT has variable income streams including parking, retail, and a hotel, that will come back online. Occupancy levels are also expected to improve in 2022, he said, while the company has 4.3 million square feet of properties under development that are 72% leased in aggregate. The company will also benefit from a cheaper cost of capital, he pointed out.