Office Development Facing Headwinds, Boston Properties CEO Says

Owen Thomas, CEO of Boston Properties (NYSE: BXP), joined reit.com for a CEO Spotlight video interview at Nareit's 2017 Washington Leadership Forum at The Hay-Adams.

Thomas observed that  property markets in the coastal gateway cities where Boston Properties operates are generally healthy and rents are increasing modestly, according to Thomas.

“We are having an adequate amount of growth and job creation, and that’s creating net absorption,” Thomas said.

Boston Properties also doesn’t see too much upside risk to interest rates in the near future, according to its CEO. “We think we’ll continue to have a favorable environment for funding our business,” Thomas said.

Office development, meanwhile, is a little above long-term averages, according to Thomas. “That’s something we’re watching carefully,” he said.

Thomas said he sees headwinds for new development. “Projects are harder to start today than they were a few years ago,” he said. Thomas attributed that to the maturation of the current real estate cycle and an increase in the costs of development, labor and land.

Thomas also discussed the rise of co-working.

“We are big fans of co-working. We embrace it. We think it’s been a positive for the overall office business,” Thomas said. Co-working companies including WeWork have been able to aggregate demand and are leasing “significant spaces,” he pointed out.