BXP Lifts 2026 Outlook on Stronger Office Leasing and Occupancy
BXP raised its 2026 funds-from-operations guidance after reporting improved leasing activity and portfolio occupancy of 89.4% in the third quarter.
BXP, Inc. has increased its full-year 2026 funds-from-operations guidance following stronger leasing activity and rising occupancy across its premier workplace portfolio. The real estate investment trust now forecasts 2026 FFO of USD 7.06 to USD 7.08 per share, alongside an updated same-property net operating income growth projection between 2.35% and 2.75%.
Third-quarter results showed in-service portfolio occupancy rising 100 basis points quarter-over-quarter to 89.4%, with management anticipating levels near 90% by year-end. BXP completed 1.2 million square feet of leasing during the period, lifting year-to-date volume past 4 million square feet. Leasing spreads climbed 6.5% on a gross basis and 9.3% on a net basis, while active negotiations covered 1.3 million square feet and additional discussions spanned more than 2.8 million square feet.
Management attributed recent leasing momentum to rising demand from technology, financial, legal, and business-services tenants, alongside limited new office construction. Operating expense savings generated roughly half of the quarterly earnings beat. In San Francisco, taking rents at 680 Folsom increased over 25% over the past 12 months as the surrounding market absorbed empty space. Across its portfolio, the company cited an 8% vacancy rate for premier workplaces, compared to 13% for non-premier properties.
Despite operational improvements, BXP faces near-term financial hurdles. Management noted headwinds from elevated interest rates, debt maturities, and capital competition for commercial real estate equity. Strategic property dispositions have raised $1.37 billion toward a $1.9 billion target, which the company expects will cause approximately $0.08 per share of dilution in 2027. Refinancing the GM Building mortgage and lower projected lease termination income of approximately $15 million in 2027 are also expected to impact results.
Capital allocation remains focused on pre-leased developments with projected yields of 8% to 9%, which management favors over property acquisitions or share repurchases. While deliveries such as 290 Binney and Reservoir Place are slated to support growth in 2027, management anticipates faster FFO expansion in 2028 as asset sales wind down, followed by the delivery of 343 Madison in 2029.