Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you provide an overview of your retention ratio and expectations for new leasing activity on vacant space this year? A: In years with large lease expirations, we typically retain a lower percentage of tenants. However, in years with smaller expirations, like 2025, we expect to retain a higher percentage, around 45% to 50%. We aim to cover approximately 3 million square feet of vacancy and known expirations this year, which should lead to a meaningful increase in occupancy in 2026 and 2027.
Q: With strong activity in Back Bay, Boston, and Midtown Manhattan, what would it take to reduce concessions? A: Inflation has significantly increased build-out costs, making concessions sticky. In Midtown, some reductions are seen in the Park Avenue corridor, but availability outside this area keeps concessions stable. In Boston's Back Bay, concessions have firmed, but downtown remains competitive.
Q: What are the risks or offsets that could impact FFO growth in the coming years? A: We expect meaningful NOI increases from our same-property portfolio and developments in 2026 and 2027. However, interest rate fluctuations could impact our interest expense as we refinance bonds. We are also actively looking for accretive acquisitions, which could affect FFO.
Q: How widespread is the trend of life science tenants seeking office space, and is AI impacting the biotech sector? A: Life science companies are focusing on later-stage trials rather than new drug discovery, leading to increased demand for office space. This trend is more prevalent in suburban Boston. In South San Francisco, office space demand from life science tenants is typical, and AI's impact is not yet clear.
Q: How do you view capital allocation, particularly in terms of development and acquisitions? A: Development is supported by current market rents in Midtown New York, where we plan to launch the 343 Madison project. In DC, we created an accretive development opportunity at 725 12th Street. We continue to seek acquisitions that can be transformed into premier workplaces, although nothing specific is imminent.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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