BXP, Inc., the largest publicly traded developer, owner, and manager of premier workplaces in the United States, has recently experienced a significant upturn in its stock price, gaining 10.3% over the past month. This outperformed the Zacks REIT and Equity Trust - Other industry’s growth of 2% and the S&P 500 composite’s rise of 2.4% over the same time frame.
One-Month Price Performance
What’s Aiding BXP’s Growth?
The return-to-office policies implemented by many companies, coupled with a decent job market, are likely to drive the demand for BXP's strategically located, high-quality office properties. In the first quarter of 2025, the company executed 91 leases totaling around 1.1 million square feet with a weighted average lease term of 10.9 years, an increment of 25% year over year. Around 270,000 square feet of leases were signed subsequent to the quarter end through April 29, bringing the total to nearly 1.4 million square feet. This emphasizes the sustained demand and long-term commitment of corporates to quality office spaces with premier amenities as their key business strategy. Given the strong leasing momentum, management expects its 2025 occupancy to stabilize between 86.5% and 88%. We estimate an occupancy rate of 86.9% in 2025.
Headwinds for BXP
In a volatile and still elevated interest rate environment, with policy changes, geopolitical concerns, and inflationary pressures, companies remain focused on cost controls and are delaying their decision-making for leasing office assets. Moreover, there is competition from developers, owners, and operators of office properties and other commercial real estate, affecting BXP’s ability to retain tenants at relatively higher rents and curbing its pricing power. Given this backdrop, it will be challenging for the company to backfill tenant move-outs and vacancies in the near term. Owing to several larger expirations due in the first half of 2025, management expects its occupancy to decline slightly during the first half of 2025.
BXP’s Estimate Revisions and Valuation
Analysts seem to be slightly bearish about BXP’s prospects, as indicated by the Zacks Consensus Estimate for funds from operations (FFO) per share’s downward revision for both 2025 and 2026 over the past month. Currently, BXP is trading at a forward 12-month price-to-FFO of 10.26X, which is at a discount to the industry average of 15.59X. The stock is also trading at a discount to its industry peer SL Green Realty Corp.’s SLG current forward 12-month P/FFO of 12.08X and Vornado Realty Trust’s VNO P/FFO of 17.53X.
Final Thoughts on BXP
BXP owns a high-quality portfolio of Class A office properties concentrated in select U.S. markets. Strong demand for top-tier office space, coupled with BXP’s capability to deliver such offerings, is expected to support leasing momentum and rental rate increases. Its broad tenant mix also contributes to revenue stability. However, in the face of macroeconomic uncertainty and shifting policy dynamics, many businesses are postponing leasing decisions. As a result, BXP may face near-term challenges in re-leasing vacated spaces and mitigating the impact of tenant departures. That said, while the stock currently trades at a relative discount to peers like SL Green and Vornado Realty Trust, prospective investors may choose to remain cautious until there’s greater clarity on macroeconomic trends and potential policy shifts. However, existing shareholders may choose to remain invested, given the superior portfolio quality of BXP and the return-to-office policies implemented by several companies. At present, BXP Properties carries a Zacks Rank #3 (Hold).
In conclusion, while BXP's stock performance has been strong recently, investors should consider both the company's growth potential and the current macroeconomic environment before making an investment decision. Prospective investors may choose to remain cautious until there's greater clarity on macroeconomic trends and potential policy shifts. However, existing shareholders may choose to remain invested given BXP's superior portfolio quality and strong demand for top-tier office space.
