BXP's Q2 2025 Earnings Call: Contradictions in Yield Targets, Occupancy, and Asset Sales

Strong Leasing Activity and Earnings Beat:
- BXP reported over 1.1 million square feet of leasing in the second quarter, contributing to a total of 2.2 million square feet in 2025.
- The earnings per share surpassed expectations by $0.05, and the portfolio generated an additional $0.04 from early revenue recognition and higher service income.
- The strong leasing momentum and operational efficiency drove this performance, with improving demand from financial and professional service clients.

Capital Market Recovery and Office Transactions:
- The office private equity capital market transactions volume increased by 80% in Q2, reaching $14.2 billion.
- Notable transactions included 590 Madison Avenue, 1345 Avenue of the Americas, and Entrada in Culver City, California, at valuations of $1.1 billion, $1.4 billion, and $212 million, respectively.
- These transactions were facilitated by favorable market conditions, including increasing demand in premier workplace segments and attractive asset pricing in certain markets.

Prospects for 343 Madison Avenue Development:
- BXP announced plans to begin construction on 343 Madison Avenue, a 930,000 square foot premier workplace, with a projected stabilized cash yield of 7.5% to 8%.
- The project achieved a letter of intent for 30% of the building from a prestigious investment-grade financial institution at economics consistent with underwriting.
- The development's prime location and demand for high-quality office space in New York are expected to drive significant value creation for shareholders.

Occupancy Improvements and Market Conditions:
- BXP expects its total portfolio occupancy to improve from 86.4% in Q2 to around 87% by year-end, despite adding several developments in Q3.
- The demand for premier office space on the East Coast, particularly in New York and Boston, is strong, with notable activity from financial and professional services sectors.
- On the West Coast, demand is improving, particularly in AI-related fields, though many established tech companies remain cautious about growth.