Boston Properties asset sales boost earnings but core metrics miss estimates
Office REIT delivers record leasing and strong asset dispositions while same-property NOI declines
Boston Properties reported fourth-quarter results that masked underlying operational weakness, with headline earnings bolstered by substantial asset sales while core performance metrics fell short of Wall Street expectations.
The office-focused real estate investment trust posted funds from operations of $1.76 per share, missing the Zacks Consensus Estimate of $1.80 and representing a 1.7% decline year-over-year, according to analyst coverage. The miss came despite quarterly lease revenues increasing 1.4% to $809.2 million, which itself fell slightly below analyst projections.
The headline beat appeared impressive on the surface—earnings per share of $1.76 versus a $0.385 estimate—though this figure was inflated by $208 million in gains from $890 million of asset sales during the quarter, generating $800 million in net proceeds, according to earnings analysis. Same-property net operating income, a key measure of operational health, declined 0.7% year-over-year, highlighting the fundamental challenges facing the office sector.
Chief Executive Owen Thomas sought to emphasize the company's execution despite the headline miss, pointing to a "strong overall performance in 2025, particularly in leasing, asset sales, development, financing, and client service," according to earnings call transcripts. The company leased 1.8 million square feet in the fourth quarter and 5.5 million square feet for the full year, surpassing its leasing goals.
The asset disposition strategy has been a significant focus for Boston Properties, which has completed over $1 billion in sales during 2025 and January 2026, making progress toward its multi-year $1.9 billion disposition target. The strategy reflects the broader challenge facing office REITs as they adjust portfolios in a post-pandemic landscape.
Looking ahead, Boston Properties provided guidance that suggests gradual improvement. Management expects occupancy to rise from 86.7% at the end of 2025 to approximately 89% by the close of 2026, with same-property NOI growth forecast between 1.25% and 2.25% for the year, according to the company's outlook. The company projected 2026 FFO in the range of $6.88 to $7.04 per share.
The backdrop for office REITs remains challenging. The sector recorded a total return of -22.07% for the full year 2025, underperforming the broader REIT market which returned -3.57%, according to sector analysis. However, some analysts see potential for a turnaround in 2026, with REITs entering the year at notable valuations discounts compared to the broader market.
Thomas cited data indicating that December 2025 saw the highest in-office activity since the pandemic, with office visits nationwide increasing 10% compared to December 2024. The company also expressed confidence about artificial intelligence's impact on leasing demand, noting accelerating demand from AI companies, particularly in the Bay Area and New York City, according to call highlights.
Lease mark-to-market outcomes revealed significant geographic variation, with Boston showing roughly 10% increases while New York and Washington, D.C. remained flat and the West Coast experienced approximately 10% decreases. This divergence reflects the ongoing readjustment in office real estate markets following pandemic-era shifts.
Shares of Boston Properties closed at $64.15 on January 29, down 1.6%, giving the company a market capitalization of $11.46 billion. The stock remains below its 52-week high of $77.80 reached earlier in the year but well above its 52-week low of $52.41. Analysts have a consensus target price of $77.95, according to market data, suggesting potential upside if the company can execute on its 2026 guidance and broader office demand continues to recover.