Cuộc họp công bố kết quả kinh doanh Quý 3/2026 của BXP: Nâng dự báo FFO khi tỷ lệ lấp đầy đạt 89,4%

Nội dung chính

• BXP đã báo cáo dòng tiền từ hoạt động kinh doanh (FFO) quý 3/2026 đạt $1,89/cổ phiếu, vượt mức trung vị của khoảng dự báo $0,08/cổ phiếu. Kết quả hoạt động của danh mục tài sản vận hành đã đóng góp $0,10/cổ phiếu vào mức vượt kế hoạch này.
• Tỷ lệ lấp đầy danh mục tài sản đã tăng 100 điểm cơ bản so với quý trước lên 89,4%, tăng 270 điểm cơ bản so với đầu năm 2026. Ban lãnh đạo dự kiến tỷ lệ lấp đầy sẽ đạt khoảng 90% vào cuối năm.
• BXP đã hoàn tất cho thuê 1,2 triệu feet vuông diện tích trong quý và hơn 4 triệu feet vuông tính từ đầu năm đến nay. Chênh lệch giá cho thuê đạt mức dương 6,5% trên cơ sở gộp và 9,3% trên cơ sở ròng.
• Công ty đã nâng dự báo FFO cả năm 2026 lên $7,06 - $7,08/cổ phiếu, tăng mức trung vị thêm $0,05. Mức trung vị này tương ứng với mức tăng trưởng FFO 3,2% cho năm 2026.
• BXP đã thu về hơn $520 triệu tiền thu thuần từ bán tài sản trong năm 2026 và $1,37 tỷ kể từ hội nghị nhà đầu tư, vượt tiến độ so với mục tiêu thoái vốn 1,9 tỷ USD đến năm 2028.
• Dự án phát triển 343 Madison đã đạt tỷ lệ cho thuê 56%. Hợp đồng cho thuê 5 tầng tiềm năng sẽ nâng con số này lên 70%, trong khi ban lãnh đạo hiện kỳ vọng lợi suất của dự án sẽ ở gần cận trên của khoảng 7,5% - 8% ban đầu.

Dữ liệu tài chính cốt lõi

Kết quả kinh doanh và hoạt động

Tăng trưởng tỷ lệ lấp đầy tiếp tục là động lực thu nhập chính. Trong 270 điểm cơ bản mức cải thiện kể từ đầu năm 2026, ban lãnh đạo quy 240 điểm cơ bản cho việc cho thuê diện tích trống và khoảng 30 điểm cơ bản cho các thay đổi danh mục đầu tư. BXP đã ký 1,5 triệu feet vuông hợp đồng cho thuê đối với diện tích trống đang hoạt động trong năm 2026, bao gồm 375.000 feet vuông trong quý 3.

Công ty có 600.000 feet vuông diện tích hiện đang trống nhưng đã cho thuê dự kiến bắt đầu hiệu lực trong quý 4. Danh mục hợp đồng cho thuê đang đàm phán đạt tổng cộng khoảng 1,3 triệu feet vuông, trong khi các cuộc đàm phán tích cực bao phủ hơn 2,8 triệu feet vuông, tăng từ mức khoảng 1,7 triệu feet vuông ở quý trước đó.

Giá thuê cải thiện tại một số thị trường văn phòng hàng đầu. Các giao dịch tại Midtown Manhattan tạo ra mức tăng ròng 23%, trong khi giá chào thuê tại Reston tăng từ khoảng giữa 50 USD lên mức thấp 60 USD/feet vuông trong vòng 9 tháng. Tại tòa nhà 680 Folsom của San Francisco, giá thuê thực tế tăng từ khoảng giữa 60 USD lên mức giữa 80 USD trong năm qua.

Ước tính điều chỉnh theo giá thị trường (mark-to-market) trên toàn bộ danh mục của BXP đã tăng khoảng 10% trong hai quý qua. Dù vậy, ban lãnh đạo vẫn kỳ vọng việc gia tăng tỷ lệ lấp đầy tiếp tục đóng vai trò quan trọng hơn đối với đà tăng trưởng NOI ngắn hạn, vì chỉ có khoảng 5% danh mục đầu tư đáo hạn trong một năm thông thường.

Phát triển dự án tiếp tục là mảng đầu tư tăng trưởng được công ty ưu tiên. Danh mục dự án đang triển khai của BXP bao gồm 3 dự án văn phòng và 4 dự án nhà ở với tổng diện tích 3,5 triệu feet vuông và 2,9 tỷ USD vốn đầu tư của BXP, trong đó khoảng 750 triệu USD vốn cổ phần vẫn cần tiếp tục giải ngân. Ba dự án phát triển văn phòng hiện đã được cho thuê trước 70%.

Tại dự án 343 Madison, việc thi công vẫn đúng tiến độ và trong phạm vi ngân sách. BXP đã bán 10,6% cổ phần tại dự án với giá cao hơn giá gốc và tiếp tục theo đuổi mục tiêu bán tổng cộng 30%-50% cổ phần. Ban lãnh đạo cho biết diện tích còn lại dự kiến sẽ đạt mức giá thuê cao hơn ước tính ban đầu.

Dự báo của Ban lãnh đạo

BXP đã nâng dự báo FFO năm 2026 lên mức 7,06 - 7,08 USD/cổ phiếu. Mức điều chỉnh này phản ánh mức cải thiện dự kiến 0,07 USD/cổ phiếu trong NOI của danh mục đầu tư, được bù đắp một phần bởi 0,02 USD/cổ phiếu chi phí lãi vay tăng thêm.

Ban lãnh đạo đã nâng triển vọng tăng trưởng NOI cùng cơ sở tài sản năm 2026 lên 2,35%-2,75%, chủ yếu nhờ tỷ lệ lấp đầy gia tăng sớm hơn dự kiến. Công ty kỳ vọng tỷ lệ lấp đầy danh mục sẽ đạt khoảng 90% vào cuối năm.

Đối với năm 2027, ban lãnh đạo không đưa ra khoảng dự báo chính thức nhưng cho biết kỳ vọng FFO sẽ tăng trưởng. Triển vọng này bao gồm các tác động đã được thảo luận trong cuộc họp, bao gồm chi phí tái tài trợ, mức pha loãng từ việc bán tài sản và khả năng bán tòa nhà Times Square Tower. Tăng trưởng NOI cùng cơ sở tài sản dự kiến sẽ tăng tốc khi BXP hưởng lợi trọn vẹn từ đà tăng tỷ lệ lấp đầy của năm 2026, các hợp đồng cho thuê mới và việc hết hạn thời gian miễn phí thuê.

Các thương vụ bán tài sản đã hoàn tất dự kiến sẽ tạo ra mức pha loãng khoảng 0,08 USD/cổ phiếu trong năm 2027. Việc bán tòa nhà Times Square Tower vào cuối quý 1/2027 sẽ làm tăng thêm khoảng 0,06 USD/cổ phiếu pha loãng.

Rủi ro và Các yếu tố cần theo dõi

• Chi phí tài trợ vốn cao hơn: Lợi suất trái phiếu Kho bạc Mỹ kỳ hạn 10 năm đã tăng khoảng 30 điểm cơ bản trong những tháng trước. Ban lãnh đạo kỳ vọng lãi suất cao hơn sẽ ảnh hưởng đến định giá bất động sản và có khả năng ảnh hưởng đến khối lượng giao dịch.
• Tái tài trợ cho tòa nhà GM Building: Khoản vay thế chấp 2,3 tỷ USD, hoặc 1,4 tỷ USD tính theo phần sở hữu của BXP, đáo hạn vào tháng 6/2027 và hiện có lãi suất 3,6%. Các đề xuất tái tài trợ cho thấy chi phí lãi vay trong tương lai sẽ cao hơn.
• Sự suy yếu tại Tây Los Angeles: Ban lãnh đạo cho biết khu vực Tây L.A. vẫn chưa ghi nhận sự phục hồi cầu như các nơi khác. Các dự báo của BXP giả định sẽ có thêm diện tích trống tại Colorado Center và không phụ thuộc vào sự phục hồi tỷ lệ lấp đầy trong ngắn hạn tại đây.
• Các yếu tố bù trừ lợi nhuận năm 2027: Sự sụt giảm lợi nhuận do bán tài sản, chi phí lãi vay vốn hóa thấp hơn, chi phí cho thuê nhà ở và việc bình thường hóa thu nhập từ chấm dứt hợp đồng có thể làm chậm đà tăng trưởng FFO.
• Điều kiện phát triển và huy động vốn: Các dự án theo kế hoạch vẫn phụ thuộc vào tiến độ cho thuê, phê duyệt và khả năng huy động vốn cổ phần. Lãi suất cao hơn cũng có thể ảnh hưởng đến định giá dự án và việc bán vốn cổ phần trong tương lai.

Điểm nhấn phiên Hỏi & Đáp với chuyên gia phân tích

Tăng trưởng giá thuê văn phòng và tỷ lệ lấp đầy: Ban lãnh đạo cho biết quyền quyết định giá của danh mục đầu tư đang mạnh lên, nhưng tỷ lệ lấp đầy vẫn là đòn bẩy lợi nhuận lớn hơn trong ngắn hạn. Về dài hạn, khi tỷ lệ lấp đầy tiến tới khoảng ổn định của công ty là 93%-94%, tăng trưởng giá thuê sẽ trở thành động lực thúc đẩy NOI cùng cửa hàng (same-property NOI) quan trọng hơn.

Nhu cầu từ ngành công nghệ tại San Francisco: BXP cho biết tổng nhu cầu của khách thuê tại San Francisco là khoảng 8,6 triệu foot vuông, trong đó ngành công nghệ chiếm khoảng 62%. Một diện tích 75.000 foot vuông dự kiến sẽ trống lại tại Salesforce Tower đã thu hút 7 lượt khảo sát. Ban lãnh đạo cho biết giá thuê thị trường hiện tại tại tháp này cao hơn 30%-60% so với giá thuê trong hợp đồng sắp hết hạn.

Tình hình cung - cầu tại New York: Ban lãnh đạo đã ghi nhận 59 khách thuê đang tìm kiếm diện tích tối thiểu 100.000 foot vuông tại Thành phố New York, so với chỉ 26 diện tích cho thuê trống trong các tòa nhà chất lượng cao hơn. Tại GM Building, giá thuê văn phòng trung bình thấp hơn 150 USD/foot vuông, so với giá thuê dự kiến bắt đầu từ khoảng 190 USD/foot vuông tại 343 Madison và vượt quá 300 USD/foot vuông đối với một số diện tích.

Phân bổ vốn: Ban lãnh đạo cho biết việc phát triển các dự án đã cho thuê trước hiện mang lại lợi nhuận triển vọng hấp dẫn hơn so với thâu tóm. Công ty đã dẫn chứng mức tỷ suất lợi nhuận khoảng 8% cho 343 Madison và tỷ suất lợi nhuận phát triển bằng tiền mặt trên 9% cho các dự án tại Washington, D.C. Việc mua lại cổ phiếu trung hòa đòn bẩy vẫn đang được xem xét nếu có vốn thặng dư, nhưng phát triển dự án hiện là ưu tiên sử dụng vốn hàng đầu.

Chi tiêu vốn và AFFO: Chi phí giao dịch liên quan đến cho thuê dự kiến sẽ đạt tổng cộng khoảng 550 triệu USD, tăng giảm đôi chút, vào năm 2026. Ban lãnh đạo dự kiến mức chi phí này sẽ thấp hơn đáng kể vào năm 2027 do có ít hợp đồng gia hạn đã ký trước đó bắt đầu có hiệu lực, trong khi NOI bằng tiền mặt sẽ hưởng lợi khi thời gian miễn phí thuê kết thúc.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, and thank you for standing by. Welcome to Q3 2026 BXP Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Helen Han, Vice President, Investor Relations. Please go ahead.

Helen Han

Good morning, and welcome to BXP's Third Quarter 2026 Earnings Conference Call. The press release and supplemental package were distributed last night and furnished on Form 8-K.

In a supplemental package, BXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Inventors section of our website at investors.bxp.com. A webcast of this call will be available for 12 months.

At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Although BXP believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in yesterday's press release and from time to time in BXP's filings with the SEC. BXP does not undertake a duty to update any forward-looking statements.

I'd like to welcome Owen Thomas, Chairman and Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer.

During the Q&A portion of our call, our regional management teams will also be available to address any questions. We ask that those of you participating in the Q&A portion of the call to please limit yourself to one and only one question. If you have an additional query or follow up, please feel free to rejoin the queue.

As the big 3 are all reporting today, Alphabet, Microsoft, and of course, BXP, and we have the Fed call, so let's get started. Owen Thomas will now begin his former remarks.

Owen Thomas

Well, thank you, Helen, and good morning to all of you. BXP delivered another very strong quarter, both operationally and financially. Third quarter FFO per share exceeded both our guidance and consensus estimates by $0.08. We also raised the midpoint of our 2026 FFO per share guidance by $0.05 and now expect our FFO per share to grow more than 3% in 2026.

We are delivering on the strategic plan we laid out at last year's investor conference and outperforming the three primary goals we articulated. Leasing space to grow occupancy and FFO and selling assets to optimize our portfolio, raise capital for developments and reduce leverage and advancing developments that enhance portfolio quality and support future FFO growth.

Leasing market conditions are robust across most of our portfolio and continue to improve. We are growing rents and achieving record rental rates in New York City, the Back Bay of Boston, Reston Town Center and for new development in the CBD of Washington, D.C. San Francisco is improving rapidly and leasing activity in Seattle is gaining momentum.

There are three primary reasons for these strong market conditions. First, investment in AI and associated infrastructure when measured versus historical new technology CapEx cycles is very material today and could become unprecedented. This investment activity is driving both U.S. GDP and corporate earnings growth, which creates strong leasing demand from not only AI companies, but also from financial, legal and business service companies that are growing head count to support the high levels of AI investment.

Second, due to elevated construction costs and competition for capital from AI infrastructure investment, development of new offices in the U.S. is at record low levels. Across BXP 6 markets, office construction is limited to a handful of buildings planned in New York City and the new projects we are developing in Washington, D.C.

Lastly, client demand is concentrated primarily in premier workplaces, which continue to materially outperform the broader office market. As a reminder, Premier Workplaces represent roughly the top 14% of space and 8% of buildings in the four CBD markets where BXP has a major presence. Direct vacancy for Premier workplaces in these four markets is 8% versus 13% for the broader office market, while asking rents for premier workplaces command a premium of more than 60% of over the nonpremier buildings.

Low vacancy, strong demand and minimal new supply is a uniquely positive combination of market circumstances and could not provide a better backdrop for BXP to grow rents and occupancy in its premier workplace portfolio in the quarters ahead.

The capital markets environment for real estate has been slower to reflect the vibrancy of the underlying property markets, an obvious issue is the 30 basis point rise in the 10-year U.S. treasury over the last couple of months, likely culprits for this increase or inflationary pressure from tariffs and energy prices substantial AI-related capital spending and upward pressure on term premium associated with the expanding U.S. federal budget deficits.

A less obvious issue is the availability of equity for commercial real estate. Although debt capital continues to be readily available at attractive spreads but higher costs, competition for equity capital with a massive AI investment spend is impacting commercial real estate fund flows including REIT share prices and capital raising as well as fundraising, transaction volume and pricing in the private real estate market.

Office transaction volume in the private markets was $19.4 billion in the third quarter, which was up materially from both the second quarter and the third quarter of '25 million but was skewed by many small deals and two large medical office portfolio trades. Higher interest rates will likely reprice current assets in the market and may weigh on transaction volumes in future quarters.

Though there continue to be very few premier workplace assets trading, there were a couple of transactions in the quarter with relevance to BXP's portfolio, a 49% interest in 1301 Avenue of the Americas located in Midtown New York City is under agreement to sell at a valuation of approximately $1.3 billion which represents pricing of $740 a foot at an initial cap rate of 7.3%. This asset comprises 1.75 million square feet is fully leased and is being sold by an opportunistic buyer to a domestic adviser.

Second, a leasehold interest in 100 [ Altair ] located in downtown Sunnyvale, California, was sold for $219 million, which represents pricing of over $1,200 a square foot and a 6.5% initial cap rate. This 180,000 square-foot building is fully leased to data bricks on a long-term basis and was sold by the building's lender to an adviser.

Turning to the execution of BXP's business plan. Our first and most impactful goal is to lease space and improve portfolio occupancy. We had another strong quarter, completing leasing of 1.2 million square feet and over 4 million square feet year-to-date. Our in-service portfolio occupancy rose materially and for the fourth straight quarter to 89.4% and which is above the 89% occupancy forecast we provided for year-end 2026. This outcome reflects strong execution by our leasing teams, the quality of our portfolio and the very healthy leasing markets previously described.

Our second priority is to raise capital and optimize our portfolio through asset sales. At our investor conference, we communicated an objective to generate an aggregate $1.9 billion in net sale proceeds by 2028 from the sale of land, residential and nonstrategic office assets. We are well ahead of schedule as we've raised over $520 million in total net sale proceeds this year and $1.37 billion since our investor conference.

Including four assets we have under contract for sale, total dispositions could reach approximately $1.45 billion. In addition, we have agreed terms and are negotiating a contract to sell Times Square Tower in New York City, a significant sale given our 55% unleveraged interest in this 1.2 million square foot building. The buyer needs to secure debt and equity financing and if completed, the sale would occur in the first quarter of 2027 and enable us to achieve our 2028 disposition target well ahead of schedule.

The two operating property sales we completed in the third quarter were stabilized older, nonstrategic office assets in Washington, D.C. We sold [ Sumner ] Square, a 217,000 square foot to rebuilding historic redevelopment that is 93% leased and subject to a ground lease for $63 million or $300 a square foot and a 9.9% cap rate.

We also sold 1330 Connecticut Avenue, a 254,000 square foot building that is 83% leased. After extending the anchor tenant lease, we achieved a gross sale price of $102 million or $400 a square foot and an 8% cap rate.

Although the sales resulted in modest dilution they raise capital and increase the quality of our remaining Washington D.C. portfolio.

We are very pleased that we accelerated our $1.9 billion disposition program as the favorable pricing we received over the past year for many sale transactions would be difficult to replicate in today's higher interest rate environment.

BXP's third priority is to grow FFO through new developments. Given current market conditions, we are proceeding selectively with preleased office developments and more actively for multifamily on land we control with an equity partner. BXP's largest development underway is 343 Madison, our premier workplace tower in New York City with direct access to Grand Central Terminal. This past quarter, we signed a 2-floor lease with a business services company in the upper half of the podium level, bringing the building to 56% leased. Further, we are in lease negotiations with a 5-floor client for the bottom floors of the podium, which if completed, would bring us to 70% leased. The remaining availability, including encumbered space is 5 podium floors and 7 floors at the top of the building with expected rents exceeding our original pro forma.

The construction of 343 Madison remains on time and budget, and we recently announced closing the sale of a 10.6% interest in the project to [ AVRS ] Partners, one of our longtime financial partners at the [ GM ] Building. The sale was completed at a price above our basis, and we continue to speak with select investors in pursuit of our goal to sell a total interest of 30% to 50% in the project.

As leasing advances, rents improve and the delivery date nears, the value of the development and pricing for future equity sales continues to rise.

In terms of additional development activity, we are pursuing another preleased premier workplace development opportunity in Washington, D.C., which would likely commence in 2028. In addition, we have three apartment development projects located in Weston and Waltham, Massachusetts and Santa Monica, which we plan to start in 2027, subject to site plan approval and raising the required equity capital.

BXP's current development pipeline comprises three office and four residential projects underway, totaling 3.5 million square feet and $2.9 billion of BXP investment with approximately $750 million of equity remaining to be funded. The three office developments are 70% pre-leased, and the aggregate pipeline will deliver meaningful external growth over the longer term.

So in conclusion, BXP is well positioned for continued success. Leasing demand is strong. Vacancy in the premier workplace segment is low and declining and new supply remains muted. Debt capital is readily available for premier workplaces at attractive credit spreads, albeit at higher overall costs.

BXP continues to capture market share driven by our financial strength, reliable client service and a less competitive landscape across many of our markets. Our outperformance against business plan goals should drive portfolio occupancy and FFO per share, deleveraging external growth from development and a portfolio increasingly concentrated in premier workplaces.

With improving fundamentals, clear strategic direction and proven execution capability, we remain confident in our ability to deliver longer-term growth and increase shareholder value and with that, I'll turn it over to Doug.

Douglas Linde

Thanks, Owen. I'm going to keep going on the strategic priorities because nowhere is more evident than in our occupancy growth. And the projected occupancy gains were foundational to the plan that we push forward about a year ago since the incremental revenue falls almost entirely to the bottom line FFO.

We put forward, as Owen said, a 200 basis point improvement in '26 and a 200 basis point improvement in '27 for a goal of 91%. Actually, it was 430 basis points because we ended the year at 86.7%, but it's 30 basis points. So it's among friends, right?

As you read in our press release, we've gained 100 basis points of occupancy in the last quarter, and we've achieved 270 basis points of incremental improvement since the start of the year. I am going to focus my remarks this morning on this outperformance.

A small portion of the occupancy improvement in calendar year 2026 is due to changes in the portfolio. In aggregate, portfolio changes impacted occupancy by positive 30 basis points. So 240 basis points of improvement came from leasing vacant space. During calendar year '26, we've executed 1.5 million square feet of leases on vacant in-service space, including 375,000 square feet of vacant in-service space this quarter.

Our remaining 2026 expirations total only 186,000 square feet. We're negotiating leases on about 75,000 square feet of that space. And we have 600,000 square feet of currently vacant space that is the least and expected to commence in the fourth quarter. We should end the year at about 90% occupied as we stated last quarter, clearly, we have achieved our 89% goal much more quickly than we expected.

Our current pipeline of leases in negotiation is approximately 1.3 million square feet and covers 275,000 square feet of vacant space and 300,000 square feet of 27 expiring units. Our active discussion pipeline stands at over 2.8 million square feet including some large early renewal discussions. This is a meaningful increase in activity relative to where we sat last quarter where that number was about 1.7 million square feet.

In 2027, we have 1.6 million square feet of expirations with 467,000 square feet of signed leases on vacant space expected to commence in '27 and we're negotiating leases on an additional 250,000 square feet of vacant space, and we are in renewal or replacement lease negotiations on about 300,000 square feet of '27 expirations. This encompasses -- I'll do the math for you, over 1 million square feet of '27 expirations as we enter November '26.

Our largest known '27 exploration is 175,000 square feet at Colorado Center in Santa Monica, and the next biggest move-outs are 120,000 square feet at 1265 Main Street in Waltham and 120,000 square feet at 504 Carnegie Center in Princeton. How much occupancy may exceed 91% in '27 will be a topic for our '27 guidance next quarter.

We've seen portfolio outperformance in the Boston CBD and Urban Edge in Reston, Virginia and Washington, D.C. and San Francisco, Mountain View, Seattle and of course, in Midtown Manhattan. The outperformance is being driven by our ability to lease more quickly, reflecting the depth of demand for our premier workplaces. We continue to see demand from a wide spectrum of industries, though varying by market, technology, defense and cyber security, asset management, financial services and professional services. Space growth is a factor in many of our clients' requirements.

This quarter, we had 10 existing client expansions totaling over 160,000 square feet. We completed 74 total transactions this quarter and renewals made up about 47%. Our portfolio leasing spreads this quarter were up 6.5% on a gross basis and 9.3% on a net basis with outperformance from New York City and Washington, D.C. and negative results in Boston and San Francisco.

A few insights from the deck. In Boston, this quarter, we had several transactions in our Urban Edge assets including 70,000 square feet at the quarry in Weston, where we had a 15-year lease expire 18 months ago and the rent went down on the new deals by about 28%. The one Back Bay transaction this quarter at the Prudential Center resulted in a 25% net increase on a 10-year lease that expires in 2027.

In New York, the Manhattan office transactions actually range from 10% to 30% increases but the data also includes Princeton, which mutes it. By themselves, the Midtown office transactions were up 23% on a net basis.

In San Francisco, a small portfolio was executed this quarter. The average new rent for the CBD deals was about $100 a square foot and the expiring rents average 120, obviously slight down.

And in Washington, D.C., the main driver of the positive performance is the replacement lease we completed at 500 North Capital in advance of the Air tenants relocation the 725 12 Street in [ '28 ], where the new rent is up almost 30%.

What was noticeably absent from our remarks last September was any mention of incremental contribution from improvements in pricing. This will now be a factor in driving future NOI as we experience lease expirations over the coming years.

Over the last year, in the BXP Midtown Manhattan, Back Bay of Boston and Reston, Virginia portfolio, market conditions have allowed us to increase rents and in some instances, lower concessions. This is now happening in our San Francisco properties as well.

This represents an important incremental evolution in our growth outlook. Occupancy gains will be supplemented by the benefit from improving rent economics.

We completed 220,000 square feet of leasing in the Boston portfolio. We have now executed our third second-generation lease at 888 Boylston Street, where the embedded market rent growth is between 20% and 25%. In another Prudential Center building, we completed a sizable renewal a few days ago, so it's not in the third quarter stats. The rent will be up over 20% versus the expiring rent.

We continue to make progress at our core asset, our largest availability in the Urban Edge, where again, we executed about 70,000 square feet this quarter.

About 200,000 square feet of our current Urban Edge availability is in purpose-built life science assets. In the last month, there has been a pickup in inquiry for life science users with lab needs. While many of these are consolidations are lease expiration-driven activity has increased.

In New York City, 360 Park Avenue South, 200 Fifth Avenue, 399 Park, 510 Madison and the [ GM ] building are all 99.9% leased. We have one full floor availability at 599 Lex, which has had multiple offers outstanding and will be getting back about 50,000 square feet at 601 in late '27. This month, we completed a long-term renewal with one of our anchor tenants at 250 West 55th Street, extending a 29 expiration until 2045.

We have a number of 29 portfolio expirations that are being discussed, including the space that [ CV Star ] will vacate upon their relocation to 343 management.

On the West Coast, the most significant momentum in our portfolio continues to be at 680 Folsom. We executed an expansion with the client during the quarter and at least our last full availability last week. We've moved taking rents on our vacant space from the mid-60s to the mid-80s over the last 12 months, an increase of over 25%. Since the space has been vacant since 2024, it's not showing up in our second-generation statistics.

During the quarter, we executed over 300,000 square feet in the West Coast holdings, including 140,000 square feet at Madison Center, where we did another early rule with a major tenant. We've executed leases or in discussion with smaller technology companies in our San Francisco and Seattle assets on built space. Our strategy has been to design in prebuilt suites or floors to make the least decision easier to reduce downtime.

We are seeing great traction. We are negotiating our first significant initial lease expirations at Salesforce Tower. One client is growing by 10,000, one client is maintaining its footprint and one is downsizing by 75,000 square feet. Current market rents are 30% to 60% higher than the expiring rents in the building and still would be significant discounts to new construction rents.

As an aside, we listed the 75,000 square foot block we're getting back 3 weeks ago, and we have had seven new clients toward the space since then.

In D.C., it was our most active reason this quarter. Our team was able to orchestrate a 206,000 square foot long-term lease with Google at 500 North Capital to backfill 100% of the space that [ McDermott ] occupies more than 2 years prior to its expiration. This was a complex transaction and demonstrates the experience of our regional teams, in this case, D.C.

In addition, we completed six other leases totaling 120,000 square feet in Reston. Reston continues to have almost no available space. We are in lease on the last full floor in the urban core, and we have moved our taking rents from the mid-50s to the low 60s over the past 9 months.

Here, too, we have aggressively completed prebuilt. We're delivering a full 24,000 square foot floor comprised of five suites next week and 4 of the 5 will be occupied upon delivery.

In summary, our assets are seeing strong demand growth. We are leasing space faster, driving occupancy higher and benefiting from improved pricing power as demand grows and new supply limits remains limited in the back bay of Boston, Reston, Virginia, Manhattan, Seattle and San Francisco. As Michael described, this is translating to our bottom line.

Michael LaBelle

Great. Thank you, Doug, Owen. Good morning, everybody. As Owen described in his remarks, we had a great quarter. Strong execution of our leasing and capital plan, outsized occupancy growth. We beat our earnings guidance and consensus estimates for the quarter, and we raised our full year earnings outlook.

In the debt markets, we completed our $700 million 10-year bond offering at a 6.05% interest rate. We opportunistically executed this issuance in August, well in advance of repaying our $1 billion bond at maturity in October and prior to the run-up in interest rates. Had we waited until maturity, the interest rate would have been closer to 6.75% and the annual interest costs going forward would have been approximately $0.03 per share higher.

We reduced the size of the refinancing to $700 million using our ample liquidity to fund the difference as part of our longer-term balance sheet strategy and saving $0.02 per share in annualized net interest expense.

As a reminder, we utilized $1 billion of our cash on hand after the end of the quarter to restate the maturing bond.

Interest rates continue to be volatile, and we're actively monitoring our future financing needs with the goal of mitigating the impact of higher rates as much as possible through the potential hedging and utilizing the full suite of capital markets available to us.

The CMBS market remains active with several large SASB financings closing in the past quarter. The AAA tranches for high-quality office financings are pricing at approximately 100 basis point spreads, our $2.3 billion mortgage, which is $1.4 billion at our share on the [ GM ] building expires in June 2027 and the current interest rate is 3.6%. We are receiving proposals to refinance it for a 10-year term with an all-in credit spread in the low 100s.

We also have a financing opportunity next year in our $750 million unsecured bond that expires on December 1, 2027, with a current interest rate of 6.75%. Based on where our 10-year credit spreads are trading today, approximately 135 basis points, we could issue a new 10-year bond at approximately 6.4%, creating the potential for a roll down of this interest rate upon refinancing.

Importantly, we continue to benefit from strong access to capital and have significant financing flexibility with multiple sources of debt capital markets available to us, including the unsecured bond market, the bank market and the convertible debt market. Investor demand for high-quality premier workplaces backed by experienced sponsors remain strong, and we are well positioned to capitalize on these opportunities.

Now I want to turn to our earnings for the third quarter. We reported funds from operations of $1.89 per share, which exceeded the midpoint of our prior guidance by $14 million or $0.08 per share. Stronger performance in our operating portfolio delivered $0.10 per share of our outperformance this quarter.

Revenues exceeded our expectation from higher-than-projected occupancy due to earlier lease commencements and higher service income resulting in $0.03 per share of better-than-projected performance. We also recorded $0.02 per share of higher termination income, mostly related to a restoration payment that we received from a client in Boston on their lease maturity. This payment reflects a negotiated settlement in lieu of the client completing the restoration work.

Approximately half of our outperformance this quarter was driven by lower operating expenses, reflecting the continued success of our proactive tax appeal program as well as lower-than-projected repair and maintenance expense. We expect that $0.04 per share of this benefit is the result of timing of expenses that will be deferred into Q4 and are incorporated into our full year FFO guidance.

The strong performance of our portfolio was partially offset by $0.02 per share of higher than projected net interest expense due primarily to the timing of our bond offering that closed in August, versus our expectation of refinancing closer to the expiration in October.

For the full year 2026, we are raising our 2026 FFO guidance by $0.05 per share at the midpoint to a range of $7.06 to $7.08 per share. As Doug detailed, we anticipate that our occupancy will improve again in the fourth quarter and end the year at approximately 90%. In our same-property portfolio, we are increasing our expectation for NOI growth in 2026 to 2.35% to 2.75%. That's an increase of 35 basis points or $0.04 per share from last quarter's guidance. The increase is from pulling forward a portion of our expected occupancy gain into the third quarter, partially offset by the deferral of operating expenses into Q4.

In addition, we've updated our guidance for portfolio NOI by $0.02 per share from the unanticipated restoration income we recorded in Q3, the only other change in our portfolio projections is an increase of $0.01 per share of NOI from the timing of our asset sales program. We have one additional sale that we expect to close in 2026 and which is a $20 million land sale under contract that is set to close in December.

Lastly, we're projecting our net interest expense to be higher by $0.02 per share from our Q3 results due to the timing of our bond offering.

In summary, we are increasing our guidance for 2026 FFO at the midpoint by $0.05 per share. We expect an incremental $0.07 per share from portfolio NOI and partially offset by $0.02 per share of higher interest expense.

Looking ahead, we remain confident in our ability to deliver sustained FFO growth over the next several years supported by improving property fundamentals, continued leasing momentum and the execution of our strategic initiatives. And don't forget that 725 12th Street delivers in 2028 and 343 Madison begins to deliver in 2029. At the midpoint of our guidance, we expect to deliver 3.2% FFO growth in 2026, and we expect FFO to grow again in 2027.

As you start to think about 2027, there's a few things to keep in mind. First, and as Doug described, we expect to improve our occupancy next year, plus we will have a full year of our 2026 occupancy gain. That will result in stronger projected growth in our same-property NOI both on a GAAP and a cash basis.

We also expect to see incremental NOI from our development pipeline, including a full year of 290 Binney and the delivery of our Reservoir Place redevelopment in Waltham that is leased to Boston Dynamics.

We have two residential projects delivering midyear with 121 Broadway in Cambridge and 17 Hartwell in Lexington. Both projects will be in lease-up during 2027 and upon completion, we will cease capitalizing interest, creating a near-term drag on FFO before the projects begin contributing to earnings in 2028.

From a financing perspective, the most significant impact will come from the refinancing of our loan on the GM building that I mentioned earlier, we will also see potential changes in short-term SOFR rates affecting our floating rate debt portfolio. And we expect lower capitalized interest following the completion of 290 Binney this year and our planned 2027 deliveries, partially offset by the incremental investments in 343 Madison and 725 12th Street.

We anticipate a normalization of termination income. This year, termination income is expected to total approximately $24 million. That is higher than our historical average that is closer to $15 million. Our asset sales program is another important component to our strategy to strengthen our balance sheet and position the company for long-term growth.

Based on transactions completed to date, we expect approximately $0.08 per share of dilution in 2027 compared to 2026. This does not include the possible sale of Time Square Tower that Owen described, which would result in approximately $0.06 per share of additional dilution if it closes at the end of the first quarter of 2027.

Importantly, we expect the dilutive portion of our sales program to be largely behind us following these transactions. And our focus will shift more to accretive land sales and potentially multifamily dispositions over the next couple of years.

While these factors will moderate FFO growth in 2027, the fundamentals of our operating business continue to strengthen. We are seeing positive momentum in leasing activity and rental rates across our markets with limited new supply and continued demand for premier workplaces. Looking further ahead to 2028, we expect to benefit from the improving operating environment a manageable lease expiration schedule, fewer dilutive asset sales and significantly lower refinancing exposure. We believe these factors position us well for a sustained period of FFO growth with the potential to accelerate by 2028.

That completes our formal remarks. Operator, can you please open the lines up?

Operator

[Operator Instructions] And I show our first question comes from the line of Jana Galan from Bank of America.

Phần hỏi đáp

Jana Galan

Congrats on a great leasing quarter I know the smaller market exposure, but can you share your outlook for L.A. expectations for the large lease expiration at Colorado Center and then maybe also plans for the mortgage debt for Colorado Center?

Douglas Linde

Sure. So I'll give you a perspective on the leasing market, and Mike can talk about the -- I guess, it's a June maturity or July maturity of the CMBS loan. The one market in our portfolio that has not seen the demand recovery has been West L.A. The look, the realities of what's going on with the media businesses and the consolidations that are occurring and obviously, the reductions in labor that are coming from that, coupled with how artificial intelligence is impacting the projection of visual media is having an impact on that marketplace from a demand perspective, and so it's pretty slow.

And interestingly, when we look at our projections on a going-forward basis, we have very little sort of reliance on improving our occupancy at Colorado Center in the short to medium term, as part of our occupancy projections. So we sort of built in the expected availability of space there.

There is activity. It's really around consumer products facing companies. It's mostly musical chairs. We are aggressively making proposals to a number of the clients that are in the marketplace. The offering at Colorado Center is a terrific offering, but people don't have to make a decision to move. And so there's no compelling urgency out there, which I think is part of what the slowdown is from a leasing perspective. And Rod, maybe you want to comment if I miss something there.

Rodney Diehl

The only thing I would add, Doug, is that the vacant space at Colorado Center is all shell and that's harder space to lease. The upcoming role with some of the space in one of the buildings next year, we're actively marketing that. It's built space, it's a good condition, and we're getting more activity on that.

Michael LaBelle

So thanks, Jana, for your question. On the financing, so we have a $550 million CMBS loan. We're only 50% ownership of this asset. So our share of that is $275 million and expires next summer. And given the rollover exposure, my expectation is that we're going to seek to do a shorter-term extension or a bridge financing relative to this financing. And we anticipate that the rate on that will be close to or slightly above where it is today.

Operator

And I share our next question comes from the line of Steve Sakwa from Evercore ISI.

Steve Sakwa

I know you're probably loath to talk about individual tenants. But 1 of your top 10 tenants has kind of been in the news recently. I'm not asking you to sort of opine on their exact outcome. But to the extent that any of that space did come back to you. Just could you maybe help sort of frame out kind of where our rents are for that space relative to market? And what sort of activity levels are you seeing for that kind of premier space in the portfolio today?

Douglas Linde

So the General Motors building is 99.9% leased. The average office rent at 677 5th, which is the General Motors building, is under $150 a square foot. And if you think about the rents that we are going to be achieving at 343 Madison where I think the lowest rent we will do is $190 a square foot, and we will be achieving rents in excess of $300-plus a square foot. There is a vast gap between where the in-place rent is at General Motors building, 767 5th, and where we believe and perceive the market is.

And the building across the street that related is putting up, I believe, has already achieved some rents for the mid portion of its building in the mid-$250 square foot range as well. So that's sort of the state of the market at that corner of 5th Avenue.

Operator

And I show our next question comes from the line of Seth Bergey from Citi.

Seth Bergey

I just thanks for the helpful comments about kind of some of the transactions. I guess just given kind of the movement in the 10-year, what's kind of the appetite from different capital sources for kind of the 343 Madison? And has that changed at all just given the move in the 10-year?

Owen Thomas

As a broad comment, I do think higher rates have an impact on real estate valuations. There's a tremendous amount of fixed income value in a real estate property. And as I said in my remarks, I would anticipate in the market today that there will be some changes in pricing.

We don't have enough prints yet in the last month, I think, to really kind of tell you exactly what that is, but I would expect some change.

The 343 deal is -- first of all, it's a trophy asset. There's very few, if any, assets like that, that are in the market. And it's also more of a total return kind of analysis because it doesn't have a current cap rate. It's -- you invest in the project, we deliver it in '29 and then it's sold thereafter. So I guess, theoretically, you could argue maybe it had some impact on the residual value, but there's not a current cap rate.

Operator

I show next question comes from the line of John Kim from BMO Capital Markets.

John Kim

This quarter, your vacancy tightened cash lease spreads improved, although it was mixed by region. But given your visibility on your leasing pipeline and the mark-to-market potential you see in Salesforce Tower. How much do you see the cash lease spreads accelerating over the next year?

Douglas Linde

So Mike, do you want to sort of take out? Because you're looking at it on a portfolio basis, right? I mean I think our same store this year is going to be somewhere in the 2.5% range. And I think that number is going to accelerate next year in a material way, as Mike described. Because we're going to see both the occupancy gains as well as the improvements in the rental rates that we're achieving today.

If you sort of did the math on the numbers that I was providing you on sort of a market-by-market basis. There's not a market we're not seeing double-digit increases in less than 12 months. Is that sustainable for the next 3 years? If Owens perspective on no new supply continues, and there is no availability in these marketplaces for high-quality space and the demand continues, we're going to see a really, really strong period of time. We're not banking on that relative to what our projections are showing, but it's a pretty unique time to be leasing space in the premier marketplaces because of the factors that we've sort of just outlined.

Michael LaBelle

The only other thing I would add, Doug, is if you look at the mark-to-market of the portfolio, we kind of look at every quarter and we update our market leases every quarter. That's grown by approximately 10% in the last couple of quarters. So the kind of embedded future growth is certainly going up.

I think that the primary growth factor over the next couple of years is going to be occupancy growth because that's just much more meaningful than getting the mark-to-market on the 5% of our portfolio that rolls in a given year.

Operator

And so our next question comes from the line of Blaine Heck from Wells Fargo.

Blaine Heck

Owen, you talked about a lack of available equity capital in commercial real estate, given the vacuum created by AI investment, and it sounds like you guys might achieve you're delevering through dispositions ahead of schedule. So do you think this is going to be an opportunity for BXP to go on the offensive in '27 or '28 through acquisitions, while some of your usual competitors are kind of focused elsewhere?

And maybe to add on that, with the stock trading around $61 per share, have you and the Board considered a stock repurchase plan as another option for capital allocation? And how do you think about that option and how it stacks up relative to development spending and acquisitions at this point?

Owen Thomas

Well, I do think because of the absence of capital and a more favorable competitive environment for us, i.e., less competition across much of our footprint. I do think it represents an interesting time for BXP to go -- to be on the -- continue to be on the offensive and look at new investments. The way that has shaken out over the last couple of years, and I would probably anticipated continuing is that development represents a better opportunity for new capital investment.

I mean the deals 343 Madison, which we've talked about at length, we think our yield is going to be somewhere in the 8% range. These new developments that we're doing in Washington, D.C. are more in the 9% plus cap rate, these are cash development yield range. And my expectation is, notwithstanding your comments about competition and capital I think it's going to be hard to find acquisitions of properties that are of the quality that we would be interested in trading at those kind of cap rates.

Could that change? I hope so. We're certainly out there all the time looking. We're not stopping looking. That's part of our job. But I think the current market conditions would have us believe we're probably going to be doing more on the development side.

As I mentioned, we are looking at another similar transaction to the two that we've already done in D.C. We have sites in all of our cities that if we can find an anchor tenant that are going to be actionable. And that's my -- that's what I suspect where most of our new investment dollars will go.

Douglas Linde

And just to follow up just on your last is the stock buyback. So we, at the Board level spent hundreds of hours internally preparing for valuation discussions relative to all different kinds of methodologies and where we sort of see our NAV, our discounted cash flow value, all that sort of stuff, and we discussed this with the Board all the time.

Owen described our strategic priorities that we sort of set out a year ago. To the extent that we have incremental available capital, absolutely, one of the things that we think about is can we consider doing a stock buyback on a leverage-neutral basis if we have incremental capital versus where we sort of set out our "strategic objective". So it's certainly on the table.

Owen Thomas

Yes. And I think another way just to add to what Doug said on the buyback. I mean, if we can do new developments that are pre-leased at a 9 and our stock is trading at a high 7s cap rate, it feels like a better use of capital is to do the development.

Operator

And I show our next question comes from the line of Nicholas Yulico from Scotiabank.

Nicholas Yulico

I know you guys gave a lot of details on potential 2027 impact. And I think Mike, when you're going through that, you said all these factors will moderate FFO growth in 2027. I just wanted to be clear on what you meant by that, if you're suggesting that actually 2027 would be slower growth in 2026 or just that these factors weren't in place, you'd have higher FFO growth?

Michael LaBelle

I think what I'm trying to communicate is without giving guidance or 2027, by the way. So we expect we're going to grow next year. There's been a lot of discussions about the impact of higher interest rates and refinancing and asset sales, and we do have those things that have an impact. But the other parts of our business are doing really, really well.

And as Doug mentioned a couple of questions ago, our same property portfolio is going to have, we believe, higher same-store NOI growth than it did this year. So I think what we're saying today is that we believe we're going to continue to grow in 2027.

Operator

And our next question comes from the line of Alexander Goldfarb from Piper Sandler.

Alexander Goldfarb

Owen or Doug, a question on tech leasing. There have been a lot of announcements. Obviously, Microsoft had their buyout news earlier this week. There's pushback on data centers, there's focus on how much CapEx the hyperscalers are spending and such.

Within all these headlines, are you seeing any impact on office leasing or the way the VCs are looking at tech. And what I'm asking is, we always make the parallels to the dot-com where the business models were excessive relative to their financials. And then this time around, it seems like everything is more disciplined. But just curious if the leasing demand is still disciplined or if they're starting to be signs that maybe some of that CapEx concern is starting to spill over into office demand?

Douglas Linde

Okay. So I'm going to start here, and then I'm going to let Rod talk about what's going on in the CBD of San Francisco because it's the sort of poster child for what's happening with technology leasing.

I believe that right now, Rod, there is somewhere in the neighborhood of 9 million square feet of tenants in the market and almost 50% of that is net growth from organizations, either growing companies or companies that are being newly formed and looking for space. And the activity level to use the word that Mike likes is palatable -- palpable, sorry. Well both palatable and palpable.

So Rod, you should describe what we're seeing at Salesforce Tower as an example, with the 75,000 square feet of space that we have available and sort of where the activity in that marketplace is sort of going to have to find its logical home.

Rodney Diehl

Yes. So it's -- I mean, the tech demand is, as you said, Doug, it's actually a little bit -- I guess it's about 62% roughly of the total demand, which is about 8.6 million square feet. And it's as strong as I've ever seen it. And we have our own personal examples of it. You mentioned one of them in your initial comments at Salesforce Tower. I mean that 3-floor block, which is mid-block at Salesforce Tower that we're getting back in the fourth quarter of next year. we've had seven tours already on it. We're expecting activity and written proposals coming in shortly.

And it's -- our anticipation is the kind of rents that we would be getting for that space are going to probably be plus 10% to 15% higher than what we agreed to on the floors above it when we did the renewal. So that's in a 6-month period and already, we're seeing that kind of growth.

But more importantly, just the demand, I mean we're seeing it 680. I mean we're pretty much leased up there now with the different groups that we've used to. Big AI companies, whether it be open AI, anthropic, both continue to look for more space. And then there's all the others that you don't know the names of yet, but they're out there looking and they're pushing the demand.

So -- and I think, Alex, if your question was -- and I think I heard you say that your concern is that people are taking more space maybe than they need. They're growing faster than they anticipated. And it doesn't feel like that yet. I mean the people that we're talking to, they're people in the space. They're not just warehousing space when they take it down. So that's encouraging for sure.

Douglas Linde

And Hilary, maybe you can comment on the number of large users that are in the market right now in Midtown Manhattan and other parts of Manhattan and sort of the dynamic that we're seeing there in the face of what's going on from a growth perspective.

Hilary Spann

Yes. Yes. Thanks, Doug. Alex, so in New York City right now, there are 59 tenants in the market as of the end of third quarter, 100,000 square feet or greater, and there are only 26 available blocks of space in better buildings to sort of try to accommodate that demand, which, of course, is why we're seeing such strong preleasing and the development opportunities that are available around the city.

But so more than twice the number of demand than available spaces in New York to accommodate tenants in better buildings. So it's a very, very tight market, and there is a real mismatch in terms of the demand from large users versus the availability of space.

Operator

Our next question comes from the line of Caitlin Burrows from Goldman Sachs.

Caitlin Burrows

Just on the topic or importance of occupancy that you mentioned earlier, another side of that would be avoiding vacancy. So on the topic of renewals. Can you talk about but retention has been like, I guess, over the past few years? And do you expect that to meaningfully improve? Or do you still have some older leases that could still limit renewals and retention?

Douglas Linde

So Caitlin, this is an intellectual exercise that we go through in terms of how we describe retention because what happens is that in many of our larger organizations when we think about their renewals, we're so far ahead of when the tenant actually does their deal that when we actually think about the renewal on a sort of shorter-term basis to already been completed.

So it skews these numbers. But in terms of the -- what I would look at as our sort of near-term expirations because the near-term expirations generally have a higher propensity to be a move out because we haven't -- we've already gotten through all the larger transactions.

We tend -- as this quarter is a good example, we're sort of in that 45% to 50% range. That's generally where it is. When I look at the path in front of us for 2027 and interestingly for 2028, my guess is that we're going to take care of a significant portion of what is in our lease expiration schedules prior to the end of that year. And so those numbers are going to come down pretty dramatically.

And I know that as of today, we are working on of the three largest expirations we have in 2027, we are in renewal conversations on two of them right now. And so from my perspective, we have a very manageable long-term lease expiration-driven program, right?

I mean, I talked about in my comments, that we just took care of the McDermott lease expiration in 2028 at 500 North Capital. That was one of the larger ones at 206,000 square feet. And so it's just sort of our natural course of business.

Michael LaBelle

I think the only thing I would add, Doug, is I think we are seeing improvement in this quarter. The retention was over 60%, which is strong. The other thing I think we will see as these markets tighten the likelihood for renewal is much higher because there's less places for people to go.

Operator

And our next question comes from the line of [ Conan Mitchell ] from UBS.

Unknown Analyst

Great. Just following up on an earlier line of questions. the story seems to be -- it's still driven by occupancy gains and filling vacant space. However, you did discuss higher rents and lower concessions. So maybe the story primarily remains the occupancy build. But is the inflection point nearing or -- is pricing slowly becoming a more important piece of the story, although the NOI growth may be still primarily driven by the occupancy builds?

Douglas Linde

Yes, I think that's an accurate way to describe what we I think I tried to communicate in my prepared remarks and then Mike described sort of the realities of the situation is when you only have 5% of your portfolio rolling over in a year, even if you have a 10% gain on the average mark-to-market, that is dwarfed by 100 basis points of occupancy increase on a portfolio of 46 million square feet.

So over time, as we get more and more leased, right, when -- and I think we've described that our or sort of stabilized numbers in the 93% to 94% range. As we get closer to that, all of the growth in the portfolio same-store is going to come from the improvements in the fundamentals of our underlying business. But until we get there, the occupancy gain is going to be much more impactful to the growth story.

Michael LaBelle

I think the other thing we're doing, right, is we're reaching further into our exploration table, right, to try to do these early renewals. Doug talked about a bunch of early rules that we're working on.

And so from a GAAP basis, if you do those early renewals at higher rents, we will start to get some of that blended into current periods as we complete those renewals.

Operator

And our next question comes from the line of Floris Van Dijkum from Ladenburg Thalmann.

Floris Gerbrand Van Dijkum

Really encouraging news on the filling the vacant space clearly and the fact that rents are rising. Maybe if you could talk about the net effect of rents as well. And maybe talk about the difference in markets and TI packages, particularly when you compare New York versus San Francisco and D.C., perhaps and Boston?

Douglas Linde

Okay. So this is minutia in terms of how to answer the question. But the sort of big picture perspective is, there's no market that we are operating in, where the concessions are getting larger. So if there is an improvement in their underlying gross rent or net rent that we're charging, it's all to the bottom line. .

The overall sort of comparative model would be as follows. The TI cost is higher in San Francisco than it is in New York and then it is in Boston and then it is in Washington, D.C. on a "new transaction" on a high-quality premier building. The free rent would be higher in D.C. than it is in San Francisco than it is in New York than it is in Boston on those same transactions. Those are just sort of what I refer to as market norms.

And then the other sort of important factor is the leasing commission and the leasing commissions are generally significantly higher in Washington, D.C. and New York City relative to Boston and San Francisco. So that's sort of the comparative landscape.

But again, the net effect of rents because those transaction costs are going nowhere other than down are all inuring to an improvement in the underlying fundamentals of the transactions that we're doing. And I'm talking -- those are all CBD numbers. And the importance of that is, I think we say that 90% of the NOI from the BXP portfolio is coming from CBD markets. That includes Reston, Virginia as a CBD market.

Operator

And I show our next question comes from the line of Upal Rana from KeyBanc Capital Markets.

Upal Rana

With occupancy increasing 100 basis points and about half of that remaining signed but not commenced pipeline commencing by year-end, could you frame the cash flow contribution from that pool during '27 and including any time to free rent to burn off?

Michael LaBelle

I really don't want to get into 2027 guidance right now. I think the two things to focus on is we believe there will be an acceleration of our same-property NOI and in 2027. And there is a significant amount of free rent from our 2026 leasing that is burning off. So the AFFO will be improved the cash portion of our FFO will be improved in 2027 over 2026.

Operator

Thank you. And I show our next question comes from the line of Dylan Burzinski from Green Street.

Dylan Burzinski

Maybe just pivoting back to 343 Madison and some of your commentary around the remaining space having rents higher than sort of where your underwriting is -- does that mean we should sort of reevaluate that 7.5% to 8% yield on cost target that you guys sort of outlined when you guys initially broke ground.

And I know some of that had fees baked into it, but assuming that's all the same, I mean, is it fair to say that, that maybe you'll end up higher at the higher end of the range. Just any thoughts there would be helpful.

Owen Thomas

Yes, I think that's fair. I don't think we're saying above 8%, but I think we're in the higher end of the range. Also, don't forget, if we sell down interests above our basis that also contributes to higher yields. So -- and we're -- we have done one transaction of sell down. We're trying to do more. And as Doug described, rents are going up.

Operator

Our next question comes from the line of Ronald Kamdem from Morgan Stanley.

Ronald Kamdem

Just going back to that line of questioning on the [ FAD ], if you take a step back and what's a good number to think about annualizing the CapEx spend for this year? And then what's the context of how much more elevated that is because of all the leasing right that's been done and what that could trend to in a normalized year? Just trying to get some numbers around that.

Michael LaBelle

This year was a very unique year because we had a couple of million square feet of the renewals that kind of hit our leases commenced that we had done 2, 3 years ago. So the sheer square footage of leasing commenced based upon that factor was just higher than it has ever been. And that actually didn't reflect doesn't have anything to do with necessarily our kind of occupancy growth per se. It was just like these renewals that we did 2 or 3 [indiscernible] ago that happened to have their lease commencement date in this period.

And so I think that we're going to see while we're going to grow occupancy, we're going to see a much lower amount of leases commenced 2027 because we don't have as many of those hitting and that's going to enure to a lower level of transaction cost than this year, which right now this year, we're at $450 million for the year. And we will see some more in the fourth quarter. So we'll probably be somewhere $550 million, plus or minus by the end of this year. I don't see it being anywhere near that next year.

And again, the cash NOI is going to grow as well. So I think we will benefit next year from that in our AFFO.

Operator

Thank you. And I share our last question in the queue comes from the line of Alexander Goldfarb from Piper Sandler.

Alexander Goldfarb

Mike, just quickly, on the 2027, when you said that you expect FFO to grow maybe modestly, does that include the impact of Times Square Tower, the $0.06 dilution from that?

Michael LaBelle

Includes everything we talked about.

Operator

That concludes our Q&A session. At this time, I'd like to turn the call back over to Owen Thomas, Chairman and Chief Executive Officer for closing remarks.

Owen Thomas

Thank you. That concludes our remarks. Thank you all for your interest in BXP. Have a good day.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.