Please welcome Mike LaBelle, CFO of BXP.
Is this working? Can you guys hear me? Excellent. Good morning, everybody. Welcome to BXP's Investor Conference. It's been a while since we've had one. Welcome to Big Night Live. Many of you probably have not been here. We developed this place. It opened in 2019, and it's been really successful. They host concerts almost every night, except for last night, which was good. Today we get to take it over, which is very cool. As the voice upstairs said, I'm the CFO of Boston Properties. I'm Mike LaBelle, if you don't know me. It's actually been five years since we last had an investor conference. It's a long time. It's great to see all of you here.
You know, we really appreciate all of the interest that you give BXP and all of your support, so thank you for all of that. Our theme today, you might have seen it everywhere, is the BXP opportunity. We hope that you're gonna come away from today with a much better understanding of what that opportunity is. A lot of you, and it was a great crowd, actually, came yesterday to the tours, and I think it was really kind of fun and interesting. We exhibited some of the most exciting projects that we have going on and new opportunities that we have going on here, in the Boston region, like the View Boston, which was stunning, and the sites in Cambridge that we talked about, which was great.
Also if you didn't see it, we did a press release this morning. Unfortunately, we couldn't do it yesterday, because we executed a portion of this transaction, yesterday. We announced the acquisition of a fully leased lab building in Kendall Square, which is a sale-leaseback transaction, at 125 Binney Street. In conjunction with that, we were able to recapture about 200,000 sq ft of office space in an office building that we own right adjacent to it. We're gonna be converting that building at 300 Binney Street to a life science building. It's 100% leased already to a world-renowned research institution. It's a very exciting project. You're gonna hear more about it later today, from Doug and from the Boston team.
Today, you are also gonna get the opportunity to meet a number of people from across the company and from across the country that are here. We're gonna have a number of presentations, a lot of content that we have to get through. First, you're gonna hear from Owen and then from Doug. They're gonna describe the current and future trends in our business, you know, how we're making strategic shifts to create opportunities for ourselves and take advantage of opportunities that are out there, how our portfolio is positioned, and what our growth opportunities are. Then you're not gonna sit here the whole time. We're gonna break up into smaller groups. We've got five regional stations that are located throughout this venue, and this venue's kind of cool. There's all sorts of nooks and crannies and little places that you can go.
On your name badge is the name of the group that you're in, and if you look on the back of it, there's a schedule that you have where you'll rotate through all five of the regional stations. One of them is up here. The Boston group will be up here. The Washington, D.C. group is back in the green room over there, which is all, you know, where the stars hang out before they go on stage. I was back there earlier. The New York team is gonna be where breakfast was at Studio B. And then there's a tequila bar where we put the West Coast. That's out front. And then after that, we're gonna have lunch, and lunch is just across the way at Banners Restaurant. Some of you might have been there last night.
We're gonna have a nice buffet lunch there. We're coming back this afternoon here, and we've got a couple of panel discussions, one on private equity and one on life sciences. We've got a couple of presentations on sustainability and on some residential. We're gonna talk about interest rates and debt markets, which are interesting. I'm gonna try to finish it up, hopefully, you all are still here to really talk about our growth opportunity. You don't wanna miss that. A lot of content, but I think it'll be really beneficial to you. We don't do this very often, so we wanna do a full day, and you can really get a good sense of what we're doing.
Before we do get started, I do wanna give a big thanks to Helen Han, who is back there somewhere. Helen is our head of investor relations. I also wanna thank the many others that are on our team and really helped coordinate and organize this event. There's a lot of people that put a lot of time and effort into all these presentations and all the organization here. It's a big task, and Helen's done a great job. Helen, thank you. Appreciate it. With that, I'd like to introduce our Chairman and CEO, Owen Thomas.
Okay. Helen, great choice of music there. Thank you. I'm glad you didn't do what I had suggested. Anyway, it's great to see all of you this morning. I would just start off by thanking all of you for being here. I know how busy you are, how many companies you cover, how hard it is to take two days out and focus on one company, and it's important to us, and we appreciate your doing it. I hope the tours were interesting. I did enjoy the fun run this morning, so thank you for those that came out. I just wanna say how important this event is to BXP.
We obviously want to showcase our great buildings and our strategy and all the smart things that we're doing, but we also want to showcase our great team and the depth of our team. We have 35 people within the company that are going to be presenting to you at various times, either yesterday or today, and a lot more people at BXP that were involved in putting all this together. One other important introduction I want to make before I get started is Senator Kelly Ayotte, who's sitting here in the front. Kelly has been a director of BXP for about four years, and she's currently our lead independent director. Kelly is a former U.S. senator from New Hampshire, former Attorney General of New Hampshire, and is currently sitting on four significant corporate boards.
She's gonna be here for most of the day. If any of you would like to spend a few minutes with her, I know she would welcome that. With all that aside, let's jump into my opening remarks. I'm basically gonna do two things this morning. The first is I'm gonna describe the three market forces that are having the biggest impacts on our business. That's the economy, it's client preferences in terms of how they're using their space, and the emergence of the premier workplace business. Based on those three things, I'm gonna describe what strategic shifts that we're making in the business.
The other thing that this presentation is gonna do is set the table for a number of deep dives that you're gonna hear from all my colleagues over the rest of the day. I'll just provide an introduction and mention that. Then I hope to leave time for a few questions at the end. Let's jump into it. First is the macroeconomic environment. There's a lot of things going on. The way I think about this, I just focus on one number, and that's inflation. That's the problem. That's what's driving all of this macroeconomic uncertainty. It's amazing to me how the financial markets have underestimated the durability of inflation. You know, a year ago, it was transitory. The markets were up in July because everybody thought inflation was coming down. Well, it didn't.
It was 8.6%, 8.5% in August. For those of you that follow this, core inflation is actually up. Even though the Fed is starting to do its work, inflation remains a problem. This is driving everything economically, in my opinion. First, Fed action. You can see the chart here on the upper right, Federal Reserve. You know, you can argue whether they were late raising rates, whatever, it doesn't matter. They're doing it now. They're doing it very aggressively, as aggressively as I remember, as I can ever remember them doing it, and they're gonna do more of it. 'Cause they're going to tame inflation, which is not tamed yet. Then that's having an impact on all the financial markets, including fixed income.
The 10-year U.S. Treasury has gone from 0.5% to 3.5%, and my guess is we've got upside from here. I think the other factor that's going on is quantitative tightening. Harder to see that and see how the flows work, but I'm sure that's having some impact on the fixed income markets as well. Then we're also seeing credit spreads widen out. Here on the left are general investment grade corporate spreads as well as REIT unsecured. Then on the right is closer to real estate the CMBS spreads have gone from 80 or 90 to 155. You're gonna get a lot more from James Magaldi on this topic. With the reference rate up and with spreads up, clearly, cost of capital for real estate and for American business is up.
What's the next knock-on effect? The economy. GDP is coming down. You know, the quarter-over-quarter, the last two quarters have been negative. -1.6% in the first quarter, and I think -0.6% in the second quarter. The year-over-year is going to zero, and my guess, it is probably gonna continue to go down given all the factors that I mentioned. Then it is flattening leasing activity. These are overall U.S. numbers shown here, and this always happens in a recession. When business leaders and companies are facing economic uncertainty, they're much less likely to make a big financial commitment, which is a lease. This is happening in this economic slowdown, and it's happened in past ones.
I think this is probably the largest economic force that's at work in our business right now because we're seeing this leasing activity flattening out after having a nice recovery post-COVID. I think the most interesting thing perhaps, or the most surprising thing in all this is how low unemployment is. It's at 3.7%. It's you know, pretty close to an all-time low, and that's with the economy dropping and, of course, with this high inflation. Look, I think we have some structural things going on in the labor market, which perhaps didn't exist at earlier cycles in our careers. One is demographics. We've got more people retiring than entering the workforce. That is creating labor shortages.
We don't have a cogent immigration policy in this country, which is another problem, causing labor supply issues. However, and by the way, I think this is important to focus on this. This is gonna feed into client preferences. I think what's gonna happen is we're gonna have higher unemployment. If the economy continues to go down, I think unemployment will go up. It may not get back up to, say, 10%, where it was in the GFC because of some of these structural things that I'm talking about. Let me just finish on the talking about the business cycle by saying the following. It's called a business cycle for a reason, because it's a cycle. It goes down, and it comes back up.
I've been through many of these in my career, and I'm highly confident that this one's gonna come back up. Number 2, as we go through this, given the strength of our company, it's going to create opportunities for us to make new investments, many of which I'm sure we haven't even identified yet. I'm excited about that. Third, look at what's happening with the United States. Look at the dollar. Look at the increasing dominance of our economy globally. Look at the challenges that much of the world faces. Look at the onshoring that's going on in our country now of our businesses. I just have a huge amount of confidence about the future of the country, albeit we got to work through this economic slowdown. Okay. Next topic, client preferences.
You would hope that a company like us would be talking to our clients all the time, and we do. However, and in addition, during COVID, we made a much more conscious effort to, I would say, more formally interview several large clients and non-clients that were space users because there's so many things going on with remote work and so forth that we wanted to make sure we understood fully what was going on. We've been doing this throughout the pandemic, and in the last quarter, we went out again and interviewed 24 large space users. You can see they're across a whole set of industries, tech, financials, law firms, other. These are big and small. Most of these companies are our clients, but not all of them.
There were a few companies that, you know, like Airbnb, you know, they're doing interesting things with their space. We wanted to talk to them, so we did, because we wanted to learn from that. The other thing I would say about this is we did this at a senior level. In some cases, CEO, COO, heads of real estate was probably most common, and senior people on our side did the interviews, including me in many cases. I think it was a great learning exercise. What did we learn? We learned some things that were comforting, and we learned some things that were challenging, and I'm going to take you through both. The first thing is, I've heard this from every business leader since the start of the pandemic.
In-person work is preferred over remote work, and it's critical for long-term business success because of the collaboration benefit, the efficiency benefit, the onboarding benefit, the cultural deterioration that companies are feeling from remote work. Business leaders spend a tremendous amount of time today figuring out how to get their companies more in person. This is as critical a HR management issue as compensation is today, and they're all thinking about how do I get more of it. The issue is the labor shortage, because there are some, not all employees, that want more remote options, and many companies are reticent to be overly prescriptive about in-person work. That's basically what's driving, I think, the remote work phenomenon today. It certainly has been over the last few years. It certainly isn't health security.
One of their strategies for doing this is carrots, not sticks. Certainly, with the companies that are our clients, carrots are a lot more effective than sticks. One of those carrots is great space, being in the best buildings, having the greatest build out, being in highly commutable locations, having a well-amenitized buildings. This is critical. I'm going to talk about it more. The other thing we heard from most of these clients is their headcount grew tremendously.
Even though I heard this multiple times, "We don't know exactly how we're going to work in the future, but we've increased our headcount 25%, 50%, and we're not going to give back any space because we just got a lot more people that we're going to try to have to figure out how to house over the long term." Very common phenomenon amongst these clients. Hybrid work is the most common format being used, and I think it's here to stay. That being, you know, Tuesday to Thursday, Monday, Wednesday, Thursday, whatever it is. Most companies are saying, "You can work. We're going to work hybrid, but we expect everybody to be here on Tuesday or Wednesday," just so that when the employees come in, they get that collaboration benefit.
If you have that set up, it's hard to save space because you need to be able to house your entire workforce at any one on any one specific or specific days. Then the other one that I thought was fascinating is I heard this from a senior portfolio manager who ran an asset management company, and also heard it in a law firm. Senior people expect to have an office even if they don't use it. Part of their social contract with their employer is, "You provide me an office. You know, I may or may not use it, but that's what I expect." Again, that's a tailwind for space demand. What did we learn that was challenging?
I would say particularly in the tech sector, though, most companies, particularly the large tech companies, have mandated or suggested a hybrid work format. Very few of them are enforcing it. It is related to this issue about tight labor market conditions and employee preference for many of those employees. I think this is a big issue. When we think about it by industry, and I'm going to talk about this in a minute, you know, technology is definitely lagging the other industries in terms of employees returning to the office. It's not true of all tech companies, but I think by and large it is. I've talked about the tight labor market conditions remaining. Also, what we heard from smaller tech companies is some of them have gone virtual first. They have no in-person work mandate.
They provide an office if people want to come in, and then they do, team or company meetings once a quarter. People have a lot of flexibility on where they can live. I do think, frankly, a lot of these smaller tech firms, they're competing for computer science engineers and other, components in the labor force. They're competing with these big techs, and I think this is one of the ways that they're doing it, is providing a lot more flexibility to their employees. The other thing that's happening is I talked about hybrid work, and I talked about how it's, all employees come in on specific days of the week. If you have slower attendance at work on, for example, Monday and Friday, you have less foot traffic in cities.
I think local retailers, local restaurants are just not getting the same footfall that they used to get. I do think this is going to drive a lot of urban planning thinking around changing commercial centers to more mixed-use centers. I think New York City is a great lab for this. If you look south of 42nd Street, it's vibrant. Why? Because it's mixed use. I mean, there are office, there's retail, there's apartments. It's all more or less jumbled together, and it's very active. Up until, you know, probably fairly recently, Midtown was quieter because it's a much higher percentage of office buildings, and they just weren't being used in the same way, certainly on Monday and Friday. I think we're going to see a lot of building conversions and a lot of city centers going to mixed use.
The other big thing that's been happening is support functions like IT, HR, and accounting. They are much more remote. Even at Boston Properties, we've provided a more remote opportunity for our employees that are in support functions. Also, by the way, companies have different employees in these different categories. In other words, many of the big banks, all of the traders, investment bankers, and so forth are in most of the week, if not all of it. All of the support areas, this could be 50% of their employees are working in a more flexible format. I think one thing that's interesting to do, and I did a little bit of it in my remarks, is just break this down by category.
Industries, who's in, who's out, or who's leading and who's lagging. Financials are much more in. I mean, those of you that are from New York or been in New York recently, particularly post-Labor Day, it's much more in. As I mentioned, tech is out. I talked about the job function. This is an interesting one, seniority. Leadership is in trying to set an example. Entry level is in because they experienced remote college and figured out how lousy it was, and they want to be in the office. The issue has really been the mid-level. It's those employees and professionals that know enough to be able to work remotely, to have clients, to have skills. Maybe they're at a point in life where they have small children. It's a bigger issue for them to come into the office.
That's what I hear over and over is the challenge in terms of bringing people back. Locations. All the global heads of real estate that we talk to, outside the U.S., people are much more in the office. Why? I think it's because the unemployment rates in those countries is much higher. I think that's fundamentally what's going on. In the United States, we've got an increasing dichotomy here that the East Coast is more in than the West Coast in a general sense, and that's because of the technology trend primarily. Okay, what has been our experience? These charts represent BXP's badge swipes. By the way, we only really have good data on 10 buildings that are in Boston and New York. What is this saying?
It's saying that, we are achieving post-pandemic highs in terms of people coming back to the office post-Labor Day. We're hitting those right now. That's not surprising for those of us that commute on trains or experience our cities. That's what it feels like. We're at about, on a peak day, we're about 60%-65% of where we were, before the pandemic. The other thing is, that I've talked about, is what's the work pattern during the week? If you look at this chart on the top... By the way, it's not to scale on the Y-axis. What this tells you is Tuesday's the peak day, Wednesday and Thursday a re close. Monday is 30% down from Tuesday, and Friday is 60% down from Tuesday. That's the work pattern that we're seeing in our offices. Okay.
I wanna turn a little more philosophical for a minute on this topic. The one thing that I hear sometimes that drives me crazy is, you know, we are so much more productive working from home or working remotely. I've heard that for a couple years now, and it never really struck me as accurate. That's not what these numbers suggest. What these numbers that I'm putting up here are U.S. labor productivity over, you know, back to 2018. What it's showing you is that the output per hour worked is actually dropping. It looks like it's starting to drop at a more accelerated pace over the last couple of quarters.
I think work from home, and look, these are labor productivity numbers, and economists that are a lot smarter at this than I am could come in and argue there's lots of other different things going on. I'm convinced remote work is contributing to this. I'm convinced remote work is contributing to a lot of the service disappointments that we are all experiencing in our daily lives. I don't think the remote work phenomenon is good for the country. Here's some math around why that's the case. Then, to turn even more philosophical for a moment, let's turn the lens here away from employers and turn it to cities and the country and to workers and ask ourselves, is remote work for them?
What has been interesting and heartening to me is over the last several months, there's been actually a lot of what I'd call more cultural articles written on this topic. Some of these we've tried to capture here. Peggy Noonan talking about how remote work is hurting our cities because people aren't coming back and populating them. The New York Times questioning, can you be successful in your career if you're working remotely? Can you get promoted? The Washington Post talking about, well, if you're working remotely, why isn't your job getting offshored? Good question. Larry Fink thinks that we're gonna solve inflation by getting people back to the office because he's looking at the same productivity numbers that I just showed you, and he's been vocal about that. Malcolm Gladwell has been out recently saying, "This isn't good for you, worker.
It's not good for your mental health. It's not good to sit at home looking at a computer screen all day. Get back in the office, be with other people. It's better for you, it's better for your career." Then, I mean, MIT even questioning is remote work really good for innovation? Again, these things are hard to quantify, but I think they're important, and I'm delighted that the world is waking up to them. Okay, to just bring this section to a close, in terms of client preference, I do think in-person work will continue to increase. Technology industry is lagging. High quality workspaces are critical. Hybrid work and more flexibility will survive long term, but it won't be a pro rata impact.
I think as labor market conditions loosen, I think that'll even drive more people back to the office. In-person work is positive for productivity, mental health, and I think the health of cities. Let's move to what I call the premier workplace markets. About six months ago, we were seeing two things. We were reading research reports that said our cities were 20% vacant, and we were leasing lots of space at pre-pandemic levels. We said, "How can this be? This has never happened." We went to CBRE and said, "You guys got to quit printing this research that's not useful to many people and start putting together something that is.
Our suggestion to you is you should break out what we would call the premier workplaces. They agreed, and they went to their, you know, industry leading leasing brokers around the country who identified those buildings in those cities that their clients wanted to lease. Are they newer? Yeah, but they're not all new. You know, it was, I think it's important. I've seen these research reports that are just on age. That's important, but that's not the only marker. They were asked the question, "What buildings do the tenants wanna lease?" What they did is they identified across our five CBDs, 279 buildings that we would call premier workplaces, and that's out of 2,200 buildings.
If you add all that up, it's about 17% of the space out of 700 million sq ft. What we think is emerging is two businesses. There's the premier workplace business, where BXP competes, and there's the overall office business. They are different, and they have different operating characteristics, which I'm about to take you through. If you look at this, the premier workplaces across our five CBDs, this is direct vacancy as of June 22nd or at the end of June, which is the second quarter of this year. It's 7.9% vacant. The rest of the market is 12.4% vacant. That's a 50% higher direct vacancy rate for the non-premier buildings versus the premier buildings.
If you dig into some of these cities, San Francisco is a double. It's more than double, the vacancy rate. Seattle is nearly double. A huge difference. You know, in the traditional office business, if you were 10% or less vacant, that is a pretty healthy market condition. I think the other interesting thing to look at, I always like to look at, is net absorption in these two businesses. In the premier workplace business, the net absorption over the last six quarters has been slightly negative at 0.7 million sq ft. By the way, this was a big sublease done by Amazon in Seattle, which drove that number down. Otherwise, it would've been flat. If you look at the rest of the market, it gave back almost 16 million sq ft.
The premier workplace business is performing very differently from the rest of the office business, and this data proves all that. By the way, I could have put up a lot of other data about this too. We have asking rents. There's a widening gap in that area as well. You know, it's very clear what's going on. Then we asked CBRE, we said, "Okay, now tell us how we did. Tell us about our buildings. Where does our portfolio stand?" If you look at this, we have 45 million sq ft in service. Seventeen million is suburban, so there's 27 million that's CBD. Then if you go down and look at the bottom. We didn't do suburban, we only did the CBDs.
If you look at the CBDs, 89% of our space, they deem to be in the premier workplace basket. By the way, two buildings we're converting to premier, so 360 Park Avenue South in New York and Safeco Plaza in Seattle. If you add those, which they will be when they're finished, we're at 94% of our CBD spaces in this premier workplace segment. That is very important as you think about investing in our company, because, again, I would suggest to you that you're not investing in the office market, you're investing in the premier workplace market, which has very different operating characteristics than the overall office market. To prove that this is true, you're gonna see this chart about three times today. This is our leasing.
We're leasing space at pre-pandemic volumes, even when you take out the development leasing. You're gonna see it again, because again, it's proof of what I'm saying. Last thing I wanna talk about briefly is the capital markets for premier workplaces. It's hard to break this out, but we did get some RCA data on office transactions over $100 million. $100 million is a pretty big deal, and most of those assets are certainly higher quality. The answer is yes, there is liquidity for this segment. Look at 2021. I think the remote work issue was greater in 2021 than it is now, and look at the sales volumes that occurred for office transactions.
Then, if you looked at the first half of 2022, it was actually greater than the first half of 2021, if you look at those two quarters. Cap rates have been coming down. I will say since the 10-year has shot up to 3.5, things have changed. There is fewer transactions going on, and I do think cap rates have been modestly impacted. But again, there is liquidity. There are investors that are interested in investing in premier workplaces. We just demonstrated this. I think the best example of what I'm saying is what happened at 601 Massachusetts Avenue. We just sold it for $1,100 a foot and a 5.1% cap rate, and that just closed in August. That was post the rise in interest rates.
I put a couple of other deals on this list. I admit these are older, and they were done in a pre-interest rate rise environment, but they were all done in the mid- to low-4 cap rate range. Again, interest. I do think the capital markets, as well as users, are very interested in premier workspaces. Given all these three trends that I talked about, what strategic shifts are we making as a company? The first thing is we intend to embrace and leverage our market position as the leading premier workplace builder, owner, and manager. I just. I'm only gonna say it once, but I'm gonna pause for a minute because I think this is really important.
We're embracing what we do, and we believe in it, and we think this environment is gonna create a lot of opportunities for us. Why is it an opportunity? One, we have the premier portfolio. I told you about the CBRE data. Doug's about to give you 45 minutes on it. We're gonna do a deep dive on this. We have an amazing portfolio of assets. We love our markets. If you look at knowledge workers, all the major categories, four of the five cities we're in is the top employer in all these knowledge market categories. We believe in them, and we think they're gonna and they're large, and they're gonna create great opportunities for us over time. We're a development company that happens to be public. The development DNA at Boston Properties or, excuse me, at BXP is extraordinary.
Hopefully, that comes out as you meet all of our talent over the course of the day. We deliver on time and on budget at attractive yields, $1 billion-$2 billion of developments every year. We've got a great pipeline of new ones to come. Our client base is extraordinary. Interface with clients is more important as they are trying to put out carrots for their workforces. Development of headquarters facilities is very franchise-oriented. That's gonna help us. All of our clients are more interested in sustainability, and I know a year from now, they're gonna be even more interested in it. We have a leading practice in sustainability that's geared towards having us be more sustainable, but also advising our clients on how they can be as well. You're gonna hear a lot about this from Ben Myers.
We have $17 million of development sites already under control. That's number 1. Number 2, we are always what I'd call polishing the apple. We are always refreshing our portfolio. Here are the numbers back to 2010 on acquisitions and developments and dispositions. We're building new, we're buying new. We're buying things and making them new. That volume is $1 billion-$2 billion a year, depending on the year. We're always refreshing. We're selling. We're selling our older assets. Why do you think that CBRE says that we're 94% in the premier bucket? Because we sold a lot of stuff. You know, buildings evolve in their cycles, and we've been very actively doing it. We just didn't start it. We've been doing it for years.
If you look here on the left, you're seeing kind of an upward trajectory in asset dispositions, and that's gonna continue. You know, we're still working on our plans, but our bar has been raised for quality. The market has raised the bar for quality, and I think you're gonna continue to see a very active disposition program from BXP. Let me talk about the triple A's. The triple A's are attractive, actionable adjacencies for BXP. The first one is life science. We're gonna talk about it. We made a wonderful announcement this morning to further build out our life science business. We have a demonstrated long-term track record in this business.
We have over 9 million sq ft of projects that we either can build or projects that are under our control or we're in the process of developing or redeveloping. By the way, this is critically important. I mean, Boston BXP is the largest landlord in Boston and in the Bay Area, and together, those represent about 45%-50% of all the lab space in the country. We're already set up in the right places, and we have the right raw materials to continue to grow this business. You're gonna hear a lot more about this from Dave Provost this afternoon, so I'm not gonna get into it too much. We have an amazing client base that we have good relationships with. They're in 3.4 million sq ft of space.
We also have been increasing our resource commitment to this area. We have a dedicated life science team that manages our buildings and generates new client relationships and new business. We have an external life science advisory board that's populated by two senior doctors in the industry, and they've been extraordinarily helpful to us in understanding the dynamics of the business and understanding the science behind several of our clients. This is the second triple A, attractive, actionable adjacency, and it's our residential business. We've been doing this for nearly a decade. You see all the projects that we have here on the upper right, over 2,000 units. By the way, this excludes The Avenue, which we built in D.C. and successfully sold.
We are doing this as part of our mixed-use developments, and we're doing it on a one-off basis as well. If you cap the NOI on all these buildings at 4%, which is about where the cap rate is for this industry now, all of these projects are profitable. That's very important. It gives us confidence to continue to grow this. Then if you look at the future, we have sites under control. That's another 2,800 units that we will commence over time. I talked earlier about growing mixed-use opportunities in our cities. This is gonna play right into our capabilities 'cause we know office, we're starting to spend more. By the way, the market is spending a lot of time on conversions. This isn't something that's going to happen. It's something that is happening, and I think we can participate in that.
Also, we are starting to work in this business with private equity investors. We just launched a major development called Block D, gotta work on the naming for that, in Reston, and we brought in a JV partner for that. I think we'll be able to extend our capital reach more in that segment, in this residential segment. You're gonna hear a lot more about this from Rich Ellis this afternoon, so I won't get into it. We're going into an economic slowdown. I gotta talk about risk mitigation. First thing is, we have been building a very capable private equity business within BXP over the last decade. If you look at this chart showing our JV income stream in 2013 versus 2022, it's nearly doubled.
By the way, it's a little bit understated because the green is 100% owned and the blue is joint venture interest. If you looked at it on a gross asset basis, the blue piece would be much larger. I couldn't be more proud of the firms that we are working with, the investors that we're working with at the bottom of this chart. These are some of the largest, leading, most sophisticated real estate investors in the world, and they've said, "We wanna work with BXP and make strong returns for our constituency," in their deals. They're doing it, and it's helped us mitigate our risk and also expand our reach without having to raise equity. We're gonna continue to work with these investors and make money together.
The other risk mitigation things that we obviously are thinking about on new development, on office pre-leasing requirement and/or partnership. You know, I mentioned we had 17 million sq ft of sites. Not sure you're gonna see us buying a lot more development sites. Of course, we'll always have a strong eye on our leverage and maintaining our premium ratings that we have in the company and maintaining our strong balance sheet. Just to bring all this together and leave a little bit of time for questions, let me just summarize, I think, what, hopefully, the takeaways that you all have. One, we think well-located premier workplaces will continue to be attractive to users of space and capital providers. Feel very strongly about that.
Second, BXP has the team, the execution capability, the assets, the market positioning, and the client relationships to be successful in the premium workplace business and to build our market share. Third, we have actionable adjacencies, which you're gonna hear a lot more about this afternoon, that will add to our growth opportunity. We are going into an economic slowdown, so we're gonna calibrate our new investment activity to the U.S. economic environment as it evolves. The last thing that I'm just gonna say is, I didn't say a word about valuation of the company, and the only thing I'm gonna say about that is you need to stay and watch Mike LaBelle's presentation this afternoon because it's fantastic, and he's gonna cover that very carefully, and I think it's very important that you all see it.
Thank you for your attention. I did leave myself a few minutes for questions, and I'll be delighted to answer anything. Yes, sir. Sorry I can't see faces in the light.
No worries. Thanks, Owen. This is Vikram. I just wanted to get a sense, just bigger picture over the next, call it three years. Based on all of this, what's the volume you would anticipate recycling, selling in terms of office assets to make it even more premier? And then just capital investment into the portfolio, what's your sort of what do you envision today over, say, a three-year period?
I heard, dispositions over three years and then capital investment.
That's right.
Yeah. Dispositions, if you looked at the charts I provided this year, we're projecting about $850 million of gross sales. We're still working on our plans, so I'm gonna be a little bit more general. I think that is gonna be more typical of where our volume is over the next three years than what it's been in the past. As I mentioned, we have to. I think the market is forcing us, you know. The good news is at BXP, our founders, if they were up here talking about the company or when they were up here talking about the company, all they talked about was quality. Best buildings, best locations, best cities. That was what they talked about.
We have embraced that and carried it forward, and that's put us in a very good position today. When you own 53 million sq ft and you're adding, you know, we're building another 4 or 5 million sq ft, you know, assets change over time. Some of them are not as premier as the others. We are gonna seek to sell some of those when we can. I think we have to match, however, our own goals for dispositions with the capital markets, because if the capital markets don't Kooperate, you know, we're not gonna be able to sell as much. In terms of capital investment, you know, there's lots of ways to answer that.
I mean, I don't think you should expect the capital investment in the portfolio to be, and Doug may make some comments about this in his remarks. It's not gonna be substantially varied from what it's been over the last few years. In terms of making new investments, it's gonna be very driven by the opportunity set. I mean, what we do as senior leadership is we establish the perimeter and the strategy, but the actual deals are opportunistic, and they come up from the regions. You know, sometimes we might say, "Well, we'd rather, you know, allocate capital to this region, but we like this deal over in this region better," because the numbers work better. We're just gonna do that.
I think the answer to the second part is, you know, what's the opportunity set that presents itself? Look, I think if you go through those factors that I mentioned, economic slowdown, evolving customer preference, prototypical focus on premier workplaces, there's gonna be some changes going on in the office business, and I think it's gonna present for BXP. Yes, sir. Alex.
Thanks, Owen. A question overall. You know, clearly tenants, you know, using one of your competitors, SL Green's One Vanderbilt.
Yeah.
Clearly, competitors will pay premium prices to the market for new construction. Certainly, you guys benefit from your pipeline that has that.
Mm-hmm.
At the same time, as we've seen in New York, when you get a bunch of new supply, the rest of the market goes slack.
Yeah.
I don't think we're debating the ability for new building to get the rents, but obviously, you know, the bulk of your building are existing assets. Do you see the ability for you guys to really grow rents if everyone is increasingly going for new product, which leaves a lot of generic-
Yeah
Space empty, even if it's, you know, older space that's technically not competitive, tenants still use that, you know, when they're doing comps to say, "Hey, it gets cheaper here," what have you. What do you see for the overall existing portfolio and the ability to push rents?
Yeah
When you have sort of this stagnant market where product is falling out of favor, you have new supply that's creating Swiss cheese from older buildings, et cetera.
Yeah. It's a great point, and I'm glad you raised it because for those of us that have been around doing this for a while, when do you remember office markets being 20% vacant and lots of construction? That didn't happen before. That was because clients were much more fluid about looking across the whole market in terms of where they would take space. Hopefully, what I demonstrated in my remarks is that's changed. The clients that we're serving are focused on the premier workplaces, which are, at least according to CB, 17% of the market. That vacancy is about a single-digit number, and that's why you're seeing construction, because construction's only competing with those premier workplaces. Alex, to answer your question, we're not operating in the. You know, there's 400 million sq ft in New York.
We're not operating in that market. We're operating in the premier workspace segment, which I think according to that math was, like, 9%. That's where our buildings are. I think right now, it would be very hard for me to say, given the recession that we may or may not have, that we're gonna be able to push rents in those buildings. I think over time, as we come out of the recession, I think our buildings, according to CBRE, are in that premier workplace segment, and I think we will be able to push rents. It's not right now, and it's because of the economic environment. Yes, sir.
Thanks. It seemed like you're more cautious on the West Coast markets relative to East Coast. I guess to that end, you know, why does it make sense to expand your presence in Seattle, you know, as an example?
Yeah. Well, I would say that, a couple things. I think that I know I put the basket of the whole thing as West Coast, but I do think the Bay Area in California is probably slower to return to the office than even Seattle. I also believe, given that I think future is about technology and innovation and, there's not as much life science in Seattle. I mean, if you look at the computer science workforce, you look at the employers that are in Seattle, I just think it's a kind of market where talent is gonna wanna be over the long term, and we believe in that. I
Basically, what we did this year is we allocated capital out of the CBD of Washington, D.C., not the region, but the CBD, and we put it into Seattle. We all, as a management team, have more confidence that that capital is gonna grow at a greater rate in Seattle than it will in the CBD of Washington. Yes, you had a question? Yeah. Yes, you. Well, we have great companies. You saw Google. You know, I think if Google came to us and wanted us to build a building for them and they wanted to take more space, of course, we would be interested in it. But I do think we're gonna have to be more cautious in thinking about taking any kind of speculative risk in the portfolio that's geared towards the technology segment.
I think, look, those companies are going through a lot at the moment. You know, their advertising revenues are under attack. They've hired a lot of employees. Their growth is slowing. They're experiencing things that they have not experienced before. I think that's really gonna be the key thing that we all need to look at, you know, as real estate investors in lots of different segments, is how are those companies gonna respond to it. That's a good question. I would love to keep answering, but I'm out of time, and I wanna leave time for all the great presentations from my colleagues. Thank you very much.
Please welcome Doug Linde, President.
Hold off until the end of the day, because I actually have some good answers to some of the questions that he asked for, Alex and you, Laura. Where is that clicker? My job this morning is to try and ground us all in what the BXP portfolio is today, what you own if you're a shareholder, what you will get when you purchase our shares. Hopefully, through a series of charts and pictures, illustrate the premier workspace thesis that Owen was just describing. I have to sort of pause, though, and give you the appreciation that you're gonna hear from Owen, you're gonna hear from me, you're gonna hear from Mike, you're gonna hear from our regional executives when you sort of do the part of the presentation that follows me.
We have 750 people who are the folks that are executing every single day, and it's their ingenuity and it's their commitment to their clients, and it's their creativity that is the foundation of who we are and what we do. I just hope when you leave here this afternoon, you're gonna have a strong appreciation of the breadth and the depth of the talent at BXP and why I think we distinguish ourselves as both a developer, an operator, a manager, a leasing companion, and a great client service organization, because that is what we are all about. We are all about serving our clients and ultimately being profitable in those endeavors. Owen did a great job of describing the BXP opportunity. Go back for a minute. There we go.
I wanna just sort of pause for a minute and give you the perspective that we are in an economic downturn, and the company has worked for decades to position itself to be responsive and prepared for economic downturns. We can handle these things. We've handled them before. What we are going to see over the next six-eight quarters is nothing that we have not experienced before. I hope that you have a perspective, when you get through my presentation, that we are in a great position on a relative basis to weather what will be likely a quieter, stormier environment than we have been in in the past. Now, I am not gonna spend much time talking about any market conditions this morning.
You hear about that on our calls, and you're gonna be exposed to the regional teams, and I'm gonna let them describe for you what's sort of going on on a minute-to-minute basis in their markets. I don't think, quite frankly, you're gonna see or hear much that's different than what we spoke about on our last call in July. I'm gonna start with sort of our portfolio. I think based upon the questions that we get every quarter, and, you know, Vikram asked a question about sales, that there's some degree of an expectation that we have a very static portfolio. I don't think that is really the case.
In fact, if you go back to 2017 when we had our last investor conference, and you look at where we are today, let me sort of give you a perspective on where we were. We now have both our West L.A. and our Seattle portfolios. That's 4.5%. Boston has gone from 31% to 34%. New York has gone from 31% to 27%. These are all NOI numbers. San Francisco has gone from 18% to 20%. Obviously, Salesforce Tower's construction was the big additive there. Our D.C. portfolio's gone from 21% to 14%. As Owen said, we have grown in Reston, and we've reduced substantially our CBD exposure.
I think, as Owen said, we're gonna continue to tinker with the portfolio, and you should expect to see incremental additional changes as we move forward. Let me jump into the regions and give you a perspective on what we are and where we are. All of this information is on these slides, and Helen, these slides are all gonna be available, I think, tomorrow or Thursday. You don't have to write all these numbers down. You don't have to worry about how quickly I'm moving through them. I think it gives you a good perspective on what we are and where we are. Boston is obviously dominated by the Back Bay and Cambridge, followed by our suburban portfolio and then the CBD.
As I move through these slides, I segmented things sort of on both a square footage basis and a lease expiration basis, 'cause I think that's what people are most concerned about, which is what's your exposure as we move into the next six quarters. I think this will give you a pretty granular view of that. Here's our Boston portfolio. As you can see, it's very well leased. If you looked at our expirations for 2022 and 2023, it's about 8%. I can tell you, and you'll see later, the vast majority of that's already been committed. In Cambridge, I wish we had some space to lease. There's some pretty exciting news we announced this morning.
On June 30th, when this slide was originally put together, we had 60,000 sq ft of lab space in Cambridge, 60,000 sq ft. You see here that we have 578,000 now. We did two things that were announced this morning. The first is we purchased a building, 125 Binney Street, which is a 270,000 sq ft building, fully leased, 100% leased to Biogen for the next 6.5 years. Second, we terminated a lease on 300 Binney Street, which is a building that Biogen leased, and we have leased that building to a very prominent life sciences organization who will probably be making their own announcement over the next few days. We're gonna sort of hold that tight in terms of our client relationship.
The perspective is, I think there was an article in The Globe that rents for life science in Cambridge are in excess of $115/sq ft. I'm sure Dave Provost was a little bit more bold with his views yesterday when you guys went to Cambridge and talked about rents. I'm gonna... You know, I'll get to sort of what the rationale was for recapturing that building and the incremental return that we're gonna get on it, and why, as an organization, operationally, we can create value, and we can put additional capital to work in a very slow economic environment. Our suburban portfolio is a more granular portfolio, and I've sort of broken it down into three components.
You have our traditional workspace buildings, I don't use that O word anymore, which are concentrated on the inside of Route 128. We have our lab buildings, which are on the outside of 128. The sort of you know the secret sauce, if you will, for our life science expansion in the greater Boston market is we have a number of what were great locations for office space, so no longer what we're in, we're in the workspace business now, that can be converted at our discretion into laboratory buildings. Now, obviously, we've you know started that process with a building that we'll talk about in a few minutes, 880 Winter Street. We're doing two additional developments today that could have been office buildings that are now lab buildings in greater 128.
If I use 200 West Street as sort of an example of what we've done, we took a former office building, now a workspace building. We converted 120,000+ sq ft to lab space. We leased it to a company called Translate Bio, who was then acquired by Sanofi, so we got a great upgrade in our credit. We've got another space that we recaptured. We've signed a lease with a life science company for that space. We have spaces that will be rolling over in 2024. Our intention is to take those spaces and convert them to lab space. We have the ability to build another 120,000 sq ft of lab space on that site.
To give you a sort of a perspective on at our discretion, we're in a position where we can move and migrate our portfolio into the life science world. We also, and I think this is sort of the theme that I harped on five years ago when I stood before you, is we continue to reinvest and invest in our portfolio. Last time we talked, I talked about the things that were going to be happening and the things that were ongoing. Well, the vast majority of that work is done. We continue to spend money on systems and upgrading sort of bathrooms and lobbies and corridors on a consistent basis. Big picture, we are investing somewhere between $2-$3 a sq ft across the portfolio every year.
You know, for a 50 million sq ft portfolio, that's $150 million. Then occasionally, we have a larger, more meaningful project like, you know, putting a new skin on 399 or doing a major amenity center at the General Motors building, which obviously are on top of those dollars. Our theme is we continually are reinvesting in both the inside of the buildings and the infrastructure as well as the amenitization and the positioning of these buildings. If you visited the Prudential Center yesterday. This is not working real well, Helen. Maybe we should just point it at the screen. We have a whole sort of series of photos here of the things that we've been doing. This, for example, is 100 Federal Street.
We have a repositioning that we did 100 at 140 Kendrick Street, which you'll hear about a little bit later, where we created what we refer to as the Exchange, which is an amenity center. This was a 380,000 sq ft office building that had a 100% expiration in November 2022, and is basically 90% pre-leased today. If we move into New York City, here's our portfolio there, again, on an NOI basis and a square footage basis. I should make one comment about the numbers that I'm putting in front of you. All of our square footages and all of our expirations are on a 100% owned basis. Why is that? Why aren't I showing you sort of what our percentage is?
Well, it's because we don't treat a building that we own 20% of or 30% or 40% or 100% differently. Our leasing teams, our operational teams treat every square foot that we have equally. It's just as important to lease a building that we have 20% ownership in as 100% ownership in. Organizationally, we think about all of these buildings as though 100% of the square footage and 100% of the ownership is ours. Here's our breakdown of New York City. As you can see, we have sort of one, I would say, glaring challenge, which is Dock 72. The good news is we have 120,000 sq ft of signed leases that have yet to commence.
With full disclosure, WeWork is negotiating an early termination on 60,000 sq ft that they've never built out. They will be left with about 160,000 sq ft of space in this building at the end of the day. If you pull out Dock 72, and you pull out our Carnegie Center suburban Princeton portfolio, we are 94.3% leased in our Manhattan portfolio. We have invested more capital over the last decade in our New York City portfolio than any other region by far, and we effectively sit with brand-new buildings.
You know, Alex, when you're talking about new versus what I would refer to as reposition, we have repositioned this portfolio, and I would argue that on a, you know, relative basis, a building like 399 Park Avenue beats its competition day in and day out. The challenge we have today is a lack of space, believe it or not, in our Midtown portfolio as we sit today. We've done things like investing in The Hugh, which is our new, you know, effectively, culinary hall at the corner of 53rd and third, which sort of adds to the 399 campus, the 601 Lex campus, and the 599 campus. We have new amenity centers going into the General Motors building. We have a new amenity center going into Times Square Tower.
We've put ourselves in a position where we really have what I would refer to as a brand-new portfolio in Manhattan. San Francisco, again, this is the market that's grown. We are dominated by the CBD today. Our opportunity set is really in the suburban Mountain View and the Silicon Valley marketplace. Nonetheless, we are what we are, and relatively speaking, we're in great shape. We have modest expirations coming in 2023, which is at 535 Mission Street, and we have a modest amount of exposure currently at Embarcadero Center. Again, from a portfolio perspective, not much happening over the next six quarters.
Again, because our portfolio is so new in California, really have focused our redevelopment efforts and our repositioning efforts on Embarcadero Center, where we've just completed a total redo of 100% of the lobbies at EC 1, EC 2, EC 3, and EC 4. We just put a new bike center into the project, which is probably the nicest bike center in the city of San Francisco. We're working on a new conference center to replace the conference center that, you know, was a great conference center for 15 or 20 years, but really it's feeling outdated right now, and that's a project that'll commence in 2022.
Down in South San Francisco, we have our Gateway project, and we invested in and put together a timber construction amenity building, which is really the gathering place for the life science community in and around South San Francisco. As Owen said, we have our Boston portfolio, which is concentrated in Cambridge and in Waltham, and we have our life science portfolio, which is we're in combination with Alexandria is really focused on Gateway, which is in South San Francisco. We have Washington, D.C. Washington, D.C., 2/3 of what we are is Reston Town Center. Reston Town Center is getting bigger, not smaller. We continue to build buildings. We will be putting into service our Reston Next project towards the end of this year. That's a building that we built for Fannie Mae and for VW.
VW has yet to move into that building. As you heard, we're gonna be doing another residential building. Then we have our Reston Next phases two and three, which is additional units and additional square footage. As we may be shrinking in our CBD portfolio, we're growing in our overall investment in the Washington, D.C. area through our portfolio in Reston, Virginia. As you can see, our CBD portfolio is in pretty good shape. We're making progress. We have very little in the way of incremental rollover again in 2022 or 2023. Here again, we have repositioned the portfolio where necessary. They're smaller buildings. They're not nearly as capital intensive.
We continue to think about how we create conference centers and fitness centers where those things may or may not be up to quote-unquote "current conditions." In a building like Met Square, we did a major repositioning and reinvented the building, which is our building with Blackstone. That building has probably been one of the most successful leasing projects we've had in D.C. in the last two-three years. Then finally, L.A. and Seattle. In L.A. and Seattle, we've grown. There's very little in the way of future exposure, 95,000 sq ft in Los Angeles and, you know, almost 30,000 sq ft, which is virtually nothing in Seattle.
As you're gonna hear later, we're gonna invest in the portfolio, and we're gonna do things like changing the aesthetics of the Santa Monica Business Park and adding parks and places where people can gather. Then in Seattle, it's gonna be a major renovation of Safeco Plaza, and I'm not gonna steal Kelly and Ray's thunder, and you'll hear about that in more detail when you get to their station. What does this all mean? How do you sort of think about this? We have right now about a 89.4% occupancy in our portfolio. As you can see, we have about 8.5% expiring over the next year and a half. We have, sitting with us today, 1.8 million sq ft of signed leases that have not commenced. What does that mean?
It means that we haven't started recognizing revenue. As an example, we signed a lease earlier this week for the former Lord & Taylor space, which is 118,000 sq ft of space. The tenant won't be occupying that building until the first quarter of 2024. That is a signed lease showing as vacant. Right now, today, we're negotiating about 600,000 sq ft of leases, most of which will probably be signed in 2022. One point eight million sq ft of signed leases, 600,000 sq ft of leases that are currently in negotiation. This is the slide that Owen was talking about earlier. Since 2015, we've averaged 1.2 million sq ft of space. The last year, it's been 1.3 million sq ft of space.
If you sort of go back to the beginning of the pandemic, it was, call it 800,000 sq ft of space. What will we lease in 2023? I can't tell you, but I can tell you with pretty good certainty that we're gonna lease some space in 2023. Let's assume we lease 600,000 sq ft of space in 2023 on a quarterly basis. That's 2.4 million sq ft of space. 2.4 million sq ft of space, less 8% rolling over, plus the space that we have quote-unquote, "already committed" and are working on, gets us to somewhere in the low 90s on an occupancy basis. Now, why didn't I sort of put a number down for you?
The reason I didn't put a number down for you is because when you look at my supplemental information, every quarter, you see where occupancy is. When we sign a lease, as I just described, for a building that's gonna be occupied in 2024, it's not gonna be in that number. If we bring a new building into service, as an example, 300 Binney Street will be coming into the portfolio next quarter, and it will be effectively 100% vacant. There's a fully signed lease for a tenant that will be paying rent starting in the first or second or the third or the fourth quarter of 2024. If we pull a building out of service that's 100% vacant, that's gonna reduce our occupancy.
All of these sort of ins and outs impact what reported numbers look like on a quarter- by- quarter basis. If you look at my portfolio today, and you look at the leases that I signed and the leases I'm negotiating, and you look at the static view on what I would otherwise be negotiating and signing in 2023, and Mike will bring this home later, our occupancy is going up. We are bringing more revenue into the company on space that is currently in service today as we move into the end of 2022 and into 2023. Let's switch to our development portfolio for a minute. Yesterday, you all got to see the Prudential Center's new observatory.
This sort of hearkens me back to a conversation that Mike and Helen and I had with an investor right after we got back from Labor Day. We had our first investor one-on-one. We went to someone's office, and they said, "So the markets are slowing down. The macroeconomic conditions are less hospitable. You're more risk averse, therefore, you should be slowing down what you're doing. So how are you going to grow externally over the next number of years? Because if you're not building new assets, what are you going to do? Because you've told us that you're unlikely to be doing much in the way of acquisitions." I said, "Well, let's talk about the Prudential Tower as an example." We've invested $180 million into the View Boston.
I hope everyone got to go down to the 50th floor and look out the nice windows inside that sort of, you know, what we refer to as our exhibition area, and look out and see what the View Boston looked like in 2018. In 2018, 250,000 people paid $22 to go up there and stare out the window and walk around, a carpeted area with no quote-unquote exhibits. We know that in 2019 in Seattle, the Needle did about 1.3 million visitors. We know in 2019 that there were three observatories in Manhattan, and they did about 9 million visitors. You know, obviously Empire State publishes their results, so you can see exactly what was going on there.
There are now five observatories in New York City. We know that about 75,000 people on a minimal basis each day walked through the Prudential Center during an average day in 2019. We know that Eataly is currently doing somewhere between 5,000 and 10,000 visitors on an average day during the week. Obviously, a Saturday is probably more popular than a Monday, but 5,000-10,000 on an average non-holiday week. We know that the Boston Duck Tours are charging somewhere between $35-$45 to go onto their roving tour of Boston. We know that people are paying $15 to get a map so that they can go on the Freedom Trail, which is a free walking trip along Boston.
You saw that there's a food and beverage operation that could be up there. There are two bars. We feel pretty good about the amount of revenue that we're gonna be able to produce and the number of visitors that we're gonna have. I'm not gonna do the math for you because I don't want to be out there quoting numbers before we've even opened up. You can sort of get a picture of the volume that could be done and the revenue that's possible. You know, one of the analysts, I think Danny Ismail from Green Street, put a report out on sort of the average margin on the quote-unquote observatories across the country, and I think the numbers were used between 50%-70% margins.
As you're picking up volume, it's all going to the bottom line. Over the next X number of years, as the tower starts to ramp up, all of this income is going to start to be pushing through and adding to our bottom line on a going-forward basis. That's a way for us to create value. What's another example? I talked about 300 Binney Street. One of the frustrations that we have is that people sort of look at us as a collection of assets, and they don't really value the team and the ingenuity and the creativity.
If an institutional manager was owning, 300 Binney Street, which is the building that we recaptured from Biogen, and they had, you know, five and a half years left on their lease, I think they would have let the lease play out, and they would have just said, "Well, you know, we're getting great rent on that building, and we're just gonna sort of move forward." We looked at that and said, "We think there are some tenants in the market today who would be interested in this building." By the way, when we built this building, we built this building with a lab infrastructure. So that means it has the clear height, and it had the shaft spaces to allow us to immediately convert it to a laboratory use should a user want it.
Our team put two and two together, and they found a tenant who would lease the building, and they figured out a way to recapture the building from Biogen and put ourselves in a position where we could spend $200 million ± renovating a building. At the moment, we're getting about $30 on a net basis from that lease that we had that's expiring in the second quarter. We're gonna, if you know, let's just use, you know, the $115 number. You're talking about, you know, a reasonably large incremental return on a relatively modest incremental investment in terms of total capital dollars.
It's those kinds of opportunities that we look for and try to create through our expertise and our relationships in the markets today that provides us with a way to say we're gonna continue to do things in our portfolio on an ongoing basis as we move forward in what we'd consider to be a slower economic time. There is external growth in our business. Again, you know, here are just our life science opportunities in Boston, right? We just bought 125 Broadway. You'll hear later about 290 Binney Street, which is a 570,000 sq ft development that's gonna get started over the next year. We have leasing that we can do in both 180 and 103, which are our two suburban buildings.
There's a lot of embedded opportunity in the portfolio. We also, as I said, have these conversions. The way we look at these conversions are we can sequence them. We can moderate when we're doing these things. We can figure out ways to open up the buildings relative to the tenancy in them and move our tenants around, maintain that tenancy in the portfolio, and position ourselves to start another series of buildings. Here you have a series of buildings that we have actively been working on to reduce the square footage. In fact, we're trying to terminate leases or move leases and tenants from one building in our portfolio to another building in our portfolio, so that we can put ourselves in a position where we can open up these opportunities as the market avails itself relative to where we think demand is.
We are gonna be thoughtful and cautious, but be able to put ourselves in a position where we can continue to add inventory in a market where we deem there to be strong demand. In the rest of the portfolio, we are in a position where we have high-quality assets that we can target for tenancy. We're talking about 360 Park Avenue, that's under construction. You know, you'll hear about the leasing opportunities there. We have made proposals, and we have been talking to tenants about potentially starting 3 Hudson Boulevard. I mean, it's a big building, so we're gonna need a big tenant commitment. There are tenants that are actively looking for large requirements in New York City that are having conversations with BXP about that building.
In San Francisco, you know that we're under construction with our first site down in at Platform 16. We have two more buildings to build there. That building's not gonna be available until 2025. Who knows what the Silicon Valley market will look like? Who knows where the growth will be from a technology perspective? But I can tell you that, relatively speaking, class A new construction is at an all-time low relative to availability in the Silicon Valley. That's where companies want to go. As we get closer and closer, and we're in a position where we can have a definitive timeframe in terms of delivering that building, we will be talking to tenants about occupying that building and potentially taking additional space, 'cause it's an opportunity for growth.
Then in Washington, D.C., we're working hard on this next development in Reston, and our team is actively looking at the sort of next phases of Reston Town Center for both a residential as well as an office construction. You know, as you probably heard in our comments over the last couple of years, you know, we faced, you know, over 1 million sq ft of available space in Reston, Virginia, in 2020. Through, you know, incredible perseverance by the team and good product, that workspace was all leased. We're in a position where we have relatively little, as you saw earlier, exposure in Reston, Virginia.
As tenants are looking for new opportunities to house their employees, and with the likely opening of the Metro finally, Reston will continue to be a more attractive location from a commuter perspective. We're in a position where we can capitalize on new solicitations for demand for great workspaces. Finally, in California, in Los Angeles, we have the Santa Monica Business Park. The Santa Monica Business Park is a really interesting opportunity. We have 47 acres, and it's not gonna be developed in 2022. It's not gonna be developed until 2024. But who knows when we might be able in a position to start a building in 2026 or 2027 or 2028. This is a development that's gonna be decades in the making.
When you have a 47-acres parcel, you've got to go through a major redevelopment, replanning, entitlement, conversation with the communities and with the city and with all the constituencies. Clearly, the highest and best use of this land are not two and three story buildings with surface parking lots. We are in the midst of beginning a major planning effort to begin thinking about how we can reinvent this 47 acres. It's gonna potentially provide us with residential, with retail, with office, with other types of uses that will put us in a position where we can create tremendous value over a long period of time. In the short term, we actually have a site ready to go in El Segundo, Manhattan Beach on the Rosecrans Corridor, and we're actually making proposals to tenants today.
Again, there are tenants who are looking for high-quality workspaces right now, and we're in a position where we can capture those. You know, obviously, the economics have to be right and put ourselves in a position where we can have strong pre-leasing to get going with these projects. Why do we do this? We do this because we're trying to create value. I'm gonna sort of harken back to 601 for a minute. We started that building in 2013. We actually purchased the land in 2009 from National Public Radio. 2009, so 13 years ago. We built the building. We stabilized it in the mid-sevens. We just sold it for $531 million.
A $300 million cost basis, so about $227 million-$225 million dollars of value. We've created a 9.5% unlevered IRR over a 13-year period of time. That is value creation. That is what we do. That is why we are in the development business. That is how I think we drive shareholder value as an organization. To summarize, we have an iconic portfolio, a really, really well-positioned, well leased or well occupied portfolio that is going to be able to move its way through the next number of quarters in a very moderate way, with not much disruption to our revenues or to our earnings. We are positioned as an operating company to deal with these types of markets. Our property managers know how to manage costs, even in inflationary environments.
Our leasing teams understand how to get in front of lease expirations. They understand how to solve clients' needs. We're in a position where we can truly maintain our occupancy and grow our occupancy during a very challenging macroeconomic time. We can find ways to create value and do external growth, even in a softer market. Tenants come to us and ask us to make proposals for buildings that we currently control, where we can build and provide them with a great workspace for the future. Finally, creating value is what we are all about and what we want to do every single day. I'll stop there and take questions. I can't see the hands, so John, if you want to just give the mics to people.
Hey, you got Ron Kamdem from Morgan Stanley. Just two quick ones. Going back to your the leasing chart and sort of the activity, maybe can you comment on sort of concession trends in terms of free rents, TIs and LCs that you've seen sort of over the past 12 months, is number one. Then the second one was just going back to that CBRE study, which was really interesting about sort of the premier office. Can you comment on the capital intensity, though, of those assets versus the rest of the market in terms of, you know, CapEx per foot or CapEx per NOI? Just sort of any sense of how those premier assets stack up to the rest of the market. Thanks.
I'll answer your second question first. My view of these premier assets are they're in sort of two categories. There's the new stuff, right? Salesforce Tower, as an example, which is a building that's, you know, under 10 years old and really is not seeing much, if any, capital reinvestment because it's just not necessary. I would describe, you know, the Hudson Yards buildings and 425 Park Avenue and One Vanderbilt, that sort of portion of it. Then there are buildings that I would describe as either having a continual reinvestment or a major fundamental repositioning. You know, a building like 399, where we spent, you know, a significant amount of money redoing the facade and redoing the interior systems.
601, where we at one point put a new lobby in the building and then put this new culinary food hall in the building and paid major attention to the amenity, amenitization of the environment, those types of buildings, and those are very capital intensive. Those are what I would refer to as generational projects. You might do one of those every 25 or 40 years, depending upon the life of the building and where the leasing was. It's sort of, I'd say, sort of characterize it that way. Relative to leasing trends, it's an impossible question for me to answer on a macro sort of average basis, because it really depends on the marketplace.
In general, there is more free rent and more TI overall going into a lease in 2022 than there was in a lease in 2019. Two things have gone on. One is a lot more supply, right? Every one of the markets in the country, without exception of, you know, maybe Cambridge, you know, in the life science world, has got a vacancy rate that's, you know, probably double digits. Therefore, there's just more concession money that needs to be sort of pushed around. Two, inflation is real when it comes to construction costs. I mean, real.
What might have cost $175/sq ft for a great installation in 2016 or 2017 is probably not exaggerating, $250/sq ft today, both because of the shortage of talent relative to construction labor as well as materials. There are two sort of things with that, part of that materials. One is there's no longer a global supply chain. Where you might have been able to get things from all over the world, now you have one or two suppliers, and therefore you're buying from higher cost suppliers, as opposed to sort of getting the advantage of the marketplace.
Rich Anderson here, SMBC. The premier analysis focused only on the CBD. How is that? I mean, is there just a lack of premier in the non-CBD, and how is, you know, the environment changed your strategy in your non-CBD portfolio?
We refer to this as a sub-market portfolio composition. Our suburban assets, we actually don't refer to as suburban anymore. You know, I just came through a business planning meeting with our Greater Boston market, and they're calling our suburban markets, you know, our edge markets, right? They're no longer calling them suburban markets. The reason is that you're only 12 miles from the center of the city of Boston. I don't consider Reston Town Center a suburban market. I think it's the urban market of Northern Virginia. Those types of properties are, from our perspective, unique in their positioning. Most traditional suburban office buildings, which is what people, you know.
I think are effectively greenfield buildings or campuses of low height. So they're, you know, two-three stories, and they're typically surrounded by asphalt parking lots, and they're convenient to various interchanges off of major, you know, interstates, you know, in whatever that metropolitan area is. We have, I would say, over time, honed in and gotten tighter with our portfolio. So if you look at my Boston portfolio in 2022, or excuse me, 2012, you would've seen some buildings in Andover, Massachusetts, and Bedford, Massachusetts, some buildings that are sort of further off the trajectory relative to even where we were in Waltham. We've over time, you know, sold off those assets and created clusters, as I described, you know, in the sort of my charts, that are much more highly concentrated.
Our buildings, for the most part, on the inside of 128 at CityPoint, which is where most of our, what was office, but our workplace space is, are relatively new. They're buildings that were either built or totally renovated, you know, in the last 10 years. That's our portfolio. The one other suburban portfolio we have is Carnegie Center. I would argue that Carnegie Center, again, is a unique kind of an asset, and one where we have done major reinvesting in food service, amenitization, conference center, fitness, outdoor activities, and now programming and placemaking from a marketing perspective to change the mentality of how people think about that asset.
One last question.
Hi. Anthony Powell from Barclays. Can you talk more about the 600,000 sq ft quarterly leasing, I guess, assumption for next year? How does it compare to prior assumptions? What gives you confidence in that kind of number, as you go forward?
Yes. What I did was I said what feels like an incredibly low number to me that sort of demonstrates my point relative to where my occupancy is gonna be, honestly. If during the sort of heart of the pandemic, before things started to recover, we were doing 800,000 sq ft of in-service portfolio leasing, and then we, you know, we've jumped over the last six quarters to an average of 1.2 million sq ft, which would be 50% of that. I just sort of said, arithmetically, you know, where would that get us? You know, if I put that slide back up and you look back since 2015, you know, we're pretty consistently close to 1 million sq ft every quarter.
I sort of said, "Okay, I'm gonna be really conservative relative to what might happen and still show you that this portfolio is really well-positioned to improve its occupancy, because one, we have leases that are already signed, and two, only 8% of the portfolio is rolling over in the next six quarters." We don't have to have a monumental lift to be in a better position at the end of 2023 than we are in the beginning of 2022. I'm gonna dismiss everybody. I think there's a short break, Helen. Then if you look at the back of your name cards, it'll show you which of the various areas you should go to to start our regional presentations. Thanks.
Well, you can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. Yes I am, yes I am, yes I am. I'm the man, I'm the man, I'm the man. I believe every lie that I ever told. Paid for every heart that I ever stole. I played my cards and I didn't fold. It ain't that hard when you got soul. This is my world. Somewhere I heard that life is a test. I've been through the worst, but I still give my best. God made my mold different from the rest. He broke that mold so I know I'm blessed. This is my world. Stand up now and face the sun. Won't hide my tail or turn and run. It's time to do what must be done. Be a king when kingdom come.
You can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. Well, you can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. Yes I am, yes I am, yes I am. I'm the man, I'm the man, I'm the man. I got all the answers to your questions. I'll be the teacher, you could be the lesson. I'll be the preacher, you be the confession. I'll be the quick relief to all your stressing. This is my world. It's a thin line between love and hate. Is you really real or is you really fake? I'm a soldier standing on my feet. No surrender and I won't retreat. This is my world. Stand up now and face the sun.
Won't hide my tail or turn and run. It's time to do what must be done. Be a king when kingdom come. You can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. You can tell everybody. Yeah, you can tell everybody.
Go ahead and tell everybody what I'm saying, y'all. I'm the man. Go ahead and tell everybody. Yeah, what you thinkin'? Well, you can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. Well, you can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. Well, you can tell everybody. Yeah, you can tell everybody. Go ahead and tell everybody. I'm the man, I'm the man, I'm the man. Yes, I am. Yes, I am. Yes, I am. I'm the man, I'm the man, I'm the man.
I got this feeling on the summer day when you were gone. I crashed my car into the bridge. I watched, I let it burn. I threw your stuff into a bag and pushed it down the stairs. I crashed my car into the bridge. I don't care, I love it. I don't care. I got this feeling on the summer day when you were gone. I crashed my car into the bridge. I watched, I let it burn. I threw your stuff into a bag and pushed it down the stairs. I crashed my car into the bridge. I don't care, I love it. I don't care. You're on a different road, I'm in the Milky Way. You want me down on Earth, but I am up in space. You're so damn hard to please, we gotta kill this witch. You're from the '70s, but I'm a nineteen chick.
I love it. I love it. I got this feeling on the summer day when you were gone. I crashed my car into the bridge. I watched, I let it burn. I threw your stuff into a bag and pushed it down the stairs. I crashed my car into the bridge. I don't care, I love it. I don't care, I love it, I love it. I don't care, I love it. I don't care. You're on a different road, I'm in the Milky Way. You want me down on Earth, but I am up in space. You're so damn hard to please, we gotta kill this witch. You're from the '70s, but I'm a nineteen chick. I don't care, I love it. I don't care, I love it, I love it. I don't care, I love it. I don't care, I love it, I love it. I don't care.
I love it. You may find yourself living in a shotgun shack. You may find yourself in another part of the world. You may find yourself behind the wheel of a large automobile. You may find yourself in a beautiful house, with a beautiful wife. You may ask yourself, "Well, how did I get here?" Letting the days go by, let the water hold me down. Letting the days go by, water flowing underground. Into the blue again, after the money's gone. Once in a lifetime, water flowing underground. You may ask yourself, "How do I work this?" You may ask yourself, "Where is that large automobile?" You may tell yourself, "This is not my beautiful house." You may tell yourself, "This is not my beautiful wife." Letting the days go by, let the water hold me down.
Letting the days go by, water flowing underground. Into the blue again, after the money's gone. Once in a lifetime, water flowing underground. Same as it ever was. Water the diving and water the moon. There is water at the bottom of the ocean. Under the water, carry the water. The moon. Letting the days go by, let the water hold me down. Letting the days go by, water flowing underground. Into the blue again.
If everyone can make their way to their regional session, we will be starting momentarily.
Into the blue again. Into the silent water. Under the rocks and stones. There is water underground. Letting the days go by. Let the water hold me down. Letting the days go by. Water flowing underground. Into the blue again. Into the silent water. Under the rocks and stones. There is water underground. Letting the days go by. Let the water hold me down.
Sarah will give you that. Sarah, can you ask them which of these mics. There's two mics up here. Just which of the two mics is alive.
There's 2 mics.
You're just gonna pass this?
Right.
Okay. Test. Test.
Yeah. There you go.
Are we ready to go?
Oh, the cool box.
Test, test.
You got two working on this. They're just on.
It's on.
It's different. Yeah. Water. I'm gonna do this one, and if there's a problem with the clicker, I'm gonna be able to advance you. Okay?
Hello.
Hello.
How are you?
Good. How are you?
Good.
We're just the both of us.
Yeah.
Sitting down here.
We can have you speak, though.
No, it's all good now. Thank you.
Thanks for joining us. Are we good? We good to go? All right. Well, welcome everyone to the Hub on Causeway, America's most successful vertical village. This is Boston's most sustainable three acres, and we're just so proud of it. Loved having you all tour it yesterday because it's very indicative of what we're doing at Boston Properties in the Boston region. Very focused on activity-based space and becoming the expert in each category. Today, we're gonna give you an exciting presentation about what we got cooking in Boston. You saw some announcements this morning that have been in the works for over a couple of years, and it really is also a reflection of our strategy in Boston. Several of you I had a chance to talk with yesterday, and what is the difference about our strategy in Boston versus our competitors?
It really gets to this notion that we are an infinite player in Boston. We keep going. 99% of our competitors are finite players. We compete against them on one project. They build it, they sell it, they're on. That's not our strategy. We continue to dig deep in each of these sub-markets that Doug talked about today. Today, we're gonna hear from Dave Provost, our head of development. We're gonna hear from Pat Mulvihill, our head of leasing, and Giuliana Di Mambro because she has something really special to talk about and that's View Boston. Also, as a footnote, this project, Hub on Causeway, was led by Giuliana, so we're so proud of her. This group that you're gonna see today is also a reflection of this infinite game. Thirty years at Boston Properties or 25. Dave, closer to 30. Pat, 20 years.
Giuliana, 15? 9, 10. There we go. You see the depth of our team as well. With that, I'm gonna kick it off and let our first person up is Patrick.
Yep. Yep. Thanks, Koop. Good morning, everybody. My portion of the presentation is gonna be just a sub-market overview of our three submarkets that you see on the screen here. Gonna go through a little bit of a highlight reel. We talked a little bit about, in the previous session, some of the bigger things that are going on in Boston. We'll do a little bit of more of a deep dive here. We look forward to taking your questions as well at the end. After me, Dave and Giuliana are gonna talk about our development activities in Cambridge and then View Boston, which some of you may have seen yesterday.
Just to orient everybody, I know most of you know this, but our three core submarkets in Boston are the city of Boston, 8.5 million sq ft, Cambridge, which is essentially Kendall Square around MIT, 2.5 million sq ft, and then Waltham is our edge market or suburban market, just under 5 million sq ft, and we'll get into that in detail.
Slide pause.
Yep. Okay, I'll get this. Really quickly on the Waltham market, you've heard us talk about Waltham for many years. It is the established workplace market in suburban Boston. We're spending a lot of time in life sciences in Waltham right now. We'll get into some of the details there. It is very well-performing from an office perspective, it's equally as well-performing from a life sciences perspective. It's become the dominant life sciences market outside of Boston and Cambridge, which is the reason that we're spending a lot of time there.
Our activities in Waltham right now are either ground-up development. We've got two ground-up developments that are under construction right now, and life sciences conversions, which we've completed a couple and we have more in the pipeline. Then really quickly, just to put a finer point on the reason that we're spending a lot of time on life sciences in Waltham is just what's happened with the economics out there. When we started underwriting life science conversions probably two or three years ago, we were underwriting rents in the forties and the fifties triple net. We're now into the seventies, and in some cases, eighties triple net, which you know, obviously translates into great deals. That's the reason we're spending a lot of time on it.
On the office side, you know, most of our portfolio out there is workplace. We talked about it a little bit in a previous slide, but one of the things that we love about Waltham is we're able to control the supply. We're such a dominant player out there in terms of the overall market. We're able to take office buildings out of the market and replace them with lab buildings. We're sort of pulling a lever and controlling the supply in a lot of cases. I'm just gonna go through a quick call, a highlight reel of some of the things that we're doing in Waltham. The first one, this is 180 CityPoint.
This is our largest ground up development in Waltham about 320,000 sq ft, delivering in 2023. It's 43% pre-leased to two very exciting life sciences companies, Dragonfly and Skyhawk. That building is well under construction. The curtain wall is now on the building. The second ground up development that we are working on. Ooh, maybe I missed it here. Sorry, guys. Sorry, we got a fidgety. CityPoint South. This is I would characterize this as future development. This is a 1.2 million sq ft master planned campus over five buildings. This is land that we've acquired over the last several years.
We are not under construction on this just yet, but in the planning phase and marketing it to the life sciences community. 880 Winter Street. This is probably the most recent project that we've done, a total lab conversion. This is a building that was about 200,000 sq ft, and we bought it several years ago. We converted it, just put it into service truly about a month ago. 100% pre-leased. It says 97% there because there's a couple little office suites in there. But from a life sciences perspective, this building is 100% pre-leased prior to completion. Then 200 West Street. This was also mentioned. I think Doug mentioned it. This is the building. Our first conversion.
Converted about 130,000 sq ft of this building. We plan to convert the remainder of it. And then we have the ability to expand it by about 120,000 sq ft as well. This campus, what's important about this is this has become Sanofi's mRNA Center of Excellence, so critically important facility for them for developing vaccines, which is great, a great client to have there. This is our second ground up development. This is 103 CityPoint. Smaller building, about 115,000 sq ft. The unique thing about this building is it has a GMP manufacturing component.
About 30% of this building is gonna house manufacturing for life sciences companies, and we're very active in leasing that right now. That delivers in the fourth quarter of 2023. I'll spend just very quickly on Cambridge. You've heard a lot about Cambridge over the last day or so. Incredibly strong market. Incredibly supply constrained, incredible demand, as evidenced by the announcement that we made this morning. Big pharma expansion like AstraZeneca, Takeda, others continue to expand in Kendall Square with record high rents. We're having a lot of fun in Cambridge and doing a lot of development there that Dave will get into. I'll just point to a couple of these.
We are gonna do a deeper dive on this, but on the left is 250 and 290 Binney Street. The building on the left is 100% pre-leased to AstraZeneca. Dave will talk about the Cambridge residential building that's part of that overall project. We heard about 125 Broadway and 300 Binney. On the left is the building that we just purchased, 271,000 sq ft, as a sale-leaseback to Biogen for 6.5 years. On the right is 300 Binney Street. That's an office building that we developed in 2013. We built it with the intention that it could become a life sciences building in the future, and that is coming to pass.
We terminated a lease with Biogen there and have re-leased it to another life sciences group. That building is 100% pre-leased, will deliver the end of 2024, as a life sciences building. I know some of you may have been on the tour yesterday, but we did finish our Google building. 450,000 sq ft on the left-hand side, 303 and 325 Main Street. Google will occupy that building this fall. That's the latest workspace building that we built in Cambridge. Boston finally, before I hand it over to Dave. You know, this is our largest market. 7.5 million sq ft, eight buildings, very well occupied.
The story in Boston right now is a couple things. It's been talked about, you know, this premier workspace or workplace environment. There are very strong leasing environments in certain segments of the market, and others where it's a little bit slower. What I would say is, there's a significant amount of new supply coming in the financial district. The good news is this flight to quality is developing, and a lot of those buildings are starting to pre-lease. The supply is coming down. The one thing that is unique and we are seeing mostly in our Back Bay portfolio is financial services industry is driving demand. A lot of investment firms, hedge funds, et cetera, that occupy some of our buildings in the Back Bay are the folks that are growing right now.
Significant demand from financial services. I'll run through very quickly some of our, call it, highlights in the CBD. We're here at the Hub on Causeway. Koop mentioned it, our vertical village here. This project is complete. The Verizon tower that you see on the right there directly above us is leased but for one floor. So this building, or this project, is essentially complete. We did wanna mention quickly, you know, we spend a lot of time talking to our clients. Atlantic Wharf, this is a building that we developed, completed in 2011. Wellington Management is the anchor tenant in this building. During the pandemic, we spent a lot of time with Wellington. They had certain goals for their overall footprint in the Boston region.
We ended up doing a major consolidation with Wellington at this building, renewed for 10 years and 550,000 sq ft. Separately from this building, we ended up leasing them 100,000 sq ft in our project in Needham at 140 Kendrick Street. The unique thing about that particular building, and this was very important to Wellington, is we are creating essentially a 100% net zero building for Wellington. Certainly important for us, but also important for our client. Wellington's footprint is actually larger than it was before, but they're in two buildings versus three buildings, and we're their only landlord now in the Boston region. 200 Clarendon Street, mentioned this earlier as well. This is our largest building, maybe our most important building in the Boston portfolio.
It is truly 100% leased right now. This is essentially full of investment firms, some law firms, hedge funds, et cetera. We are planning a very significant capital investment in this building, roughly 35,000 sq ft private club amenities, similar to what we're doing at the General Motors building in New York, which will get underway next year. In the category of future development, this is 171 Dartmouth Street. This building is about 660,000 sq ft, sits immediately adjacent to Back Bay Station, and we're actively working on pre-leasing this building in the market right now. From there, I'm gonna turn it over to Dave, who's gonna do a little bit more of a deep dive.
Thank you.
You got it?
For those of you who were with us yesterday, this is a recap of what we went through. Highlighted in blue is our Kendall Square campus in Kendall Square. Up on the north there is what we call our North Parcel. During the pandemic, we talked about it. We upzoned that parcel for 1.5 million sq ft. We got a couple questions last night on how we did that, so I'd like to touch on that today as well. This is existing conditions. Then this is a bird's-eye view of what North Parcel will look like upon completion of that development, 1.5 million sq ft.
By the way, I do wanna point out at the top you can see 125 behind the Akamai building, and 300 Binney. So you see those synergistic opportunities, adjacencies that both OT, Doug, and Koop talked about. The two lab buildings which I'll dive into detail, 290 and 250 Binney, totaling 1.15 million sq ft, and then the residential tower. In between is a park. Beneath that park is 30,000 sq ft by 110 feet deep. That is a vault that we're creating to house the Eversource electrical substation that was originally planned to be in a residential neighborhood above grade, separating an economically vulnerable neighborhood from its school and park. Not a good idea. A lot of community opposition.
The city officials made an appeal to the Cambridge Development Group entities to have that relocated into the commercial district. We were the only developer that submitted a proposal, and we said that we would create that vault in exchange for 1.5 million sq ft of development rights. That was the genesis of how we came about the development rights. Pat touched on this. 290 on the left is 570,000 sq ft, 16 stories. We hope to commence construction on that this spring. Pre-leased to AstraZeneca, which is great. The second phase, which is shown here, located at 250 Binney. That's 16 stories, 580,000 sq ft. The Cambridge Residential, which we talked about yesterday, 37 stories.
Upon completion, it will be the tallest building ever built in the city of Cambridge. 350,000 rentable, about 440 units. Very similar in quality to Hub50House, if you had a chance to look at that yesterday. We're super excited about that project as well. With that, I'll turn it over to Giuliana.
Thank you, Dave. Welcome everybody. For those who didn't make it to the tour yesterday, I'm gonna talk about View Boston, which is the observatory that we are currently building at the top of the Pru Tower. We are really excited about this project. This image shows we've very much flipped the way the observatory used to be. It used to be the observatory down on the fiftieth floor. There was no outdoor space, and there was a restaurant on the top floor. We have flipped that on its head and really put the observation deck with the big views and the big volumes of glass on the top floor. We've created over 11,000 sq ft of outdoor revenue-generating space. It's the first time that Boston will have had a 360-degree outdoor viewing deck with an observatory.
Then on the 50th floor, we have created an experiential attraction, and we're really excited about that for a couple of reasons. One, we think it's a great draw for both tourists and locals alike. It's another type of experiential entertainment that people can do on a sunny day or a rainy day. Complementing those parts, we have two food and beverage opportunities. Just taking you through the experience really quickly, you arrive on the 52nd floor, and you have unparalleled views of the city. You know, we are anticipating some very heavy volume days, and so we have designed the observatory to really maximize the viewing opportunities for people. We've added these lookouts, which are raised platforms, which will help on a high-capacity day to help people see out and over and get a different perspective.
We also have a variety of photo opportunities located throughout, which provide both fun mementos and upcharge opportunities. This is the outdoor terrace. We're really excited. 7-foot ton of glass going all the way around, so it will be very safe. But again, visitors will be able to experience Boston both indoors and outdoors. You know, we sort of saw it yesterday, but one of the advantages of this deck versus some other ones is that the outdoor space is partially weather-protected. Even if it's, you know, probably not if it's a hurricane, but if it's raining slightly, you can still be outside and see things without getting wet. This is one of the food and beverage opportunities that I talked about. This is on the 51st floor. It's an indoor-outdoor bar.
We're excited about this both, you know, I think as a place to stop and grab a refreshment during the tour, but also we think there's a big market for, you know, evening cocktail lounge type of business here as well. Okay. Yes. Then this is an image of the what we're putting in on the 50th floor. This is a model that we're putting in. It's gonna be one of the largest models in the city, and it will span Boston from Fenway to the Seaport. 32 different projectors will be projecting scenes, seasons changing, major events, and other information onto the model. That will kick off the experiential tour, which will then also include a interactive wall where you can explore the city thematically or by neighborhoods, sort of going from macro- to- micro.
There will be a 260-degree immersive theater experience in the attraction floor, as well as some private event space and another bistro and some merchandise. With that, I think we'll open it up to questions. Oh. There we are.
There we go. These are called stated goals. You probably heard them earlier, but I would like to just tell you why we're so excited. Maybe some of you have had this experience, especially if you're specializing in the REIT field as an analyst. You go to a cocktail party, and everyone here has experienced this where they go, "Oh, we're so sorry, Koop, your industry's, you know, being destroyed." We just go, "Shh." We have never, ever had as much activity as we have right now. It's amazing. I can't believe that you guys didn't gasp when you heard that delta of $100 a sq ft VIG to the positive on 250 bidding. That's $25 million a year new. 10 years, a quarter of a billion dollars coming in.
We are so excited about the things we're coming up with and what we're doing. Dave Provost and his team Giuliana Di Mambro pulled a rabbit out of the hat where we got 1.5 million sq ft in Cambridge, in a market where that didn't exist, put a value on that land. It's been so much fun, and we don't think it's over yet. We are getting greater access to our clients than I've ever seen in my career. Our clients are getting deep with us on strategy. We're spending time on it. Before, there was all kinds of walls between us. The next time we visit with you, we will guarantee you, in the Boston market, we will be the leaders of activity-based space. We will be the leaders of design on workspace in this marketplace, hands down.
The opportunity is just huge for us, and we couldn't be more excited. When you take things like what Giuliana put together, and you toured it yesterday, we can't even begin to think of the many ways we're gonna make money at The View. You just take the normal business that we have with restaurant and retail sales up there and the tickets, of course. We haven't even begun to think of the ways that Rebecca and her team in marketing are going to be able to work on promotion, branding, all kinds of different things. This will be the destination in Boston. You will start your trip to Boston at View at The Pru. This is going to be a real exciting period. The great news too is this team has put us in a position that we are already leading the pack.
The workspace change is not new to us. We've been talking about this for 15 years and many of you have been with us when you visit Boston, heard us talk about the revolution in the workplace a long time ago. We couldn't be more thrilled. We're positioned to go. Going to work is no longer an obligation. It's a destination. We have those destinations and several of you I talked to about this gap that we think is there. We're calling it bifurcation. We're calling it premium, the difference between our space and others. We also like to refer to it as that Apple gap. Apple, when you buy an Apple iPhone, you're paying 2.7 x more than a regular phone.
When you work with us, you're going to get the best workspace there is just like the iPhone, but there's going to be a premium to that. We'll open it up to questions. Yes, sir.
It seems like the lab space has just expanded exponentially in the last year. With everything seems to be flowing very sort of Cambridge into Boston, might as well be East Coast, Cambridge at 148. There's only less Cambridge. I guess maybe some of your thoughts on where you think, you know, as it expanded, you want success or do you think all these submarkets will be successful? Or, you know, where are your, I mean, just some thoughts on-
Yeah, we can give you some comments on it. Let's say these are ours and our teams. A lot of this is being debated right now in the media, but here's our headline. We get back to infinite player. This is a long game. We think we're in the first three innings, Dave, maybe even first inning of a longer game. Now, people will look at Silicon Valley and go, well, anybody could have predicted Silicon Valley, right? Well, there's going to be ups and downs in that. The players that have been participating in California for a long term know that. There's going to be ups and downs. Is there going to be a gap coming up? We think so. We think that there's some extra supply in some very bad locations that could get really hurt.
There's locations that we won't even look at that players coming from outside of our market have taken down for numbers that are staggering to us. The great thing is our position is one, as Doug and Owen mentioned, where we have literally a spigot that we can turn on and off at a very, very low land basis. We also have that in our existing portfolio. Pat mentioned our CityPoint South with our partner, Joe Pasquale. This is another great example. Like this project was a JV, joint venture, with a landowner who held it for many years. Joe built a very successful shopping center next to our CityPoint product, and the gap in between is 1 million sq ft, 1.5 million sq ft that we're developing on that site with Joe. Another great indication.
We're going to do things when the time is right, but also we think we can keep doing this pre-lease game because of the access we're getting to these clients. The life science game is much more like when I was a developer of retail, where you get with the retailer and they'll tell you where they want to be and they tell you exactly what they want. Dave is getting so deep with clients, it's just like being in the candy store and nobody's watching us.
Yeah, I'd like to add to that as well. We're starting to fill it on other developments. We'll be able to talk about that more after lunch. When you're starting from Kendall Square and you talk about the other vacancies under 1% for the new developments. I do agree with Koop. I think the secondary markets will struggle, clearly. We think Waltham, Boston, and certainly Kendall Square will be resilient, will be fine. Starting from such historical vacancy, the lows, we don't see it as we think. We think it'll be very resilient and it'll bounce back. Pat, do you want to add anything to that?
Yeah, no, I agree with everything you said. The only thing I would say is we've been incredibly disciplined in Waltham and Cambridge to only invest in and move forward with projects that we think are going to be successful. We have many of them in Waltham. As we talked about, there's going to be conversions, more opportunities for conversions. You know, we get presented with a lot of opportunities in some of these secondary markets that for a variety of reasons, whether it's the infrastructure of the building, the access to talent, you know, the physical characteristics of some buildings just do not work for life sciences. I think there's been a lot of these developments that have either moved forward or are about to move forward that do have challenges.
In a market that's slowing down a little bit, for the moment, those are the ones that are going to struggle. You know, for us, 880 Winter Street is a great example. That building has unbelievable bones. It's in the right location for a life sciences conversion, and it leased up immediately. I think we have to continue to be disciplined. The reasons that Waltham is very successful from a workspace perspective are the same reasons that it's very successful from a life sciences perspective.
This pipeline advantage with the faucet, call it metaphor, is just so much fun for us. It's something that we talk about a lot with Mike LaBelle and Doug Linde, and you maintain that fortress financial statement, and you do it by knowing when to turn that thing on and when to turn it off. Our competitors just can't do that. Yes, sir.
Given the increasing environmental regulations on Boston and Massachusetts, how much are those costs going to be in your cost premise if these laws go forward? Say, electrification becomes mandatory across your entire footprint. What are the costs?
Yeah. The question is, what's the cost implications to the new regulations that are coming? We're very focused on this. Ben Myers will be able to give you actual statistics, I think, and cost on that, and I'm gonna let him do that in his presentation. I would comment on this. We're ahead of the game on all this in terms of our existing assets. We've been working on efficient technology in all these buildings continuously. The great example that we didn't highlight yesterday in that cost of the View Boston number is also cost that we put on all new chillers in that building. It's crazy. We went from, like, 30,000 feet of chillers down to 10,000 sq ft. We continue to do that in all our buildings.
We're gonna stay ahead of it, but it is a real important thing that we don't think the marketplace is dialing in. You combine federal with state with city, there's gonna be a rude awakening for a lot of players who have buildings that they have not anticipated this shock, nor are they gonna be able to make the investment in. Again, that's gonna just enhance our Apple gap multiple. Okay. Thank you for joining us.
It's a party in the USA. Get to the club in my taxi cab. Everybody's looking at me now. Like, "Who's that chick that's rocking kicks? She gotta be from out of town." Hard with my girls not around me. It's definitely not a Nashville party. 'Cause all I see are stilettos. I guess I never got the memo. My tummy's turnin' and I'm feelin' kinda homesick. Too much pressure and I'm nervin'. That's when the DJ dropped my favorite tune. The Britney song was on. Put my hands up. They're playin' my song. The butterflies fly away. I'm noddin' my head like, yeah. Movin' my hips like, yeah. I got my hands up. They're playin' my song. I know I'm gonna be okay. Yeah. It's a party in the USA. Yeah.
It's a party in the USA. Feel like hoppin' on a flight. On a flight. Back to my home down tonight. Down tonight. Something stops me every time. Every time. The DJ plays my song and I feel alive. Put my hands up. They're playin' my song. The butterflies fly away. I'm noddin' my head like, yeah. Noddin' my head like, yeah. Movin' my hips like, yeah. I got my hands up. They're playin' my song. I know I'm gonna be okay. Yeah. It's a party in the USA. Yeah. It's a party in the USA. Put my hands up. They're playin' my song. The butterflies fly away. I'm noddin' my head like, yeah. Noddin' my head like, yeah. Movin' my hips like, yeah. I got my hands up. They're playin' my song. I know I'm gonna be okay. Yeah. It's a party in the USA. Yeah.
It's a party in the USA. Here we stand. Hearts are broken in two. Stupidest nights. Losing ground, I'm reaching for you. Feel the night is calling to change your mind. You forget the lies. Survive the night.
I had to think through that one. Yeah, exactly. Great. Well. Yeah. Well, thank you, everyone. Thanks for coming today, and welcome to Washington, D.C. This feels a little bit like speed dating, I have to admit. Pete and I were joking earlier. We're sort of like running a no-huddle offense right now. We've got a ton of ground to cover and not a lot of time, and what we do wanna do is leave some time for questions at the end. Now, with that said, if you have a question you just can't hold onto, feel free to raise your hand and fire away. We'll try to answer it in the order. Really quick, this is the run of the show. Okay? We're gonna talk through our regional strategy.
give you a little bit of market overview as to what the Washington, D.C. region looks like, talk about a few key leasing initiatives that we've been working on, and then Pete's gonna cover the majority of our development projects moving forward, which we're really excited to talk about. We'll leave some time for questions. In terms of the regional strategy, this slide is really used to depict, okay, what have we been up to the past few years, and where are we going? On this slide, we've highlighted a few of the key initiatives that we undertook over the past few years. I won't go through all of them, but in terms of positioning our second-generation assets for leasing success, I probably should ask, how many people have been to the D.C.
region and have toured with us? Think of Metropolitan Square and 901 New York Avenue. These are assets that we reinvested and repositioned and reamenitized, and as a result, we've experienced a great deal of leasing velocity and leasing success. We've also culled the portfolio a little bit, right? Things that were non-core to our portfolio like Capital Gallery and the VA95 Business Park that we traded out of in June, that's 11 buildings, it was a flex industrial office product. Again, not core to our true portfolio. A few asset sales sprinkled in there. We also entered the Montgomery County life sciences market. Pete's gonna talk a lot about our future development there, but we bought 31 acres in what is effectively Main and Main in our region in terms of life sciences.
Then we did a major reset in Reston that we're gonna talk about. We had vacancy sprinkled throughout a number of our buildings in Reston Town Center, and what we did was we went through a pretty complicated process to aggregate that vacancy into one building. We went and chased a really big lease deal, and we were successful. As a result, you'll see that our portfolio out there is really strong. Lastly, I'll just touch on the fact that we're coming off of 3 million sq ft of development. With RTC Next, which is 1.1 million sq ft, 90% leased to Fannie Mae and Volkswagen Group of America. 2100 Penn, which Pete will talk about. We all talk about, I guess. Our project for Leidos, their headquarters building.
We'll talk about the headquarters for Transportation Security Administration, and we'll also talk about the Marriott headquarters. All that work has been put into place in the last couple years, so it's been a really strong development effort for our development team in the region. I'll let Pete touch on where are we going because that's his story. It's 2023 and beyond, but I would just say it's Reston and life sciences. Next slide. I do think it's probably appropriate to just give a quick overview and context as to what we view as the Washington, D.C. region. We think about it as three separate sub-markets. We've got D.C. proper, we have suburban Maryland, and we have the Northern Virginia market.
In total, that makes up about 310 million sq ft of inventory in our market. The vacancy rate in our market today across that 310 million sq ft portfolio is over 19%. It doesn't feel very healthy, right? We contrast that now to our portfolio. These numbers and figures are as of our June thirtieth supplemental. In D.C., you see that the number is 3.4 million sq ft. That 3.4 million sq ft includes 601 Mass Ave, a 500,000 sq ft office building that, as you heard in Doug's remarks, we traded out of a couple weeks ago for $1,100 a foot. Our true portfolio in D.C. today is about 2.9 million sq ft.
Another item to note is that in Northern Virginia, this is showing our portfolio as of June 30 at 3.8 million sq ft. Again, sort of, remarking and building on Doug's comments, this does not include the 1.1 million sq ft that we just delivered at RTC Next. These numbers will fluctuate. Today, our true portfolio, once you count the buildings that aren't in service, is about 9.7, 9.8 million sq ft. This portfolio at a glance, in terms of the office product, 8.9 million sq ft spread across 34 buildings, are today, our Q2 supplemental shows that we're at 89.4% occupied.
Again, if you take into account the leases that have been signed that haven't commenced and the deals that we're working on and actively negotiating that we believe firmly that we're gonna get signed, that in-service portfolio probably jumps up another 300 basis points. We also have multifamily in our portfolio. We have two really exciting projects. I'm not sure if you all have leased or have toured them when you've visited Reston Town Center, but we have the Avant and the Signature totaling 900 units. What's great about these projects is that they're 96% leased at market-leading rental rates. The rental rate right now for new leases is over $3 a sq ft in that market. That is well in excess of where we were pre-pandemic. Next slide.
In terms of our development pipeline and what are we working on, I'll talk about the items in blue for a moment. This is work that is currently underway today. Pete will talk about the 508 residential units that are underway right now in Reston at Block D, and I couldn't agree more with Doug. We need to figure out a better name for that. We're not super creative. We also have, again, RTC Next and 2100 Pennsylvania Avenue, which are going to be placed in service here soon. That equates to the 1.7 million sq ft of development. In red is all of our future development. We have an incredible opportunity to do a lot of multi-family in Reston Town Center and in downtown Washington.
In terms of our commercial development, Pete will talk to the Shady Grove project and what we're planning to build. That, in addition to the space that we can build in Reston Town Center, sets us up for a lot of success and a lot of future development. Let's talk about key leasing initiatives. One of the things that just to orient folks, so map of Washington, D.C. As you head west out the Dulles Toll Road to Dulles Airport, we're really... The Northern Virginia market is really dominated by three distinct submarkets. We've got the Arlington/Rosslyn-Ballston Corridor, and we have the Tysons Corner submarket, and then we have Reston Town Center. Okay? What's interesting and unique about all those environments is that, and it's consistent, is that it's double-digit vacancy rates and negative year-over-year rent growth. Okay?
That's not good. If you contrast that to our position in Reston Town Center, we've experienced positive year-over-year rent growth of 3% or close to it, and our portfolio today is less than 6% vacant. It's pretty incredible. We're trading at premiums well above, you know, neighboring products and properties. It's been a unique and successful project for sure. Why is that? We think about Reston Town Center and again, harking back to Doug's comment, is it a suburban project? It's really not. It's an urban project in a suburban environment. Walkable street grid, really convenient parking for customers and clients, multitude of restaurants and options. Next slide. We have over 450,000 sq ft of retail in Reston Town Center alone. We have an open-air pavilion.
Community engagement is huge. We host a number of events. This is the day after Thanksgiving. This is our Christmas parade in Reston Town Center. A few weeks ago, we had the Northern Virginia Fine Arts Festival that brought 60,000 people to Reston Town Center. What does that do? That just creates a really sticky environment for people who wanna be focused and near the activity, and we're effectively the downtown of Fairfax County. In terms of our portfolio, again, just to make sure I'm being proper with our CFO here, in terms of our Q2 supplemental, this shows 3.8 million sq ft. Again, if we add RTC Next to that, we get to close to 5 million sq ft of product in the market that is sub 5% committed. Uncommitted, excuse me.
One of the other things that we're super proud of is since 2020, so in the past two and a half years, we've done over 1.5 million sq ft of leasing across this portfolio. What's really cool about that is... I'll do this really quickly, but these pie charts here are meant to show the percentage leased. If it's all blue, that means it's really, really good. We have a couple pockets of red up here, but these buildings are headquarters for Leidos. Leidos expanded to another 70,000 sq ft in this building. Facebook is in this building. Microsoft takes the entirety of this building. Peraton takes nearly the entirety of this building. Comscore takes nearly the entirety of this building. College Board is in all of this building.
This is SAIC's corporate headquarters. Microsoft leases the entirety of this building. Bechtel's corporate headquarters. CACI's corporate headquarters. Fannie Mae's technology headquarters campus. Volkswagen's North American headquarters. Again, all of those are really high credit, high quality tenants across this portfolio, which we're really proud of. If you look at the roll, the upcoming roll in 2023 and 2024, in total, this is less than 2% of the portfolio in Reston rolls each year for the next two years. Oh, by the way, we did a quick calc on what the weighted average lease term is for our existing tenants in Reston Town Center. It's nearly nine years. That's really long and strong. In Washington, D.C., so in these numbers, we took out 601 Mass Ave, which we just traded out of.
We have a 2.9 million sq ft portfolio that has a vacancy rate or an uncommitted rate of less than 9%. We've done some really great leasing during the pandemic, and it's been a very solid market for us. This is a story of true flight to quality in this market. If you have new buildings and new product and reamenitized product, it will lease. We've found that success at Metropolitan Square, and we'll talk about 2100 Penn, as well as another example that's been really successful in this market. In terms of the rollover across 2023 and 2024, this is less than 7% of our portfolio in Washington. Again, we feel really good. We feel like we're well-positioned for the next couple years.
Lastly, just touch on 2100 Pennsylvania Avenue. We substantially completed this project in May of 2022. This is a project that's under a ground lease with the George Washington University. This is our second project with them. It's a 480,000 sq ft building. We started this building with a pre-lease to WilmerHale for 270,000 square feet. What's great is we've already done a handful of deals, and we have a few more deals that are on close to being finished, where we're gonna be 81% committed, hopefully, in the next few weeks, which puts us in really good position. Oh, by the way, on the remaining 19% of the space, we have really great leasing activity, so we feel really good about this. Again, this is a flight to quality.
This is the best building in Washington, D.C. We're seeing it in terms of tours and activity and just interest in the project. Now I'm gonna turn it over to Pete to talk about our new developments.
Good morning. As Jake said, I wanna touch a little bit on our Reston Town Center and Shady Grove Innovation District assets. Just a quick orientation. I imagine many of you, if you've been to the Washington, D.C. region, we've probably taken you to Reston. But just in terms of an orientation, with the black box there, we're highlighting what people think of as the Reston Town Center urban core today. It's about 80 acres, walkable, mixed use, et cetera. Shown in the red box there is our RTC Next development. We're gonna talk about that in great detail. The idea here and what this slide illustrates is the connectivity that we're trying to achieve here between the existing Reston Town Center and the Metro station, which you see on the bottom side of the screen here.
The idea being that if you get off of the Metro at the RTC station and head north, you automatically feel like you are in an urban environment, and that feels consistent throughout that, you know, 100+ acres that you see pictured on the screen. We went through a master planning process here for this 40 acres at Reston Town Center, and essentially, there are eight development blocks here. We can develop over time about 8 million sq ft. I'm sorry, 4 million sq ft, eight development blocks. A central highlighting feature here, and I talked about the connectivity, is that 1.6-acre central urban park. That, unfortunately, comes in phase two of the development. You'll see as we go through the phases here. We've got a tenant in those buildings that lasts through the end of 2024.
That's our phase two. We're gonna talk about the phase one for development blocks, all of which are in various stages of development going forward here. In our first phase, there are four development blocks, A, B, C, and D. There's that Block D, 1 million, 1.1 million sq ft of office, half a million sq ft of multifamily, a 200,000 sq ft hotel, and then about 61,000 sq ft of total retail, adding up to almost 1.9 million sq ft. We'll talk about each of those blocks independently. Blocks A and B is what we've probably referred to as RTC Next, the first phase of RTC Next, the Fannie Mae Volkswagen buildings. This is where, as Jake mentioned, Volkswagen and Fannie Mae are located.
This is just over 1 million sq ft of office and 16,000 sq ft of retail. Fannie Mae leases 700,000 sq ft, the entirety of the building on the right and a portion of the building on the left. Volkswagen leases 200,000 sq ft, starting at the top of the building on the left and going down. We have done additional leasing in the buildings since they opened, and they're now at 87% leased. We also delivered with this project 2,600 parking spaces, which parks Blocks A, B, and C, all within one very large interconnected multi-acre, multi-level, parking structure, which is, quite a sight to behold. Block C is our hotel. We are under a ground lease with Donohoe, which is a local hotel development company.
Surprising no one, they have had a little bit of trouble over the past couple of years getting ground up hospitality financed. They're working very hard on this. I would say they are relatively close to getting their equity and debt financing in place, and our hope and their hope is that they'll be starting construction on this late this year and delivering about 18-24 months hence. In addition to the hotel, what we think is probably as, if not more important, is the 33,000 sq ft of retail that they will construct and we will retain. Right now you can see with the big red box on the bottom, that's really integral to this project getting stitched together in phase one. Getting some critical mass of retail is really important. Block D is our PGIM joint venture.
PGIM owns 80% of the joint venture that's developing this 508 multifamily units. We'll talk about the office and retail in a moment, which we retain 100% of. This project started construction in April. We'll start delivering units in two years. Jake made a really good analysis earlier of how well our existing assets out there, roughly 900 units, are performing. We feel really, really bullish about these and the fact that we'll be delivering these units in about two years. The Block D office and retail component is 90,000 sq ft in total. It's a 78,000 sq ft, what we call jewel box office buildings, four levels.
We think this is an awesome building for a single tenant user who is relatively on the smaller side, but for whom either security or just they wanna control their own destiny and be in a smallish single-tenant building in Reston Town Center with all of the walkable amenities in the Metro. We also have 12,000 sq ft of inline retail here, which we'll deliver around the same time. Our second phase, you see the 1.6-acre urban park here now out of the shadow in phase two. That tenant, as I said, expires in 2024, so anything in phase two would be a 2025 or beyond construction commencement or development commencement.
We could do an additional 800,000 sq ft of office, up to an additional 1,200 multifamily units. While we could do another hotel, I think that's relatively unlikely in today's market. We could do up to 54,000 sq ft of additional retail, if we chose to do that. I think that you'll see that flex a little bit depending on what the market looks like and what the right amount of retail is, adding up to just under 4 million sq ft of total development. Quickly wanted to hit the Shady Grove market. We're really excited about where we stand with our Shady Grove market. It's gonna be a little bit of a different story than what you may have heard previously. The life sciences market in Montgomery County is the I-270 corridor.
There is really no other D.C. life sciences than the Montgomery County I-270 corridor. It starts at Parklawn on the south. It goes to Frederick on the north. It's about an 11 million sq ft market, but that's significantly understated if you were to put the government assets in there, which, while they're not privately owned, still has innovation and workers and all of those kind of things that I think really help drive the market and some of the big users here. Market vacancy is about 3%. There's a relatively modest amount of new development underway, and you see a pretty wide range of market rents there because of the distance that we're trying to cover. Highlighted in yellow is what is Main and Main in the Shady Grove cluster, and we'll zoom in on that a little bit. That's about 4 million of the 11 million.
Vacancy is virtually non-existent. A decent amount of the new development is going on here. You see in purple, ARE has a pretty major campus that they're under development with. They're almost 100% pre-leased in those two assets. And you see that I've narrowed the market range because this is where the highest rents in the market are being achieved right here at Shady Grove. It is anchored by the Shady Grove Adventist Hospital and Medical Center Drive, shown there in blue. You see our Shady Grove Innovation District up there in green. Shady Grove Innovation District in blue. What are we gonna build here? What you see on the screen is now the lack of any renovation projects. There's really been three reasons why we've rethought this project.
I think any one or two of which we might have been overlooked, but might have been able to overlook. When all three are added together, we've made the decision to not renovate any of these the existing buildings and to go ground up with all of this development. Number one is these are small buildings. They were about 50,000 sq ft. We experienced, as the market did everywhere, some cost escalation. When you applied that to a relatively small building, and you were spreading roofs and HVAC equipment over small square footages, it got out of whack with what those buildings ought to cost. We decided that that was not a great factor, of course. Number two, where those existing buildings were located on the site was some of the better real estate on the site.
If you put down roots with buildings that might last 20 years, it really had a decent amount of impact on what you could build and how much square footage and where you'd put the buildings. Third, like many life sciences markets, we did experience a little bit of a pause driven by a lot of things, the macroeconomic environment, the private market for venture capital and life sciences companies, the public market, all of those kinds of things. The delay of a few months that we anticipate incurring to deliver new buildings as opposed to renovating the existing buildings made sense to do. Over time, we can build up to 10 buildings here, 1.5 million sq ft.
In the kind of teal pink circle there with an N, we have envisioned an amenity building with conference amenities, potentially some fitness center, food and beverage. This is envisioned to be a different kind of asset than the Shady Grove market has today. That is a very suburban prototype of development. We think this can be enough different to really differentiate itself. We can flex the size of the buildings. We can deliver these to, you know, 150,000 sq ft up to 300,000 sq ft. It's pretty flexible zoning in the city of Rockville. From a timing perspective, and then we'll go to questions, we would anticipate being able to potentially start construction on one of these buildings as soon as a year from now and deliver about 18 months from then.
We would then go through the master planning process, but we do have the ability to deliver at least one asset pre-master planning, which we could theoretically be under construction with about a year from now. With that, we've covered a lot of ground. I will open it up for questions.
Jake, you mentioned the RTC top net rate up here where you're building. Tell me if there's leeway to that. Is it face rent or net effective rate? Where are you getting net effective in accordance?
That's probably face rents. In terms of net effective rents across those markets, that's a great question. I'd have to think through that one first, but what I will tell you is that the net effective rents that we're experiencing in Reston are incredibly strong. We're on an expense stop of $15-$16 a foot. What's interesting about the deals that we're doing in Reston in terms of the concessions, it's very antithetical to what we're seeing across the rest of the market in terms of TIs and free rent. We've been relatively consistent now for the past 12+ months in terms of the concessions and the types of concessions that are being offered.
I have been hearing about the concessions in the market.
I think the concessions across the market are no worse than equivalent in Reston's favor. Meaning if you look at it on face rents, it's not that we're having to give. We're not giving proportionally more in terms of TIs and concessions. In other words, I think that the face rate percentage is similar to the net effective percentage.
Where are you giving?
Yeah, yeah. You wanna take that?
Yeah, I mean, generally speaking, I would say it's you know, 1-1.2 months of free rent for every year of term. You know, build outs you know, can average anywhere from $90-$110 a foot. Yeah, low- to mid-50s.
Low to mid.
Yep. The other thing that's kind of interesting and unique in the market, we have a couple incubator buildings that we call One and Two Fountain Square, which are primarily multi-tenant, buildings. This is where the small, young tech companies wanna be because they wanna be next to the Microsoft and the Facebook and the Peraton. What we've done is anytime there's been vacancy in those assets, we've actually started a really incredible spec suite program where we've delivered over 20 spec suites, 75,000 sq ft. They're typically leased before we're even done with construction, and the face rate on those deals is usually $52-$53 a foot.
We're usually building out five-six of them at a time, so our costs are probably $80-$85 a foot as opposed to giving a full concession package to a tenant to build out their space.
Yeah. There's one of the benefits that we've always had in the urban core of Reston Town Center, and that we believe we will have, based on the mixed-use nature of RTC Next, is this ability to kinda share parking across times of day and multiple uses. We think there's a lot of crossover between, if you had to park a restaurant, let's say at five per thousand, a decent number of those are also being parked in the office at two per thousand. That you don't have to park them both in the middle of the day. The hotel is the really obvious one. That parker will have its choice of 2,600 parking spaces. How we've kinda planned this, and Fairfax County has changed over time from minimum amounts of parking to maximum amounts of parking.
We are able to build about just over two per thousand on the office. The retail is a little bit more complicated of how that all works. It depends on the number of seats and all kinds of things, but call it somewhere in the five-seven per thousand range. Then the hotel has a little bit more flexibility, but parking's kinda more like multi-family in the one per room range. Multi-family, we've had significant success bringing that down from kinda 1.5 or 1.6 down to 1.1 or 1.2. You put all that into a mix and we think there's likely to be a whole lot of additional. We think this is adequately parked, if not over-parked.
We've, you know, we couldn't have built more even if we had wanted to. I think if there's a maybe it's a silver lining, maybe it's a gray lining, I don't know, but the hybrid work schedules that people are likely to be employing going forward, I think works in our favor in terms of when those peaks are and how often those peaks happen, so. Yeah. Yeah. I got it. I missed the joke. You know, it's interesting. I think. In the suburbs, I think the Metro is more important in concept than it is in practice. I think it's really important for the workforces of all the restaurants. I think it's important for a small portion of the population. I do think today this is still a very car-driven market.
You know, again, the ability to share across the different uses helps in that manner. I don't know that we will see a significant reduction in executive level parkers because of the Silver Line. That's my gut.
Just really quickly. One of the great attributes that we have with Reston Town Center and the urban core is just your question about parking. We have 8,000 parking spaces that exist today in the urban core. When we have a tenant, or excuse me, a customer or a client come to us and say, "We need space, but parking is our hot button issue," we have no problems flexing on that parking as necessary because we have an incredible amount of parking. New development projects don't have that ability to do that. Most of them are parked at 2.1 per thousand. We generally provide three per thousand to, you know, all of our customers and clients.
If they need 3.5, we can flex if necessary, given the ample amount of parking and the infrastructure that already exists in the urban core of Reston Town Center. Other than the government user at the Reston Corporate Center, which moves out in December 31st, 2025, we actually kinda can't wait for that to happen because it will unlock all of the development capacity in phase two of RTC Next. But in terms of your first question, it's interesting. Reston is an interesting market, right? All those companies that I named, Microsoft, Leidos, CACI, Peraton, all of those folks are focused on the defense and cybersecurity environment. The amount of SCIF space that we have in Reston, that work can't necessarily be done from their kitchen table.
They have to be in. We don't have actual turnstiles in any of those buildings. We're not there. It's not part of the market yet, but it feels very occupied. We do census, and our property managers walk the buildings, and there's folks there. Much more so than in downtown Washington, D.C.
That user tends to live in Fairfax County and Western Loudoun, so a lot of what you're hearing is people hate to commute. These commutes tend to be on the shorter side. They drive. They park right next to the building, all those kinds of things. Reston doesn't have the other things that are driving people out of cities, crime and, you know, homelessness and all those kinds of things. It's a different type of environment. As Jake said, we probably don't have great data, but the feeling is way different in Reston Town Center. It's very active and vibrant. The streets feel really full, and the buildings are definitely fuller than our CBDs.
You know, I think I'll just quickly say the number of tenants who are looking even between Reston and Tysons is relatively small. To think that a tenant is really going to consider that far into the city and that far out in Reston is unlikely. Those markets are generally tenants have made a decision about the general geography of where they wanna be. We do not typically compete even with Tysons Corner. We do in some cases, I don't mean never. But a lot of the tenants that we see in Reston have decided that Reston is where they wanna be. I think it's less likely that they're gonna go to National Landing. Obviously, Amazon looked all over the region, so that was a very competitive and looked, you know, a much broader geography.
I think on a day-to-day basis, we don't really tend to compete with the same tenant or for the same tenant with National Landing.
Great. Thanks, everyone.
Is it on? You hear me? Okay, good. Okay. The reason I wanted you to think about that for a second is because clearly San Francisco has gotten a lot of attention as being a really tough market right now. We've got a lot of vacancy, and there's other socioeconomic issues that are out there that are causing a lot of people concern about our properties and the real estate market in general there. I want you to think about how, you know, what we were before now. Because the reason it's important is all of those things that made San Francisco a fantastic, desirable place for these companies to locate, all of those things still exist, every single one of them.
All the knowledge workers all these tech companies and other companies are trying to hire, they wanna be in San Francisco. They're coming for our universities. They're coming for Stanford. They're coming for UC Berkeley. They're coming for UCSF, UC Davis, where I went to school, gotta mention them. You have that pool of people. That is by far the most important input for a lot of these companies that they're trying to attract. The Bay Area still is a draw for all of those things. Secondly, we're still a gateway city to the Pacific Rim. That still matters. There's a ton of commerce that's coming through from that area, and San Francisco absolutely is important for that reason as well. On that front, the Bay Area is an incredibly diverse economy. It's not just tech.
It's many other things. We're gonna talk about some life science activities that are going on in our portfolio. You go down the list, you know, it's every single industry the Bay Area hits on. Tech clearly drove much of the demand for commercial real estate, but it's not the only part of the economy in the Bay Area. On top of that, it's an awesome place to live. I was born there. I'm not leaving, okay? I'm definitely not leaving. We got problems. Other places have problems too. Because the trend line that has taken us to where we are today doesn't keep going down. It's gonna turn around at some point. I'm gonna show you some slides of historical measure that are gonna show you how we bounced back previously.
Keep that in mind as we go into this. Okay, I'll get into some of the details here. There's a lot on this slide, so I'm not gonna go through every single data point. The top of it is showing the CBD market for San Francisco, and the bottom is the total, including the CBD. This is looking back about a year ago, so third quarter 2021 to second quarter of this year. It's kinda showing how it breaks out, what the statistics are. There's not a lot of change because most of the big shock hit in 2020 and the first part of 2021. Between last year and this year, there hasn't been as much change in the stats.
We've seen a little bit of a shift between what was sublease space and what is now direct space. Overall, availability is kinda hovering around the same number. You don't see too much there. I wanna point out that this is the aggregate, right? This is everything in the whole market. This is not what BXP competes in. This is not our subset, which is what you heard Owen and Doug talking about earlier, which is the premier segment of the market. That is not reflected here. When you look at that subset, as you saw earlier, the vacancy is only about 8% on the direct, premier buildings. It's quite a bit healthier, and we absolutely are feeling that. It's a tale of two markets. That is definitely the case.
Okay, this slide is kinda taking that historical look. It's going back, all the way back to 1993, and it's showing the run-up before the dot-com and then the big drop and then the great financial crisis and then, of course, the 10-year run-up that led up to 2020. As you can see, you know, this is pretty volatile. There's a lot of shifting around of vacancy and rents and everything over this time. As many of you know who've been tracking the Bay Area markets in San Francisco, in particular, it's a volatile market. It always has been a high beta market. It's always been up and down like this. Here we are again, right? I lived through each one of these, and I actually lived through one that's off this slide, okay?
Many of you here probably remember the RTC and all of the savings and loan industry. There was another one of them here off the chart. In each case, we bounced back. At each time when we were at the bottom of these charts, where everybody's looking around and going, "How are we ever gonna burn off all this supply? How are we possibly gonna get through this when our typical net absorption every year is X, and we've got this huge supply? It's gonna take 10 years. It's gonna take 15 years." Well, guess what? It didn't. It bounced back faster every single time.
I'm telling you that I don't think that if you look at the numbers now and you take this trend line and the way things have been and you think it's gonna keep going down, it's not. It's gonna bounce back at some point. We're trying to figure out, you know, how do we navigate up until then? How do we best position our properties to take advantage of that? Because it will bounce back again for all those intrinsic reasons I mentioned earlier about why the Bay Area is a fantastic place to be doing business and to be building buildings like we are. This is just giving you an overview of just the aggregate leasing activity. This is not net absorption. This is total volume of deals. This is renewals.
This is any kind of transaction that gets done. This is what the brokerage world really tracks 'cause it drives overall kinda activity in the market. As you can see, the 10-year run-up took us all the way, and we were doing just a lot every year. It was very, very busy. Then we fell off a cliff in 2020. All the deals that got done, that 4.2 million sq ft of activity, really was stuff that was probably in the pipeline already. Going into 2021, we had a little bit of a resurgence 'cause there was some pent-up demand, and companies weren't sure exactly, you know, what they were gonna need. We saw a little bit of a pickup.
This year so far, I'd say we're probably on pace to do maybe another 6 million. It looks like what the numbers are. It was about 2.5 million at the end of August, was the aggregate, was the last numbers that I'd seen. Activity's definitely still down, okay? It's just not. It has not picked up as much. I think a lot of it is still that these tenants and the clients that we're working with, they are uncertain about what their space needs are. They're still trying to navigate what that future looks like, and so they're pulling back, and they haven't done as much, actually being out in the market.
What makes up a lot of the stuff that we're seeing now, the type of tenants that we're seeing, it's a lot more the traditional companies. It's not the tech companies. They are not, by and large, the ones that are in the market. There's a few, but not as many. It's more of the law firms. It's the professional services. It's the, you know, financial companies like yourselves, and it's others. Those are still real good tenants. They make up a huge portion of our portfolio, and we're doing deals with them now and glad to do it. This last slide on San Francisco is, I think, a bright spot, and it's one that doesn't get talked about too much. It's the development pipeline, which is pretty small.
There's not a lot of new supply that's hitting the market. This is a really important point. The pandemic could have happened at a worse time. It could have happened a year later. Had it done so, we would have been under construction at Fourth and Harrison. Aaron definitely would have been knocking buildings down in the first quarter, second quarter of that year, right? I mean, we were ready to go. Several other projects in San Francisco were also ready to go. They didn't happen. The only ones that got completed, you had the Brookfield project at 5M. That's done. It's not fully leased. They've done one deal so far, so they got some work to do. You've got the Related's project out at Mission Rock, and that's it.
You're not gonna see anybody else probably adding new supply to that market. That premier space, that segment of the market that we call premier, is not gonna grow from the new product standpoint. I think that's a bright spot for sure in San Francisco. I'm gonna move down quickly through the rest of these slides here. This is. We're gonna move down to the Silicon Valley. This is a similar breakout as to the first slide that I showed you. I think the takeaway here really about the valley is by and large, the Valley has held up much better than San Francisco from a supply side. There just hasn't been nearly as much sublease space.
There hadn't been as much construction that was unleased. The stuff that was built or that was under construction had already been committed. There's just not a huge overhang right now of supply. The amount of sublease space, although it's picked up recently, there's been a few more subleases that have been announced. By and large, you haven't seen the big hit. You know, so when you look at the overall percentage of sublease to availability in that low 20%, that's not too bad. That's not great, but it's not as bad as it could be. The Valley is an interesting market. Obviously, it is very tech-driven by its name.
Those companies though that are down there, those big players like Google and Apple and Facebook, and you go down the list. I mean, Google's building right now, they're under construction with over 4 million sq ft of product in Sunnyvale and Mountain View. They haven't stopped. They're going, and they know that they're gonna get it completed 'cause they want to get their people back. Then just last, what was it? Last week or the week before, ByteDance, which is TikTok's parent company, took down 650,000 sq ft in San Jose in a relatively new project. And that's a new deal for them. They're not. They didn't have that. That was a relocation. That's a real example of a tech company that's coming in and taking down two buildings. I mean, that's.
Their plans are they're gonna use that space. They're not doing everything remote. It's a good sign. This chart here, again, similar, kinda showing you a little bit of historical perspective and kinda what happened when, you know, we were back in the dot-com days. Again, a lot of volatility, a lot of swings, a lot of supply shocks. In each case, we came back faster than we thought. It was for different reasons each time, but the markets bounced back quicker. The other thing I wanna point out here is that in the... You'll notice that the overall vacancy relative to how Silicon Valley performed in the last two downturns is much, much healthier. There's just not nearly as much vacancy as it had been previously.
On top of that, you gotta think about the fact that many of these companies now that make up the Silicon Valley base, the big players, they're much more financially healthy than some of them in the past had been. I think that's gonna also help. Pipeline, same kind of story. There's just not a huge pipeline of active projects that are under construction in the Silicon Valley. Aaron and Tommy are gonna talk more details about those and about ours in particular. You just don't see too much of that, and we don't expect to see a lot more spec development down there. Lastly, this is a slide that just shows the overview of the life science market in the Bay Area.
We're gonna talk a little bit about that, Aaron's on our Gateway project. Overall, life science in the Bay Area consists of a little over 30 million sq ft of speculative life science space, and a third of that is in the market that we are in, which is in South San Francisco. That's by far the biggest concentration. If you haven't been there to see it's by far the biggest piece of it, and that's where we're operating right now. The life science market has really held up phenomenally well over these last couple of years. It's been the one bright spot people had pointed to. Last year, the demand was extremely strong. This year, it's strong. I would say probably more normal maybe than compared to last year.
What pulled back was a lot of these early stage companies that are venture backed, some of that money got a little more conservative, and so they slowed down a little bit of their growth. They're still out there, and what they're doing is they're looking to the landlords to put more TI dollars up. They're still active, but they want more contributions from the landlords. But there's still deals that are happening, and we'll talk a little bit more about that. Again, we'll get into some questions at the end here, but I'm gonna hand it over to Aaron to talk about the development.
Great. Thank you, Rod. Thanks for having us. We're excited to be presenting today. My name's Aaron Fenton, and I oversee development for the company on the West Coast. We got three active projects under construction right now in the Bay Area, totaling about 1 million sq ft and over $1 billion or close to $1 billion dollars worth of dollars that we're investing. The first project I wanna touch on is our Gateway project in South San Francisco. Early 2020, we formed a partnership with ARE to co-develop primarily life science buildings that would total up to 2 million sq ft once we're done with the complete build-out. We kicked off our first phase early last year, 2021.
That's 751 Gateway. That's a ground up lab building that you see in the far right highlighted in yellow. Then earlier this year, we kicked off our phase 2 of the project, which is a conversion of a 15-story office building to a lab building, and that's 651 Gateway. In terms of this sub-market, it's the second largest life science sub-market in the country behind Cambridge. In terms of where we are located in the sub-market, we're on the far western edge of the sub-market, right up against the 101 freeway, and right adjacent to where Caltrain is building a new train station. All the feedback we hear from our customers and our brokers are that the further west you are in a sub-market, the better position you're gonna be in.
If anybody's ever driven in this sub-market during rush hour, if you're going to the far eastern side, which is where some of our competitors are located, you could be sitting in 30- 40 minute bumper-to-bumper traffic. That's a huge deal for our customers. Being right off the freeway on- and off-ramps and now having the Caltrain station, which opens up in the next six months, is gonna be hugely beneficial for us. What's great about this project is all of the buildings that we're delivering are gonna be delivered at a lower basis than our competitors for two reasons. Number one is we contributed our lands into a JV with ARE, and so we didn't buy our development rights. They were contributed.
They were contributed through reciprocal parking easements that we had over each other's parking lots that we unlocked, and now we unlocked all those development rights. Our land basis is substantially lower than the $200-$300 a sq ft that our competitors are paying for. Number 2, the campus as it stands today is over parked. Historically, parking ratios in this sub-market are three per 1,000, three parking stalls per 1,000 sq ft of development. The trend now and the demand right now, especially with Caltrain's being put online, is closer to two per 1,000. What we're able to do is in our first couple phases, we can deliver new buildings without having to build new parking.
That's another $100-$150 per sq ft in basis that we're not having to expend. Again, our basis on our first projects are $12-$12.50 per sq ft, and our competitors across the street are building at $1,400, $1,500, $1,600 per sq ft. We have a competitive advantage as well, from that aspect. 751 Gateway, this project sort of speaks for itself. It delivers end of this year. This is the one that we started early last year. We started it on spec, within six months signed a pre-lease for the entire building with Genentech. We've partnered with Genentech now. We're working with them on the design of their tenant improvements.
They are making a significant investment into this building, and I'm talking north of $400 a sq ft, probably $500-$600 after you include all their lab equipment and furniture. They are clearly putting a stake in the ground and calling this kind of the, you know, their new home. We're excited to continue our partnership with them. It's a LEED Gold building. It's all electric, so there's no gas coming into the building to heat the air. It's leading-edge technology in terms of the HVAC system we're putting in here. It's the largest of its kind, certainly in California, and we think in the nation. Again, delivers towards the end of this year.
They have another year plus to complete their build-out and expect to occupy in the first half of 2024. The next project, 651 Gateway, this is a 15-story legacy office building that we're converting into a lab. 330,000 sq ft. You can see the image on the bottom right, which I took last week. Took the old skin off the building, this old concrete ribbon window façade. We're gonna re-clad it with an all glass curtain wall, which you can see a rendering on the top right. We have to do a full seismic upgrade, which is required in California every time you're doing a change of use. We're stiffening the building by adding a bunch of structural steel. These lab tenants, they need...
They don't like vibration because their equipment and their lasers are super sensitive to vibration, so traditional office buildings are not designed for that. You have to stiffen that building by adding a bunch of steel. That work is ongoing right now. We deliver this one towards the end of next year. We're already negotiating on a couple floors with some tenants. We love this product because it's a different type of product for our campus and for the sub-market in that it's a smaller floor plate design, so 25,000 sq ft floor plates. It's really gonna tailor well to the smaller startup lab tenants that Rod was talking about. What we like about it is that these tenants, generally speaking, are very sticky.
Once they inhabit a location, they wanna grow in that location because they like the operator, they like the location, they like the campus. This is our incubator building that's gonna feed growth, we think, for our new developments that we're bringing online over the coming years. We're very excited about it. With that, I'm gonna turn it over to my colleague, Tommy, who's gonna chat about our San Jose developments.
Okay. Hi, everyone. I'm Tommy Chan. I'm one of the development project managers for our San Francisco team and manager for our Platform 16 project. Platform 16 is a 1 million sq ft office campus development in downtown San Jose. The project consists of three six-story buildings and a three-story underground garage. We kicked off construction back in February of this year on the first phase, which is the underground garage and the first building, which is roughly 390,000 sq ft. We're getting ready to pour our foundations, start our foundation work in a couple of weeks here with tower cranes in the air. The thesis behind this project is really related to a couple of big and exciting changes coming to downtown San Jose over the next few years and over this next decade.
The first of which is transit related, and related to Diridon Station, which is right here on this map. Diridon Station is a 15-minute walk, away from our site over here. Diridon is the last stop on the Caltrain, and the Caltrain connects San Jose with San Francisco in about under an hour, ride, which makes it really easy for our users to travel up and down Silicon Valley and to San Francisco. Eventually, Diridon Station will also become a BART stop, so it'll connect downtown San Jose with the East Bay, which will then unlock access to a lot of the tech talent and the workforce that lives in the East Bay to downtown. Lastly with Diridon is that it's also slated to become, part of the California High-Speed Rail line.
Downtown San Jose will also be directly connected to Southern California. When all these projects are done, downtown San Jose and Diridon Station is going to become one of the busiest transit hubs on the West Coast and offer us, at our site, just a plethora of transit options, up and down California.
The second major change coming to Downtown San Jose is Google's Downtown West Campus. That's everything you see here on this map that's in color. That's a 9 million sq ft development that's owned and developed by Google. That 9 million sq ft includes 7 million sq ft of office space, 4,000 residential units, 25% of which are affordable housing, 15 acres of park space, and 500,000 sq ft of retail. When this whole project is done, it's going to completely transform this entire neighborhood surrounding our site, and it's also going to bring 20,000 Googlers to come and work and live in Downtown San Jose. We're extremely excited about the project. Google is moving full steam ahead with Downtown West. They're
They started making community benefits payments out of their $200 million commitment that they made to the city when they received entitlements last year. They started horizontal infrastructure work this year and are slated to start demoing in a couple weeks and start vertical construction early next year of the first buildings. The project itself, the architecture is beautifully designed by world-renowned architect Kohn Pedersen Fox. The buildings are all fully equipped with all of the amenities and features that our clients are looking for in premier workspace. We've enhanced our ventilation rates on our HVAC systems. We're providing an abundance of outdoor workspace via private terraces. We have the ability to accommodate the full suite of amenities, gyms, cafeteria space, conferencing space. The 16 in Platform16 refers to the number of terraces that we have.
Every client is gonna have their private outdoor space connected to their interiors. Lastly, because our 1 million sq ft is sliced up into three separate buildings, we're able to provide large tech users with their individual buildings, which is extremely important in Silicon Valley. It allows them to have dedicated lobbies and access so that they can control what happens within their own space and within their own buildings. We're very excited about this project and are really glad to kick this off on the development front. With that, we'll take some questions.
Hey, just going back to Gateway Campus. It's Ron Kamdem from Morgan Stanley, by the way. Gateway Campus, I think you said that was 49% pre-leased. Maybe can you talk about sort of what the activity there is looking like? Thank you.
The question is, the Gateway Campus and, there's an amount that was pre-leased and the activity that is in addition to what's pre-leased. Is that correct? Yeah. Okay. As Aaron mentioned, I mean, Are you asking primarily about life science or also either way? I think most of our comments with Gateway were related to the life science piece. We do have three office buildings that are there as well that are multi-tenant. So we've had at least some activity on that. But really, the story is probably more about the life science. We have a project that is being reconstructed now, which is the 651 building. We are actively in discussions with a couple of different clients now. So these are smaller tenants.
They're gonna be that way in this project. As Aaron said, they're gonna be multi-tenant. This will be a multi-tenant building. It's not gonna be one big tenant taking the entire project, due to the fact that the floor plates are a little bit smaller. We, you know, we do have one deal that we're chasing right now that we feel pretty confident about. There's a couple other bigger tenants in the market that we're talking to as well that could be options for some of the other buildings within the project. Any other questions? Yep.
Yeah, sure. For those of you who didn't hear it, the question is, Platform16 in San Jose and Google and whether or not we've had any discussions with them directly. We have a great relationship with Google. Many of you who were on the tour yesterday obviously saw the project here in Boston that we've worked with them on. The folks in the Bay Area, in fact, we had lunch with them a couple weeks ago and just to talk about things in general to see what's going on, not specifically about Platform16. I mean, Google, typically, the way they operate is if the building is not up with steel standing, they usually don't engage. That's just typically how they've been.
They haven't been that far out in front of a lot of these other deals that they've taken. They've waited till the project's a little further along. We're absolutely gonna stay close to them, and they would be a logical, you know, tenant for there. I think also too, they're protecting their turf, right? 'Cause they're probably not gonna want another group coming in. I would think they might be interested for no other reason than that. I think, anyway, right now, that project is basically, if you looked at it, if you're there, it's a gigantic hole in the ground. I mean, we've gone down first to get ready to go up, and we've got a lot of time before, I think they need to, probably approach us.
We stay in touch with them. Yeah. Any other questions? No other questions? Come on, this is San Francisco. Please ask us a question. We know you guys have some questions. Come on. Okay. Yeah. Yeah, so the question is, are we seeing any credit risk with our biotech life science tenants? Fortunately, our biggest ones are folks like Genentech, so at least in our region and so, really no. I mean, I think what we did see is, I mentioned I think earlier, which is that, they've been asked, I'm sure by their funding sources, to be a little more conservative in their growth, and so they're conserving their money, and so they're coming to the landlords to ask us for bigger contributions for some of these deals we're chasing.
Our contributions had been in the $150-$200 sq ft range, and they're, you know, past that now. They're probably closer to $250-$300, and then maybe even additions above that that would be then amortized over the lease. Every single one of these we underwrite individually. I mean, we've got experts that we work with internally and with our partners, with ARE, who often has had relationships with them as well. We look at every one of them individually and very carefully for that reason.
We try to secure it as best we can, but the other way we secure it and we mitigate that risk is if we're building space for them and we're putting that kind of capital in, we're making sure that the space is the type of a space that could get re-leased, 'cause once it's built, then we could find another group that could go in there. In fact, the 651 building, we very likely will build some a full floor, maybe two full floors on a speculative basis and get it all fitted out and be ready to bring in a tenant on a you know short notice. Any other questions? Sure. Yeah. They had been like 150-200. This is life science. This is not office.
This is life science space, and we're probably looking at higher now, probably in that pushing $300/sq ft. Yeah. The thing to keep in mind though is that that move also came along with it. They're paying us the rent to go along with that bump. It's not just a concession. We're getting higher rents, but we're putting a bigger capital investment in. Any other questions? Yeah. Mm-hmm. Yeah. Sure. Okay, the question is, Embarcadero Center and leasing activity in general, but also some of our potential capital investments to make it more marketable. First of all, in terms of leasing activity, Embarcadero Center, it's really a really good example, case study of this tale of two markets that you hear about.
I mean, the top of Four Embarcadero and the top of our other buildings that have really, really good views, we've had tremendous demand for it. We've actually done leases at rates higher than before the pandemic. All of them up above $100 a sq ft. That's been pretty encouraging. Now, you get down lower in the buildings and most of our vacancy, when you saw that chart that Doug put out, the average vacancy across that whole project, most of that's concentrated in One Embarcadero. I mean, that's kinda where we are with that. I don't wanna miss your second part of your question, and that is about what we might be doing to enhance it. We went through and did all the lobbies.
That was a huge change. That's all done, and that was a big investment. Now we're looking at doing this conference amenity center in Three Embarcadero. We're working through the plans on that. That could be a really state-of-the-art, beautiful center that would be more than just a conference facility. It'd be a place people could go and occupy and spend some time when they don't wanna be in the office. I think we might be getting the hook here, but maybe we got time. Oop, Manny's giving me the ax. I'm sorry if we didn't get anybody's questions. Please, come up to us and if you have any, find one of us and ask it. Thank you. Yeah.
Guys, thank you for coming. I believe it's still morning, so good morning. Good to see a lot of familiar faces. We're gonna talk about Los Angeles and Seattle here and introduce the team real quick. For those of you that haven't met Alex Cameron, Alex is our VP of Leasing that sits in L.A. He does many things beyond leasing, as we're still a very lean team there. This is Kelly Lovshin, who migrated from our New York office out to Seattle a little over two years ago and leads our efforts there with the recent acquisitions that you've heard and our growth strategy in Seattle. My name is Jonathan Lange. I sit in Los Angeles and help lead our efforts there. We're gonna talk to you for about 10 minutes on L.A.
We'll talk to you for about 10 minutes on Seattle, and we'll have time to dive into questions and thoughts. Ray Ritchie, hopefully everybody knows Ray, but he's our godfather for both of these markets here. Ray has been studying the L.A. market for more than two decades with Mike and Owen and Doug and the team. He brought Boston Properties along with the team to Los Angeles six years ago, and he's been strategizing with Kelly and the executive team on all things Seattle. Ray is always working very closely with us in both of these markets. Alex is gonna run you through a little bit about the demographics and the layout of this massive metropolitan area of L.A., talk to you about the market, and then we'll dive into a couple of our assets.
Thanks, John. When we talk about Los Angeles, we're really talking about LA County, not the actual city of Los Angeles. LA County is 4,700 sq mi. To put that in perspective, New York with all the boroughs is about 440 sq mi. It's 220 million sq ft. New York, for example again, is 400 million sq ft. Much more spread out, much less dense. We focus on nine submarkets. The main submarket is West Los Angeles, where our two assets in Santa Monica are located. El Segundo is another market we're focused on. That's within the South Bay submarket. We have it highlighted independently here because the majority of office space in the South Bay is located in the small El Segundo submarket.
If you focus in a little bit more into West L.A. and Los Angeles as a whole, you see the higher stratification across L.A. County that has developed over really the last hundred years. Traditionally, you have your higher tenants in downtown Los Angeles. You have your studios and entertainment in Culver City up through Central L.A. into Hollywood and into the Valley. You have tech, entertainment, and gaming over on the west side, which spill down into Playa Vista. Then you've had aerospace traditionally in El Segundo, but that is starting to change, and we'll talk about BCNC and how that's changing later on.
Six years ago is when BXP's entrance into the market actually took shape after a long, long time of study. I think if you guys have followed Boston Properties, you know, longer than we've been at the company, diligence and thoughtfulness to city entrance and investment thesis comes to forefront of mind. I think that's why a lot of us joined the company and really love the strategy and the execution about how thoughtful we are with our specific assets. Colorado Center came up six years ago. Blackstone EOP was marketing its 50% interest, and I think a lot of groups looked at the asset and didn't see what Boston Properties saw.
That was the ability to acquire something that had been a little bit forgotten about, not updated in a long time, but really have the potential to be an A++ environment. We've got a full city block at Colorado Center. It's 16 acres. It's 1.2 million sq ft. When we think about the amenity package that is now available after a $35-$40 million capital improvement project over the last five years, the list goes on and on and on. We've got an Olympic-sized swimming pool. We've got three levels of below-grade secure parking. You can get in your elevator on the third level of parking below grade and go right up to your space. You've got an Equinox-style gym. You've got a full-service, now renovated, very contemporary food hall. We've got a new full-service dining restaurant that's coming on-site.
We've got on-site daycare that's mandated to stay. We've got a 4-acre public park that's open to the entire city and the community. We view this as a really, really solid example of placemaking in tomorrow's world. Where we're focused with our 50% interest here at the Colorado Center is on 110,000 sq ft of vacancy. It's new vacancy for us. We've recently cleared it up. We've got a 30-foot atrium of a 2-story atrium upon entrance into this space. We've got a screening room. We've got views of Century City, Hollywood, and to the west of the ocean. We think this is probably our best space in the project and some of the best space in West LA.
If you're gonna be leasing a nice chunk of space in this market, having competitive A+ space, as we talked about this morning, makes all the difference in the world. Two years after the entrance into L.A., we acquired the Santa Monica Business Park, also again from Equity Office, and we brought in another 50% partner here. You're gonna start to notice a theme. We looked at the business park as an opportunity completely different than Colorado Center. This is a longer-term redevelopment play. It's on three times the amount of land, so it's 47 acres, yet again, 1.2 million sq ft. What does that mean for us in the near term?
Well, it means embracing the 30 and 40 year-old assets and buildings that we have and doing something that we oftentimes don't see in L.A., which is embrace the beauty, embrace the natural landscape, embrace the permanent 70-degree weather that we have every single day of the year. We spent not very much money, and we're able to create indoor/outdoor space and place, vertical connectivity, tenant amenity lounges, and you can see a little bit of the pockets of the buildings here. We've got a lot of interior courtyards. All of a sudden, in a post-pandemic environment, that amenity in itself is proving its weight in gold.
Doug mentioned this morning, given the size and the scale of the outdoor placemaking, we're picking our moments, and we're picking our pockets to place capital as we think about longer-term redevelopment, and who might be our anchor clients over the long term here. Beach Cities, this is our third asset in L.A. It's our first development project. We're thrilled about it. Alex and Ray Ritchie are development team members out of San Francisco. Everybody's on board, and we're actually co-developing this with a group that we think is the best developer operator in the South Bay. This is a 7-acre site in Main and Marine Street of the Rosecrans corridor, which is the heart of the Manhattan Beach, El Segundo office market. It's 7 acres. It's two buildings.
It's purpose-built, and we're currently programming what Alex and the team are gonna bring to the market that is so unique, again, in this marketplace, but it shouldn't be. It's just not there right now.
I mentioned that El Segundo, over the last 30 years, was traditionally aerospace. Aerospace inventory is usually, you know, pretty tired, and it's reaching its, the end of its useful life, let's say. Because of that, a lot of the buildings don't have the amenities that we're gonna be able to provide with this new development. The rooftop deck, indoor/outdoor space, vertical connectivity with natural light and fresh air, which is critically important to tenants, especially in Southern California, we can take advantage of, you know, the warmer weather, as John calls it, of, you know, 68-72 degrees, year-round. We're excited about it, but the real amenities, around the Beach Cities, you know, we have our, you know, drivable amenities for lunch, but the real amenity for the site is the South Bay itself.
I don't know if you guys spend any time in Manhattan Beach, Hermosa Beach. It's incredible. It's walkable. It's a different lifestyle proposition to the rest of Los Angeles. CEOs wanna live there. Entry-level employees can live there. When I first moved to L.A. 12 years ago from Chicago, I moved to Hermosa Beach. I lived a block from the beach for $1,100 a month, and it was fantastic. That's where people wanna live, and they don't have the space commensurate with where they live. That's what we're hoping to fix. As part of the proposition, we have the intersection of really the locations of transportation modes across Los Angeles. We have the Metro Green Line Light Rail, which will take you to LAX and eventually to SoFi Stadium.
We have the Brown Line, which will take us north-south from the rest of Los Angeles that will connect. We have, of course, our lovely freeways as well that provide access from across LA.
We just bring this up because it kinda demonstrates, one, the placemaking ability. If you see here what we're thinking about programming on top of our rooftop parking. If you see the angles and the nodes and the 25,000 sq ft of terraces, combine that with the ocean views, it's not surprising to us that a prospective client actually found out about the design and the development, and they reached out to Alex and our team and said, "Hey, we know you guys aren't in the market yet. You're not finished with even your construction documents, but could we have a proposal?" Some of those things are percolating despite the challenging market that we have. We're excited to bring our first development project to Los Angeles, and we're gonna turn it over to Kelly here to talk about Seattle.
Thank you, team. I'll let you drive. Let's start on the region. If all of you aren't familiar, when you look at literature on the Seattle region, you kind of hear about Seattle and then the East Side. The East Side is made up of Kirkland, Bellevue, and Redmond. We've been looking at four markets on the East Side: Redmond, Bel Red, Spring District, and then Bellevue CBD. When you go to Seattle proper, there's been four submarkets that we've been looking at there as well. The Seattle CBD, where we acquired our first two assets, South Lake Union, Denny Regrade, and a little bit in Pioneer Square. The overall market is only 100 million sq ft. About 63% of that is Class A office. The light rail, the existing light rail is this dark line here, so it kind of just runs north-south.
What's interesting, and they've been working on it for quite a few years, the light blue line is the light rail being built right now. That's gonna open at the end of 2023 and some of the stops into 2024. What that is going to allow is these cities to be connected in a very short period of time. You could be in Redmond and Bellevue and be in downtown Seattle in about 15-18 minutes. The main question we get asked is: Why Seattle? I relocated from our New York March 1st, 2020. Things changed very quickly, almost on the daily basis. What did not change is our determination to be in this market, and one of the main reasons that is the clients that are here.
When you think about the amount of headquarters and the diversity of headquarters in this one region, it's quite remarkable. People always start with Amazon and Microsoft, maybe the easy two to name, but Starbucks, Costco, Alaska Airlines. There is a great diversity, and in your daily lives that you use, of headquarters that are not only regionally headquartered here but globally headquartered. All of that really stems from the talent base that comes out of this region. It has been number one for programmers and developers year- after- year, number two for female programmers and developers year- after- year. That base is why so many companies are headquartered here and why you see such longevity and diversity in the clients. Our region.
In the 2.5 years, we're proud to say that we are not only open, but we've acquired two assets, and it all started with Safeco Plaza. We closed on that on September 1 of last year and then Madison Center in May of this year. Just to go into it a little bit more, they are only one block apart. I don't know how many of you have been to Seattle, but they are. It's a steep block. It's about a 5-story difference. Even though you're just going one block between our two assets, you really have to work for it back and forth. What's really interesting is the CBD is only 12 blocks by six blocks wide. Having it in the center of that, all modes of transportation are accessible. The I-5 I nterstate is our main thoroughfare.
Third Avenue is the main bus and light rail line. Similar to what everybody keeps saying in the movies and TV shows, yes, we do commute via ferry, and the ferry terminal is right here. All different types of transportation for our Seattleites make these two buildings very accessible. Let's talk about Madison Center, our most recent acquisition. It was built in 2017. It's about 37 stories, but it is at the top of Madison, so it does feel quite taller than that. It has a great client base. It's about a mix of 50% tech, 50% professional services. What's really remarkable is the amenities. It's about 30,000 sq ft of amenities. When you enter into Madison Center, there's a 3-story rotunda with Retro Coffee right off here.
We're proud to say that Retro's doing so well they actually increased their hours, so that's always wonderful to see. We have a conference facility that seats up to 150 people, so it can be broken down into three separate rooms or one main room. We have a library. We have the boardroom up there with a private terrace. What's really interesting is the fitness facility. I don't know if you've heard about the WAC, the Washington Athletic Club. It is the number one fitness facility in Seattle. What's great here is we partnered with them. They lease and manage the space. There's yoga on the rooftop. There's cycling classes. There are many options available to our clients that makes it feel like a real fitness facility. Then what's also one of a kind is the rooftop.
It is the only one in the CBD. I know the rumor is Seattle rains all the time. I'm here to tell you it's not all the time. We do use the rooftop. It has views all the way around, and it's quite remarkable and something we're really proud of. We only have one floor left in Madison Center and three little small spec suites, so we're 93% leased and really thrilled to add this to our portfolio. Safeco Plaza. When I relocated, we identified Safeco Plaza quite early, and it's quite unique. It is a full city block, which is not common in Seattle. It's a square footprint with a square center core. It lays out extremely well.
What it also has is all of the floors, including even the lowest possible client floor, has 360-degree views. You can see Mount Rainier, Cascades, Olympics, and the Space Needle on every single floor. What you might notice is there's room for improvement, right? What's interesting is Safeco Plaza has traded hands about every five years. You will not see it on the market in five. But what we can do is we took it as an opportunity to really redevelop the amenities and reutilize them. What we don't want is something to check the box. We want people to be just as excited when the building was built. It's timeless, and it's classic, but it looks aged in its amenities. We're excited to reposition this one, and we'll show you kind of some concepts that we're thinking about.
The elegance of the building you can see when you walk up to it. Once you enter, it feels a little dated. We need to add lighting. We need to revitalize that lobby experience. Safeco Plaza is its own ZIP code, which is quite interesting, 98154. The conference facility seems to be about 150 people is what a lot of clients ask for. My guess is we have it to be 154 people can be there. We tie it into our own ZIP code. This floor is accessible by every single client floor, so it just makes it a great space right off that wonderful plaza. Bicycles. About 80% of our existing clients cycle to work at some point. It's a large percentage. Seattleites really enjoy cycling.
What we wanna do is create a much better experience when they do that and create some sort of bike facility, maybe called a hub. I see we have the hub in almost every market, so maybe we need a hub in Seattle. Have it so that there are shower rooms, locker rooms, and you can really go whether it's a regular bike, electronic bike or electric scooter, you have a great place to start your day. The boardroom, like I talked about in Madison Center, was interesting. It's booked a lot and started meeting with clients and kinda asking why. I mean, a table that seats 18, most clients have that in their space. What they explained is that this is a time to grow your business and expand.
What they want is a private area that they can meet with people that perhaps isn't on their floor. We're gonna have a boardroom as well at Safeco Plaza, which has a view of the Space Needle, so our existing clients can use it during the day, and then we can rent it out after hours. Then we need to change the experience. Right when you're at that sidewalk and you're looking at Safeco, if you look up, it's beautiful. If you look at the plaza, it needs to be updated. We're trying to figure out some ideas. What's interesting about Seattle is obviously we're in the Evergreen State.
It is green year-round, so maybe there's a way of doing landscaping or something so that even though this building is very classic and common in a lot of cities, you realize you're in Seattle and proud of it. How do we look to the future? As we're looking to grow in these new markets, one of the great things right now in Seattle is we almost have zero roll, as Doug said, over the next four years. That provides us a great opportunity at Safeco Plaza to work on our concept plans, get construction started, and have these amenities ready before our main tenant roll. Why are people relocating here? It's such a large pull. The no state income tax definitely helps, I can tell you that. It's quite nice. What it really is kind of the quality of life.
You go to work, in about five minutes you could be on a boat and swimming in Lake Washington. As someone who relocated from New York City, swimming in the Hudson River, kinda gross. Swimming in Lake Washington, quite nice. The quality of life of hiking, biking, outdoors, it's right there. You don't have to drive an hour to be there. Really, it's the talent. The national average for a bachelor's degree is about 43%. It's over 65% in Seattle. This is a very talented workforce, which is why there are so many headquarters here and why we see great opportunities for us to grow in the future. Hopefully we'll have more LA and Seattle assets, but we're thrilled about our start into these two markets. I'd like to open questions, any that you have for us. Yes, please.
It's a great question. It's a bit early, but the amount of interest right now. I'll repeat the question just because we're live here. The question was, the amount of interest that we have at Beach Cities, which is our development site in El Segundo, and the types of potential clients that are inquiring. I would say the types of potential clients that are inquiring span the board. Professional services, both traditional, a little bit more new age, all the way to media, tech, entertainment, and studio users. It's a unique site, so I think the location kinda speaks for itself, and we're just kinda wrapping up our design right now on the exterior, and we're still subject to change a number of things.
If a user wanted to say, "Hey, we'd love to make this our HQ," we would program that and take the finish level to their spec. That could range from A +++ , as you could imagine, all the way down to, you know, A +, right? We're not gonna do anything but the best product type down there, and I think that's led to the initial inquiry. You got us for more minutes, guys. Yeah. Yeah. Thank you, guys.
Good afternoon, everybody, and welcome to the BXP Investor Day presentation on the New York market. For those of you who don't know me, my name is Hilary Spann and I am the Executive Vice President of the New York region. I have here with me today Andy Levin and Heather Kahn from the leasing team, and Rich Monopoli, who I think is just taking a break for a minute, will be joining us momentarily. Rich is the SVP of Development for the New York region. Here you see our agenda for the afternoon, and I wanted to point out on this slide here on the right-hand side a rendering of 3 Hudson Boulevard, which is one of our development opportunities, in the New York market. I wanted to give a shout-out.
Rich, who's here now, hi, Rich, is the development lead on this project, and Heather is the leasing lead on this project. As we go through the presentation and when we have Q&A, they're the right people to answer any questions that you have on this project. You see here some statistics on the New York portfolio, and Doug went through some of the details of its performance over recent quarters. I thought I would give a little bit more of a broader context for what's going on in New York as a market to give you some sense of how we're situated within New York.
New York is a 24-hour environment of live, work, and play opportunities, and I thought I'd go through each of those a little bit to sort of give you some stats on how the market is performing on those fronts. The multifamily vacancy in Manhattan is 2%. There are more people looking for apartments in New York than can find apartments to rent right now. It should be no surprise to you that multifamily rents have gone up 29% year-over-year. From a live perspective, people are back, and more people want to come, and one of our great challenges is to figure out how to accommodate all of those people with housing stock. Play. I don't know if any of you live in the downtown markets like SoHo and Chelsea, et cetera, but I do, and the tourists are back.
I can attest every time I run over one of them with my stroller on the weekend that they are back in full force and they add a lot to the economic base of the city, which really helps with its vitality and certainly helps with our city's budget. That gets us to work. BXP's New York portfolio is entirely comprised of premier workplaces, as Owen defined in his opening remarks this morning. The market in New York has performed really, really well in recent quarters. In fact, August of this year exceeded the five-year average by 42% in terms of leasing volume. That's for the market as a whole. It was consistent with 2019's leasing averages pre-pandemic. The market is demonstrating some unevenness, but relative strength in terms of overall leasing.
The final comment I want to make on the office front is about BXP's portfolio performance. Our physical occupancy has reached new highs pretty consistently week over week, including a new peak last week. One of the things that is really encouraging that's going on in the market is this is pretty broad-based. We saw last week both Metro-North and the New York City subway system post new record ridership for the post-pandemic period, and so people are back in the office space, and we are very excited about the opportunities that that will afford us, and we'll talk about some of those going forward. The final comment I wanna make is on sustainability in the New York market for BXP. You all know that BXP has made a commitment to be carbon neutral by 2025, and New York as a region is doing its part.
This is important locally because New York City has enacted a law called Local Law 97, which has penalties associated with properties that fail to meet sustainability requirements. Those penalties begin in 2024 and they escalate in 2030. BXP's New York portfolio is compliant with Local Law 97 for 2024, so we've already achieved the requirements that are set forth by that legislation for 2024. We're actively working through sustainability initiatives with Ben Myers and his team to be well on the way to compliance with 2030 regs, including a NYSERDA project called the Empire Challenge, where we're taking on a heat recapture project at 601 Lex.
We're also replacing the chiller plant at the General Motors building, and while these don't sound like, you know, super interesting initiatives, they're critical, absolutely critical for the sustainability progress of the New York portfolio. With those opening comments on the performance of the portfolio, I'm gonna hand it over to Andy to talk about our leasing, and we'll go from there into a discussion with Rich on our development opportunities.
Thanks, Hilary. So we're gonna talk. A lot of these statistics will be in the Manhattan market overall. With respect to Manhattan availability, I think if you were here in 2017 and in the intervening years, we were talking about the Manhattan market and the new development that was coming online. We also talked a lot about the leasing activity and the velocity in the market. We were pretty confident the leasing activity and velocity in the market would keep pace with some of that increased supply in the market. In fact, that held true, and the availability rate was actually pretty constant. COVID hit and leasing activity took a dip. People were not leasing space for about a year and a half, so you saw a run-up in the availability rate.
Since that time and leasing has resumed, you've seen a flattening off of that availability rate and even it coming down slightly. One thing else to note on this slide is the relative availability in sublease versus direct space. They've remained pretty constant. Even during this period of time, you haven't seen a ton of sublease space come on the market, which means, I think, that people are still keeping their office and utilizing their offices. With respect to asking rents in that period of time that we talked about as well, there were some balance. You didn't see a spike in rents as leasing activity became quite healthy. We came into COVID, I think, in a more healthy dynamic in terms of rent.
You haven't seen the rents come down to any great degree with respect to the market in New York. With respect to leasing activity, first half of 2021, we still were not really back to leasing space. Second half of 2021, the leasing market started again, and you saw two very healthy quarters. 2021 obviously better than 2020. So far in 2022, the dotted line is that is the third quarter average over 15 years. There's a month to go in these statistics, so we believe we're gonna hit that line. And then we should get pretty close to that 15-year average for year-end. 2022 even better than 2021 and 2020, averaging back up to the norm. Just drilling down and seeing how we got there in this year and coming out of last year.
Coming out of last year, we had a very strong fourth quarter. A ton of stuff got done. A little bit of a lull, you know, at the start of 2022 because so much happened at that period of time. March was a great number above the average. Since that time, we've really been averaging out that five-year mark, with August being a very robust 42%, as Hilary talked about. How does this translate to our portfolio? Again, very somewhat consistent. We had a fantastic fourth quarter. We as well had a fantastic first quarter relative to our historical numbers for those quarters. Quarter two and quarter three, while it looks lower, it's just a return to the normal average for those quarters. So far, 2022 is tracking at or above average with respect to the year.
Sort of drilling down a little bit further, we don't judge ourselves against the whole market. We judge ourselves against the product that we compete, and we compete in the prime space. If you look at the direct vacancy of prime space, it got elevated a bit, but it's back down to 8%. Why is that? Because more of the leasing activity is happening in the direct space in the premier buildings in the market for which our space is counted. We're seeing that it's having an impact. In fact, as people and as the market looks at that direct space in our market, people are now starting to talk about development once again. To talk to you about the development in our portfolio in New York, I'm gonna hand it back over to Rich.
You heard it from Andy, you heard it from Doug, you heard it from Owen. Prime properties, new construction continues to outpace the broader market as it pertains to absorption and pricing. I think BXP New York is particularly well positioned to capitalize on that with two new development opportunities that are well positioned to participate in that market. This is 3 Hudson Boulevard. It's at the corner of 34th and 11th. This is about a 1-acre site that can support a 50,000 sq ft plate at the podium, tapering to 32,000 sq ft plates at the top for a total of about 1.85 million sq ft over 52 stories. This site's particularly special for four reasons. First, it's surrounded on three sides by avenues, so it's got great light and air surrounding the east, west, and south.
Second, it's on top of the 7 line, 7 Line Hudson Yards subway stop. It's a great example of transit-oriented development. Third, it's got a great public park on the east side, which sweeps into our entrance that's already constructed, one acre public park. We talk about this as though it's got the vibe and feel of the entrance to the GM Building. We talk about it internally as the General Motors of Hudson Yards. Lastly, as you can see here, with the Javits Center set low to our west, we've got great views of the water, the Hudson, sunset views, et cetera, on the west side. This is an image of the podium tapering into the tower at the ninth floor. You can see those water views on the west.
As it pertains to commercial real estate, if you've got a subway stop below you're built on a park, and you've got water views, chances are you're gonna do fairly well. We're very confident that this is gonna be a great investment for us. We've got an eye towards sustainability as it pertains to the building envelope, high performance, HVAC systems, et cetera, and now we're focused on decarbonization as it pertains to our steel and concrete spec. The building, we started construction of the foundation in 2018. We brought that up to grade, and we paused. We're well-positioned to restart when we find an anchor. As Owen has indicated, we need a substantive pre-lease to get going. We're well positioned to restart when we find that particular anchor. The second opportunity in New York is very exciting, 343 Madison Avenue.
It's at the corner of 45th and Madison, just adjacent to Grand Central. This site's about 25,000 sq ft, which is about half the size of 3 Hudson Boulevard. Excuse me. It can support about 25,000 sq ft plates at the base, tapering to 20,000 at the top, for a total of about 850,000 sq ft. We think that has nice appeal between corporates at the base, multi-floor corporate users at the base, to boutique financials and professional services at the top, all of whom are looking for that single seat commute into the city from Westchester, or what's very special about this site, it sits adjacent to East Side Access, which is the Long Island Rail Road connection to Grand Central.
It's been talked about for 50 years, been under construction for 20 years, and it's gonna open in three months. We are convinced that Kathy Hochul is gonna get the rolling stock coming in from Long Island into this particular stop in December. We think that's a real game changer as it can add up to 160,000 daily commuters coming to GCT. Previously had to go through Penn Station, so it's a game changer for Midtown East. This is an image of the building at the northwest corner, where through our obligation in the ground lease to the MTA, we have to construct an entrance down to that East Side Access concourse. We're very excited about this. I'm gonna hand it back to Hilary to talk about new submarkets.
You're all aware that BXP is a dominant player in the premier workplace environment in Midtown Manhattan. In December of 2021, our team purchased 360 Park Avenue South, which is in the Midtown South and Madison Square Park submarket of Manhattan. This represents our entry into those live, work, play neighborhoods that Owen described in his opening remarks. Here, banded across the middle of this slide, you can see some others that we think are really potentially interesting investment submarkets for BXP. Another submarket that we find very compelling is Hudson Square. It's adjacent to Soho. It's a self-contained, 24-hour submarket, and we'll be looking at opportunities there as well.
Now there are some challenges to this strategy, and primarily the challenge is that the office stock in general in this area of the city is somewhat older, somewhat smaller, and therefore somewhat harder to identify and execute on our premier workplace strategy. It's going to require patience, without a doubt on our part. We're actively looking at appropriate opportunities here as and when they come available, and we'll look forward to expanding our presence in Midtown South over time, again, as the appropriate opportunities come to us. In addition, we are expanding our focus on the life science industry in New York. We're very interested in the opportunity to partner with the city and its institutions to create life science at scale.
That also requires patience because it requires the partnership of the institutions of New York City and the city itself to require development at scale that optimizes our expertise in New York. You have here with you today one of the people that was involved in the development of the Broad Institute, and we are one of the few organizations in the real estate industry that can bring that expertise to the city of New York. Again, gonna take some patience. We'll have to wait and see what the city's needs and its institutions needs are. As and when those become available, we're very interested in expanding our focus on life science in New York. We've listed here a couple of the dominant life science submarkets in New York.
There are a couple of others that have developed up around Columbia and on the west side of Manhattan. We'll be tracking those closely as we move forward. To talk a little bit more about our Midtown South strategy, I'm gonna hand it back to Rich, who's going to go through 360 Park Avenue South.
Thank you. As Hilary indicated, the opportunities are not widespread. We are seeking unique opportunities where we can add our development capabilities and deliver prime workplace, workspace. The stars aligned last year when we identified and closed on 360 Park Avenue South at the corner of 26th and Park Avenue South. It's two stops from Grand Central on the six and about a 12 or 15 minute walk to Penn Station towards the west. It's a block off of Madison Square itself, the park, which is a fantastic location, a very desirable live, work, play location. We're really thrilled that we have gotten our hands on this particular asset. It was unique because it's something of substance, 40,000-50,000 sq ft. It's a fee simple acquisition, and it was fully vacant at closing. The stars aligned. This was a unique opportunity.
We're really thrilled to have it in the portfolio. The building's about 100 years old, and it's got great bones with 13-foot floor-to-floor heights. It's got side core elevatoring with elevators on the south and elevators on the west, which allows us to partition and create a building within a building leasing opportunity. We're taking a holistic view towards the repositioning, soup to nuts, top to bottom with a focus on hospitality.
We're trying to create spaces for our clients to work individually, to work collaboratively, to socialize and learn together by delivering from the top to bottom in the bottom right rooftop work area lounge at the rooftop garden. We're scraping the entire ground plane and the garden level below to create some work lounge areas, 150 collaborative kind of conference space down in the garden level, and we're complementing all that with a Michelin star chef-driven restaurant concept, food and beverage concept to integrate with all of that to service our clients. Can't announce that yet, but we're very close, and I think that'll have a real splash in the market. This was a great opportunity for us to get in Madison Square Park. We're gonna continue to seek more opportunities there. With that, I'm gonna hand it to Heather to talk about amenitization.
Creating a sense of place and amenitizing our portfolio is nothing new to Boston Properties. We have actively sought to enhance our premier workplaces through the curation of strategic amenitization. That's evidenced here by our existing list of assets, which predominantly have an amenity offering. As Rich and Hilary, the team have talked about here and in a broader context today, we're very focused on creating the right program for our future developments. As we look to amenitize our buildings, we strategically look at the assets, the tenant base, the location of the building, and focus on creating the right offering. This historically was done to attract and retain talent and assist our occupiers in doing so.
It's taken on a new focus today as we look to the return to work and create a new experience for people as they're coming back to the office space. Walk you through a couple of examples of what we've recently created. At the Midtown campus, where we've had the critical mass, 4 million sq ft at 601 Lex, 599, and 399 Park, we created a 30,000 sq ft food and beverage offering. We're gonna cap this off at the end of the year with a new restaurant that's gonna be run by Alex Stupak, called Misha, so an exciting addition to this food and beverage offering. At 601 Lex, we've also leased 30,000 sq ft to a third-party conference facility and 25,000 sq ft to a third-party fitness operator.
Both of these organizations collaborate with our BXP campus tenants by offering discounts, and I think really have created an overall package that supports the needs of our tenants like Blackstone, Kirkland & Ellis, Millennium, these major corporate users, critical mass, and supporting a larger offering. When we look at something else at the GM Building, we're creating 35,000 sq ft dedicated amenity space. We embarked on a series of tenant interviews to find out what the needs were for the tenants of the GM Building, and the consistent feedback was a large scale town hall style meeting place. In addition, there was a need for food and beverage as well as a fitness offering. The fitness offering is gonna be commensurate with our tenants at the GM Building, particularly as it relates to the locker rooms where we're putting in some bougie finishes.
We've partnered with Exos, which is a sophisticated wellness and fitness operator, and we've also engaged ETC here to help run the conference facility and food and beverage offering. You can see that it's a high-end offering of high level of finishes. We've got the large town hall conference room up on the right there, the fitness facility below that, and then more of the community collaborative space that will sort of support the entire offering. Looking at a slightly different model, we'll go to Times Square Tower, where we're building out 14,000 sq ft on the sky lobby of the building. Again, it's food and beverage, conferencing, and community space.
With this initiative, Boston Properties is gonna run the conferencing and the community space, and we've brought in Sodexo, which is a corporate food service provider to kinda help curate the food and beverage, and coffee offering that'll be on the north side of the space there. You can see that this is again a highly designed environment, but maybe a little bit more casual, a little bit more fitting to our tenants at Times Square Tower. We're including a game area, a TV area, just something to kind of curate the offering for the tenants in that building. We will also have a town hall meeting room, and again, importantly, a food and beverage offering. Two items to note, particularly with Times Square Tower and GM, as we launch these offerings, both were critical in securing major new leases.
At Times Square Tower, OCC was very focused on an opportunity that had a 100-person conference facility, and Perella Weinberg in all of our renewal dialogue with them were also very focused on a similar offering. With that being said, I think we'll turn it over to any questions, or anything else the team would like to add.
Sure. To repeat the question for our online listeners, the question was, could we talk a little bit about the pre-lease requirements to go vertical on 3 Hudson Boulevard and 343 Madison, and then what rent levels are required to support those developments? I'll hand it over to Rich to talk about the pre-lease. Oh, I didn't mean Heather. You can talk about the pre-lease at the 3 Hudson Boulevard.
I think we're looking at a variety of large users at the moment. We haven't determined a square footage of what it is gonna take to pre-lease, but I mean, you're looking at critical mass type tenants. I think, you know, we're looking and talking to tenants that range from 400,000-700,000 sq ft, a variety of user types. We strategically designed the building to support two anchor tenants. The base of the building is kind of likely targeted towards a financial user or sort of a technology-type tenant. We've got 50,000 sq ft floor plate, so sort of like critical mass user. And then the tower of the building will likely support more of a professional services or law firm.
I think, you know, from a rent standpoint, look, again, looking at the rent stack, we say we're probably asking somewhere between $120 all the way up. We don't wanna price the top of the building now, but if somebody pushes us for it, we're gonna be pricing it north of $200 a foot. That'll be the last space to lease in the building. I think the lease-up of a new development, and pricing and what a deal will look like changes based on where you are in the life cycle of leasing. So your first tenant in, their deal may look very different than your last tenant, which you see very clearly at One Vanderbilt, Manhattan West, and a lot of new developments today. Any other questions? It varies, right? So. Oh, yeah, sorry.
When we look to amenitize a building, how much leasable space are we taking out? If you look at the Midtown campus, quite frankly, we didn't take any space out because in each one of our offerings there, we've either partnered with somebody or created some kind of, you know, economic benefit to Boston Properties at the end of the day. The GM Building, we created a strategic opportunity. We did take space out of the rent roll, but it wasn't without creating a strategic transaction to, you know, procure that space. That's 35,000 sq ft in one point or like.
200 sq ft.
Right.
When you need to get out of the box, you need to find another building, and how much space does that take? I don't think there's a formula that we go through. It's more like we need to respond to what the tenant, to what the tenants of the building and the tenants of the market are asking for, and how much space does that require, and where is that space located. One of the nice parts about Times Square Tower and the gym amenities, those are both above grade. A lot of landlords, a lot of buildings, they're actually putting them below grade. We find that they're actually responding more positively to them, and we're competing better against the competition when we put them upstairs, and we actually have natural light.
Yes.
The question that was asked is, we referred to August leasing activity being elevated, this past month, and the question was, how much of that is gross leasing activity, people moving from place to place or upgrading their workplaces versus net new demand? Yeah. I'm gonna hand it back to the leasing team to talk about that.
Look, I think the slides are showing, right? Absorption, your net absorption is sort of remaining a little bit flat. I think that that's indicative of your question, and what's happening in the marketplace. Maybe it is there is the flight to quality, which I think at the end of the day will benefit the Boston Properties portfolio. I don't think we've touched on it here, but in our four other presentations, really the big challenge for the future is for New York to figure out what's to come of the lower quality stock so that we can start to see our statistics, potentially from a velocity standpoint and an occupancy standpoint change, 'cause the statistics get weighted down by the B and C stock.
One of the things I would add to that is that the city of New York is clearly focused on this issue of what will happen to the lower quality office stock that is not going to be competitive over the long term. It's either not well-located, it can't be made to be a premier workplace, and it can't be made to be sustainable according to Local Law 97. While I think it's going to take the state and the city some time to develop programs as to how they handle this challenge, I think it's a solution that will be implemented. It'll probably take 10 or 20 years to fully figure it out, but that's really where I see the challenges in the office market. It's not in the premier workplace space. It's in the lower quality office buildings.
Okay, well, we are standing between you and lunch, and we've been told to make sure you know that lunch will be at Banners right here across the way. With the conclusion of this presentation, you should head over there for lunch. If we haven't answered your question, we will all be here for the rest of the day, so find us at lunch or some other time this afternoon, and we'll be happy to chat further. Thank you for joining us for the New York presentation. Take care.
This is how legends are made.
On the stage is Dave Provost of BXP and Jonathan Varholak of CBRE.
Thank you so much. Can everybody hear me? Welcome back from lunch. My name's Dave Provost. I'm part of the Boston development team, also co-head of the national BXP Life Sciences, along with my partner, Jonathan Lange. I am so honored and privileged to be hosting this next session. I've been looking forward to it all week. It's only Tuesday, maybe the weekend as well.
Yeah, that's right.
We have with us today one of the most respected, prolific, accomplished players in the not just local, but national life science market, Mr. Jonathan Varholak. Welcome to the stage. We appreciate it. Jonathan is a Vice Chairman of CBRE. He also heads up their national life science platform. He is a thought leader within the industry, very cerebral. He is also a trusted advisor to some of the most sophisticated, largest, most important life science companies. So he has agreed to take time out of his very busy schedule to join us today and share his thoughts on all things life science. I noticed there was a lot of questions yesterday. I would answer them on the market, but I would say, "Please ask Jonathan," because he's out there every day. He's with the users. A lot of questions about demand.
He represents most of those big users. We're gonna make sure we leave time at the end for that. If everybody could join me in welcoming Jonathan Varholak to the stage.
Thanks.
John, if you don't mind, it's been a busy couple weeks.
Yes.
A couple months for BXP Life Sciences. You've been a big part of our success. I'd love to just do a couple quick slides, quick commercial, and then we'll dive right in. Sarah, if you could change the slide. This next slide is this map. It illustrates the various life science clusters throughout the country. It's pretty easy to see that Boston and San Francisco are the dominant markets. You heard OT talk about it this morning. They're roughly 50% of the market. We have significant investments in both of those markets. While we're in other markets, we just wanna focus on those today. Highlights. We're gonna start with Greater Boston. Go to the next slide. Significant presence in Kendall Square, Cambridge, and in Waltham. I say Greater Waltham because we also have projects in South Lexington as well.
Let's dive into Kendall Square. Big week, right? JV 125 Broadway. John was involved in this transaction. We've talked about it. 6-story, 270,000 sq ft state-of-the-art scientific research facility surrounded by BXP synergistic adjacencies. We're really, really excited about it. We're also excited about expanding our relationship with Biogen. They're our oldest, in many ways, one of our most important clients. Not 100 yards from this building is 250 Binney, which was our company's first life science building. We did a build-to-suit for Biogen in 1982. Get your head around that. We've been doing this for decades. Then also with 300 Binney to terminate their office lease, and then convert that building, and I think it was announced this morning that we've secured a long-term lease with a...
I wanna get it right. I don't wanna say the name. It's a prominent life science research organization. Did I get that right, Mike? He's got a buzzer if I give away too much. But we wanna respect their wishes. I'm sure they want to announce it to their people. We're excited about that. Of course, we've got 290 Binney, which we were fortunate enough to sign a lease earlier this year with AstraZeneca, Jonathan Varholak client. By the way, as I go through this, you're gonna see me saying that quite a bit.
Absolutely.
'Cause he represents most of these big companies. 570,000 sq ft. We hope to start construction on that. We will start construction on that first quarter. Then 250 Binney, second phase of our development rights. 16-story, 580,000 sq ft. That's Kendall Square. To Waltham, 200 West Street, 270,000 sq ft. You heard Pat Mulvihill talk in the regional breakout. That's home to Sanofi's mRNA Center of Excellence for mRNA research, also a Jonathan Varholak client. They continue to expand in Waltham. That's a big win, not just for us, but for the region and in Waltham in particular. 880 Winter Street, we just opened that up this summer. That's 97% leased, pre-leased, with some great companies.
180 CityPoint, six-story, 330,000 sq ft building that we'll deliver late next year. 40% leased to two clients, also Jonathan Varholak's. I feel like we should be buying you something like a car or something, you know? This is like.
Hope so.
Incredible.
That's why I'm here.
Exactly. 103 CityPoint. This I'm gonna have a question for you. 103 CityPoint is our newest development. It's only 115,000 sq ft, but it's a hybrid. We were listening to our clients. You're gonna hear a lot about biomanufacturing. The first floor has a 25,000 sq ft, 32-foot clear space, which we think is meeting the market, and we're getting a lot of activity. That's Waltham. Getting a lot of activity on that. Let's shift to San Francisco. Thank you. I'm just gonna focus on South San Francisco today. Next slide. 751 Gateway, 100% pre-leased. Great job, San Francisco. And then 651 Gateway is also under construction, and I know is having a lot of pre-leasing success, which is great. We have additional development rights in the peninsula, which is fantastic. That ends our commercial. Thank you for your patience, JV.
Sure. No problem.
JV, I've known you for 25 years.
Yeah.
Consider you a good friend. I know all about you. I think it'd be helpful for the audience.
Yeah.
To learn a little bit about you and tell us about yourself.
Yeah.
Your career journey.
Great.
A little bit about yourself.
Thanks, Dave, and thanks to the BXP team for inviting me to join today. It's good to see everybody. I'm a native to Connecticut. Grew up in Fairfield, Connecticut, and moved into Greater Boston or Chestnut Hill the fall of 1989 and attended Boston College. I received an accounting major. Found myself working for PaineWebber. Quickly identified that I didn't wanna be a retail stockbroker. At that time I shifted into commercial real estate back in the spring of 1994. I joined Cushman & Wakefield at that time. Was probably with Cushman & Wakefield for about eight years and then shifted in. We start up our own firm, if you remember, Dave.
I do.
Back in 2001. Richards Barry Joyce & Partners. I was one of nine founding partners there. We had an opportunity to monetize, sell RBJ to Transwestern and then again Transwestern to CBRE just five years ago. I find myself here. I co-manage the Boston office with Andy Orr and John Lasher. Dave said I do have an integral part, probably one of four principals at CBRE across the states here that oversee our life science vertical.
Fantastic. John, what a crazy couple of years, right?
Yeah.
I mean, it's going back even pre-pandemic, but the pandemic.
Right
Just explosion in the investment in life science companies, explosion in real estate as far as.
Yeah
construction explosion in rent. I'm curious to know what indices do you look at? You're a trusted advisor to some of the biggest-
Yeah
... most sophisticated consumers of our product, and I know they must lean on you. What's happening in the market? I know that you are cerebral, you're data-driven. What are the indices that you and your team look at to predict-
Yeah
the health of the market?
Great question. I think commercial real estate advisors have probably always been criticized for being a bit too historical in nature. I would say specifically as it relates to the life science industry, we really do focus in on you know venture capital or PE-backed monies being pumped into the States not only nationally, but here in Boston, and I can recite some of those numbers, but also kind of a combination watching and monitoring not only current absorption, historical absorption, how do you know how do we best forecast what is the normalized new norm as it relates to life science absorption? As I truly believe that the industry it's in its infancy and has a long way to go.
You know, I would say back in 2017, 2018, we already anticipated a pretty big uptick in activity.
The leading indicator was those VC dollars.
Exactly. Even pre-pandemic, you know, I think in 2019 alone, Greater Boston, we saw about $3.8 billion in investment just into the Greater Boston ecosystem here. 2020 is when we really saw a leap. I think both nationally we saw $22 billion invested. Obviously the core markets of San Francisco, Boston, San Diego, and some others which maybe we'll talk about in a little bit. But in Greater Boston alone, that was over $6.4 billion. The real anomaly was 2021, so I'm preaching to a lot of people who know this industry probably well. But that was a year where we saw $33 billion in investment across the States, and here alone in Greater Boston, that was $12.4 billion.
Clearly, the market has turned. You know, we're facing some turbulence and some capital market headwinds. What's been interesting is, year- to- date, you know, or really, Q2 2022, we're at roughly $12.5 billion and about $3.8 billion on the national and Boston sort of a analogy, you know, tying back to some historical data.
Right.
That's a big indicator for us.
Yeah.
We can see that real time. Clearly with the difficult times that small to midcap public companies are having, it's setting itself up for a big M&A activity or what we call a big BD year. If you have a lot of young private companies that aren't able to reach back to the venture capital syndication, they have to look for other means of either an exit, which would be obviously the sale of the company or big business development deal.
Interesting.
The market is now showing signs of that. We've actually—there's been a few business development deals just announced in Greater Boston alone this week.
Yeah. That's interesting.
Yeah.
That could bode well for Kendall Square, which is home to 19 of the largest-
Yeah
... 20 biopharma companies as far as R&D presence.
Exactly.
That's interesting. We got a lot of questions both in our deep dive and last night at the cocktail party, and it makes sense. The amount of new construction both locally and emerging clusters has been dramatic. The question is, can the demand keep up with it?
Yeah.
What are your thoughts?
You know, our thoughts are, I can speak to Boston thoroughly. You know, just in this market alone, there's about 13.5 million sq ft in the pipeline just in Greater Boston.
How big is the overall market about?
The market in total is about 50.4 million sq ft, 50.5 million sq ft, and that's Greater Boston. I would say the core markets, which are obviously Boston and Cambridge. I think Cambridge is about 18.4 million sq ft, Boston's about 13.8 million sq ft, and then the core of 128, it's roughly about 10.5 million sq ft, you know, 10.6 million sq ft. Within, I'll call it that tighter demographic that is more Greater Boston, we've got roughly about 13.5 million sq ft in the pipeline, of which 50% is pre-committed before the capital market cool down.
Wow.
Roughly speaking, if you think of that, you know, we do have about 7 million sq ft, you know, that will be delivered between now and the end of 2024 in a market that seems quieter than the crazy velocity we've been seeing for many years. I think fundamentally we look at that, we look at employment in Boston. There's roughly about 6,000-8,000. We've been averaging about 6,000-8,000 new employees per year.
Wow.
Boston as a general I'll call it R&D population is right around 80,000 people here in Greater Boston, where San Francisco's very similar at just about 85,000, San Diego at like 38,000-40,000. You could tell that when you're talking about the epicenter of the world for life science to maybe, you know, the common investor or people trying to interpret this data, it's a pretty small sample size.
Right.
To answer your question, I think we've definitely got opportunity to fill that space, but I do think the silver lining in this capital markets headwinds is that it has controlled supply development. I do think developers, overly aspirational owners of office to conversion of lab space have been scared off. I think from a BXP standpoint, that's a healthy thing.
Yeah.
You want the market to be healthy and not have too much supply coming through.
No question. That's really interesting. We got a number of questions on that.
Yep.
Are we seeing some of projects that were, you know, everybody's got photorealistic images, breaking ground. Have we seen a slowdown? It's good to hear that you've seen the slowdown. I've seen the slowdown. The head of development for Boston the last couple years, I'm calling our A&E clients, excuse me, I&E, A&E vendors to say, "Can you work on this?" They're like, "We're just straight out." I am now getting calls from those firms saying, "We're slowing down. We can do some work.
Yeah.
That's a good sign. Let's talk about Kendall Square. We got a couple questions on our tour last night, and we talked about emerging clusters, both locally and nationally.
Yeah.
The rents are high, right?
Yeah.
I mean, historically speaking. The question was, well, why are some of these companies paying that premium, and why don't they go to some of these emerging clusters? I just thought a good question would be, you represent AstraZeneca, they're now a mutual client. Thoughtful, so sophisticated. Enjoyed meeting with them and working with them. What do they think as they make a locational decision? That's a big decision. They had a presence or still have a presence at Waltham. They made a big acquisition. They're AstraZeneca. They can go anywhere they want.
Yeah.
International in nature. Could you speak to a little bit about what their thought process is?
Yeah, that's a good question, Dave. It's definitely rooted in kind of my earlier point. It's just when you look at nationally, the R&D employment numbers are only, like, 760,000 employees. Think about that.
Wow
... across the States. When you think about what inning of play we are in, this life science market has got such a long runway of growth. To put more pointed to your question, you look at AstraZeneca, it was an acquisition of Alexion. Alexion was in Seaport. Obviously, their existing presence was out in Waltham. Demographically, it was a natural fit, but beyond that, Pascal Soriot, the CEO, just envisioned himself being very close to the, to academia and being able to be at the front of the most progressive, exciting technologies today. I mean, strategically, pharma is here for a reason. Pharma is here to be kinda scrutinizing synergistic R&D from small biotechs. Again, it comes back to business development deals or eventual acquisitions to refill their pipeline.
Yeah, that's interesting.
Pharma's always constantly looking at patent cliffs.
Right
How are they gonna fill their pipeline because they are pharma, and they're so capital intensive?
Location is so important.
Yeah, correct.
I remember we were presenting, Pat and I, and the rest of the development and leasing team to AstraZeneca. You were on that call, and it was Zoom. It was the middle of the pandemic. Pascal was leading the charge, so the CEO of AstraZeneca. I was thinking, "Hmm, we've done deals with Google and, you know, all these big companies. We never would have. We'd have senior people.
Yeah.
To have the CEO so engaged, OT, you were on that call as well, and everything was focused on schedule. One of his questions, "How do I grow? Can I grow?
Exactly.
Our density kind of inch wide, mile deep, was so important to him.
Yeah.
It speaks to the importance of Kendall Square.
Yeah.
Yeah, it's interesting.
Yeah. I think the corollary, too, Dave, is, you know, if you're not pharma, why do still small R&D companies wanna be in Kendall or greater Boston? Again, it's the same impact. It's from a decision-making standpoint, for these young companies who are living off 18-24 months of runway of cash, they don't mind paying the premium to be in a premium market because they think of their exit. They're, you know, oftentimes forced to look at long-term leaseholds. They can't look two years down the road. They're thinking about, "How do I have liquidity in this leasehold liability?" Again, what is more synergistic? How do we network and be in close proximity, you know, to the greatest universities and the greatest hospitals, you know, on the planet? That's certainly the mindset there.
It's interesting. Let's shift gears a little bit.
Yeah.
We have the pleasure of talking to you once a week, talk about the market. I'm always fascinated by being on these tours. I mean, obviously leasing's the first question. How am I gonna grow? It seems like more often than not, these small to mid-size companies, pilot manufacturing, GMP-ish.
Yeah
... is so critical. How can I fit it in? Can you talk to and educate everybody a little bit why that's so important because
Absolutely
Koop always talks about activity-based space. This is truly it. You've got a, basically a mini manufacturing plant.
Yeah.
Educate us.
Yeah, absolutely. What's interesting is, I mean, this has just been a function of how much the market has grown. You continue to densify and grow, and organically grow the next generation of R&D companies. As these companies mature into their fifth, seventh year of their life cycle, you know, call it eight out of 10 of them are accelerating to phase one, phase two, phase three, and are getting closer to their aspirations for FDA approval. That is typically the precipice of when they are pushed to say, "We need small scale pilot manufacturing," or they're looking to contract manufacturing organizations to sort of house what I would call initial prototyping of their R&D product.
Yep.
I feel like we're in an inflection point where those requirements are much more real due to the maturity of the R&D market. I think it's also a confusion in the market that large-scale manufacturing truly is stereotypical to pharma.
Yeah
or a big CDMO.
Right
who is then farming out or subleasing the space to the next generation of companies.
FDA approved actual manufacturing.
To your point, these smaller increments are typically, obviously, less capital intense and are allowing them to put their big toe in the water before they go out and try to manufacture their product.
They're going through the FDA approval.
Yeah.
iterative, so having those scientists right there.
Exactly.
It's wonderful.
They're very close to clinical and approval.
Yeah.
It's, I would say, an innocuous way to invest more capital without taking on $100,000's.
Yeah.
worth of plant.
It's interesting, we heard from David Schenkein from Google Ventures, who's on our life science advisory board. We're seeing more of these hybrid requirements because they need it. It's so critical to their business. You had also seen that, and that's where we made the decision. We always do well with larger clear heights. This is a good example of it. This is about 32 feet. Actually, this is probably similar clear height to what we did on the first floor of 103 Fourth.
Yeah.
We're already seeing activity where people are coming, "Oh, boy, I can use that for GMP, and then I'll.
Yeah.
I've got lab space as well.
Yeah.
Which is great. Interesting guidance. I wanna make sure I
Yeah. I was just gonna say, the key on GMP too is I think the market will welcome these CDMO providers or a building built well like 103 Fourth, because it does have to have residual value.
Right.
Right? Oftentimes, people made the mistake years ago by buying a flex building with 16-foot clear-
Right.
that had the power, and then it's got no residual value if the company failed.
Yeah.
I think people are becoming smarter. It's akin to where the R&D investments were 15-20 years ago in developing a, you know, purpose-built lab asset.
Yeah. Interesting. Well, I know everybody's got a lot of questions. I wanna be
Yeah.
thoughtful on our time.
Good.
I have to ask you the question.
Yeah.
Right? Known you a long time. You have a unique position because you represent some of the largest biopharma companies, international companies, but you also represent the up-and-coming companies, right?
Yeah.
You have a very close relationship with all the top VCs, so you'll be, you know, could be just five scientists on their own, and you're trying to find a home for them.
Yeah.
You know, you do a good job of that, and everything in between. You have local, you have national, and international experience. If you were investing your own money in a lab building, where would you want that building as far as long-term value from a location standpoint?
That's a loaded question. You're asking a Bostonian guy who works this market where to invest money.
By the way, BXP is for sale every day as well, so.
In all seriousness, it would be, of course, Boston, but you look to San Francisco and San Diego. I would also look to other emerging markets that might be Seattle, obviously DC, Philly, New York, I can kinda consider as one market, obviously RTP. But personally, I would still look to the three leading markets. Again, it's all about talent. It's all about labor. You have to stay core. I mean, we're going through some tough headwinds right now.
Yeah.
These secondary and tertiary markets, which may eventually get there as these markets continue to mature over the next decade plus, but stay true to your core principles. You have to think of all these men and women who are CEOs of these companies. It's all about talent. It's all about recruiting, human resources, competition, as you can imagine.
Yeah.
You really have to stay in these core ecosystems.
Yeah.
such as Boston, San Francisco
Yeah, it makes sense.
San Diego.
David Schenkein and Francois Nader are life science advisory board members. Our first call, they said, "Look, really, the biggest obstacle for continued scientific discovery are people and space.
Yeah.
One of the reasons they're working with us to help make sure that quality space hits the market and also for their, you know, companies that they can grow in a reasonable and rational manner, which is absolutely fantastic. Well, I know people have a lot of questions. We have one of the most, you know, preeminent minds in commercial real estate, in life science. I wanna make sure we leave some time for everybody. If there's any Q&A, any questions for John? Yes.
Specifically around traditional office conversion to life science space, I'm just curious, what do you think of that trend in general, whether you think it's actually competitive space versus traditional life sciences, and what are the two or three things you think are really key to make a conversion successful?
Yeah. Great question. Hopefully, you can hear me well. I would say that there are two types of office-to-lab conversions. There are ones that have the traditional bones that a purpose-built lab building would have. It's simple physical attributes. It's gonna be clear height. I would say the minimum you really wanna develop today is roughly like a 13'6" clear, and it's going to be power, are really kind of the main sort of principles there. Obviously, do you have the ability to carry the use provision? Can it carry what they call ACF use or animal care facility use for research? Those buildings can be very successful. You know, BXP had that opportunity at 880 Winter Street and converted to perfection.
That building was pre-leased. It far exceeded our imagination as it relates to lease-up. You do have the office conversions to lab. It was such a scarcity supply run-up and the market was so tight, there were buildings that had like 11.5, 12 foot clear that were converted. Now, they've been successful temporarily because in Greater Boston, it was so supply constrained. The longevity of those markets or of those buildings, I'm concerned about. You know, especially as the market softens here. We're sort of at flat rent growth for quite some time. As you can imagine, in any down market analogous to office, it's a flight to quality, right?
Over time, you know, just those physical attributes of that office lab conversion is going to be the huge disparity as it relates to success and maintaining rents long term.
Good question. Yeah, no question about it. We see it.
Yeah, we see it a lot.
You know, John and his team have been great. We are Alex brought it up earlier, upzoning and things like that. We're just so fortunate. The market's so strong. Any empty building that's a good candidate, the pricing is absolutely crazy in Waltham. We've got our own portfolio to pick from, and Patrick and his team are just so adept at being able to say, "Hey, this one's a good." Remember, 880 was 80% leased. We went to our clients and said, "Today's your lucky day. We're gonna relocate you. We're gonna make it financially worth your while. You're gonna right size or downsize or upsize, whatever it is." We're able to make that opportunity.
What's really interesting is some of our, let's call a spade a spade, weakest assets from a return perspective were some of these buildings that were isolated by themselves in the woods, and everybody wanted to be at CityPoint, walking distance to restaurants and things like that, where the life science companies, you know, this connection to nature. Nature is the most popular magazine that the scientists read. We put in walking trails that connect. Connectivity to biophilia is really important to them. I just think of the west side of Winter Street.
Yeah.
It's so successful, and there's a real ecosystem there, which is pretty cool.
This is the last question.
Okay.
Thanks so much for sharing your views. Just two quick questions. One, you talked about, you know, maybe a softening in rents right now. But in the major markets, how should we think about occupancy costs? Like, what is the ceiling as these companies think about, you know, cost as a percent of their revenue, real estate costs specifically as a percent of their revenue? And then what factors would you consider in advising your clients, "Hey, you know, maybe slow down growth in the big markets. Look at new emerging clusters that may be more economical"?
Yep. Would you mind just repeating the first part of your question so-
Just how do we think about occupancy costs maybe as a percent of revenue for the pharma life sciences companies? Like, what is the ceiling, you know, leaving aside this near-term softness that we're seeing?
Yeah. The percentage of
It's a really interesting question because it comes up a lot in Premier Workspace as well, which is what's the percentage of your overhead.
Yeah.
That's attributed to real estate? We think of just traditional workplace is between that 2%-3%, which isn't a lot.
Yeah.
Obviously, rents are a little bit higher with pharma, but.
It's a great question. I would be guessing, if I'm honest right now, as it relates to a percentage, it's gotta be 3x, though, what the tolerance is for an office user. I would say that right now the market has softened. I would say that rents in Kendall Square proper, there's kind of two stories to tell. I would say that for new supply built to suit, we actually haven't seen any movement in the economics despite kind of the capital markets over the last 9 - 10 months, that we're still sort of trading in the high 120s into the mid- to high 130s on a net basis for new product.
I would say in Seaport proper here, that's probably around a 12%-15% discount off the Premier Kendall product. I would say where the real softening has been in that 10%-12% range has been really more for the tenants that are looking for 10,000 sq ft, 20,000 sq ft, 40,000 sq ft, where the sublease market has really forced landlords with those smaller bandwidth of square footage opportunities or units of space to be a bit more competitive. That's kinda what we're working through right now as it relates to the market dynamic for rents and kind of a flat rent growth and obviously some decline that we've seen over the last nine months.
Yeah. It's a great question. Well, we've got a tight timeframe today, and your time is very valuable. Thank you so much.
No, thanks to you.
On behalf of all of us. We really appreciate it.
Thank you.
I have one last question before we get off. The Harborw omen, how are they gonna do?
Oh.
He's got two star soccer players. Hit 'em this weekend.
I gotta hire Dave as my agent.
How are they gonna do?
Yeah, we got a big match today against Plymouth North. I think they'll win.
Oh, Plymouth North, sharp elbows.
Yeah.
Good luck.
All right. Thanks, Dave.
Nothing but luck.
Thanks a lot, buddy.
Please welcome Rich Ellis from BXP.
Good to go? Great. Good afternoon, everybody. For those I haven't met, I'm Rich Ellis. I've been with the company a little over 15 years, out of our D.C. office, and so I've kind of come up through the development ranks. A couple years ago, Owen and Doug asked me to, as part of my development role, also oversee our residential portfolio and more recently have charged me with trying to grow that even further. Today, what I wanna do is quickly kinda give you an overview of the portfolio, kinda how we got to where we are today, what our pipeline is, and then more importantly, how we kinda grow the platform even further. Quick, I thought a quick history would be appropriate. Prior to going public in 1997, the company really didn't do any residential.
There was one small project in D.C. Went public in 1997, kind of the thought was mixed-use projects that had a residential component, let's sell that off. The thinking being that the public markets really preferred single asset class REITs. Then in 2008, that kind of changed for a couple different reasons. Number 1, actually my first project with the company was called The Avenue in D.C., and that's our residential project. Some of you have seen that was part of our 2200 Pennsylvania Avenue office project. Frankly, we got into that by chance. We had a partner that backed out of the deal kind of last minute, very turbulent financial markets. That project, I'll get into a minute, is a good example of how we were able to add value through residential.
That got us into kind of the residential in the D.C. market. Then Koop and team here in Boston, the Lofts at Atlantic Wharf, some of you have seen. Once again, very integrated with an office project. Those two projects kind of, I think, proved to the company that we could do residential. We learned a lot and made a lot of mistakes, but then kind of really grew it, from 2017 to today. We've actually done four additional projects, 1,600 more units, in the portfolio. We've built basically 2,400 units. We sold The Avenue, which I'll talk about in a minute. The portfolio today, which I'll walk through, is about 2,000 units.
As Owen mentioned earlier, if you kind of put a cap on that, it's almost a little over a billion-dollar business. We have another pipeline that we'll get to today as well. That's another 2,800 units in general. I thought, Helen, if you don't mind, before we kinda get into it, an obvious question is, you know, BXP is a best-in-class workplaces REIT. Why residential? I think there's a couple of reasons that have proven out over time. You know, number one, this is a great example. This project is a live, work, play environment, and the residential component of that is critical, we think. Reston Town Center is a similar example. I think over time, we have proven that we can do this, and it's become a core competency.
Why offload the residential component when we can do it is number one. Then you know, it's also a more liquid asset class, frankly. We'll give a couple examples of how that's proven out over time, and it allows us to harvest value at opportune times, given that liquidity. I think that some of the jurisdictions we operate in, Reston, as an example, requires or has a ratio. If you wanna get commercial office entitled, you need a residential component. In Reston, in particular, it's 50/50. Our and affordable housing is a critical, obviously, issue nationally. Our ability to bring residential workforce units, which we've done in a couple cases, affordable units in Cambridge, we think that's a key differentiator. It helps us, helps the office and life science business as well.
Most importantly, we're not just doing this to do this. We've created value, and we think there's opportunities to create value in our pipeline. An overview of the existing portfolio, like I mentioned. A little over 2,000 units, all this is now stabilized. Our Skyline project in Oakland stabilized this summer, which we were excited about. That was, you know, a tough market through the pandemic. That asset's doing great. This portfolio overall, like I mentioned, is a little over $1 billion if you place a 4 cap rate on it. I think most important to note is each of these assets really follows the BXP DNA of best in class.
Almost to a property, each of these performs on a rent basis at the top two or three properties in its given sub-market, so that the office best in class DNA is really translated over to the residential side as well. We're seeing, you know, depends on the asset and the quarter, but this year, you know, rent growth anywhere from 3%-10%, depending on the asset. We feel very good about the existing portfolio stabilized. Looking at our pipeline, and I call this kinda actionable pipeline. These are all sites that we control, some with partners, but are all entitled in various stages for residential. These are things that we're acting on now. Block D, and by the way, I promise, OT, we're gonna change the name of that with our good friends at PGIM sometime soon.
Hopefully, we won't be calling it Block D much longer, but that's under construction. We'll get into that in a minute. 1001 Sixth Street is a site in D.C. we've owned for numerous years now with a partner. It's a surface parking lot today. We think the highest and best use, frankly, now is residential. We're in early planning for that, and we hope the Mount Vernon Triangle sub-market that it sits in has performed great coming out of the pandemic. We feel good about getting that started here in the next year or two. You've heard a lot about 121 Broadway. That's a real project, deep into design as part of the overall Cambridge redevelopment that everyone's doing in this market. Back Bay Station actually has two potential residential sites.
We've only put one up here. This Garage E site sits on terra firma, and so we're rethinking that. This involves a little bit more entitlement work, but we think it's a kinda irreplaceable location for new residential. Reston Town Center next, you've heard a lot about, includes four development blocks that can be developed and phased over time that we feel very good about. This is another 2,800 units, $1.6 billion in project costs that we can, you know, more than double the portfolio just of what we control and have here. The other thing I would mention is that we have numerous land holdings in Waltham, you know, Princeton, New Jersey, in Shady Grove, Maryland, in Santa Monica Business Park you heard about, that are not zoned for residential today.
We are gonna spend some time thinking about maybe a parcel here, a parcel there makes sense for residential. I would say a lot of those jurisdictions are not looking for residential, and it's an uphill battle. I think that our local teams, if anyone's gonna get it done, it's them because you know, they have a proven track record in each of those sub-markets. That's not on here, but there are additional land holdings that we own and control that could lead to pipeline. As I mentioned earlier. Thanks, Helen. Two quick case studies just to prove out the value creation. The Avenue project in D.C., some of you might know, this is part of our 2,200 Pennsylvania Avenue office project.
This was a 60-year ground lease and just shows how the company was able to build this project on our balance sheet in a very difficult financial time. We did this to kind of live up to our word to a major office tenant. This project ended up being a great success, delivered to a, you know, over a 7% return. We decided in 2015 to sell the asset. Really good example of the liquidity and harvesting value. This was a 4.1 cap on, I think at the time was a 58-year ground lease. So real value creation on this project. This is one, like I said, we learned a lot about. It's really our first kind of project multifamily wise.
The Avant in Reston, I could do this for several assets, but this one is a good example of kind of our first Reston residential project, 359 units. We delivered it in 2013. Cash-on-cash return that exceeded 6%. If you were to apply, and you know, we've applied in this case a 4.1 cap, just given the current Treasury. You're looking at, you know, at least $25 million just on the residential component. Good example. This was a deal that was sourced through relationships. We bought the land from the lender, the note from the lender. Just another example of how we've proven value creation in residential and hope to do it going forward. Sorry.
I kind of talked about the existing portfolio, kind of the actionable pipeline, some other land holdings. Really, we think to kind of grow this thing to the next level from a residential platform perspective, we need to be sourcing new opportunities and joining forces and funding those with capital partners. We've talked a couple of times about today about our PGIM Block D project, which I'll get into in a minute. We think this is a key strategy for a couple reasons. One, we think our market knowledge has proven out as a good way to source opportunities, number one. But also, to be frank, you know, these joint ventures allow us to increase our yields with the management fees, asset management fees, et cetera.
We think that our local knowledge, entitlement, and development expertise can differentiate us from the smaller local sponsors that a lot of our capital partners are teaming with. We hope to tap into existing relationships and maybe form new relationships to find new opportunities, bring those to those partners and kinda help the yield and the overall kinda growth in the portfolio. Block D, you've heard a little bit about, so I won't go into too much detail, but this is a good case study, we think on what I just showed you in terms of partnering with very sophisticated private capital partners to grow the business. This is 508 units. It's the tower on the right here. It will be the tallest residential tower in the state of Virginia, believe it or not, when it delivers.
This is under construction now. We actually were able to redesign the amenity spaces and some of the unit layouts during COVID to kind of expand the co-working space. Many of our unit layouts now have a small kind of work from home area, so we feel very good about this. Honestly, the Reston rent trade-outs over the last six months make us feel very good about the underwriting from a rent perspective on this project. This is a 80-20 JV with PGIM, just as an example, and this could take many different forms, but this one is 80-20 with their core fund. We hope to deliver it in the second quarter of 2024. We're the sponsor, the development manager, and the asset manager.
I think it's a good example of we were able to convince PGIM, a best in class, very sophisticated, investor, that BXP, kind of a workplaces REIT, is a good residential partner to partner with. Again, the key there is that that is the type of model we're hoping to replicate going forward. Owen this morning mentioned kind of office to residential conversions. This is something that we're reading a lot about. We have actually focused on this a lot over the last, let's say, three-four months. We've come up with an internal scorecard, and a lot of the groups, Gensler and others, have these, to really help, quickly assess the physical feasibility of a given office building.
You know, there's various stats out there, but, you know, Gensler will tell you that 30% of office product is convertible from a physical perspective. That doesn't mean it all pencils by any means. There could be opportunities. I mean, look at the CBD of Washington, D.C. There's a lot of Class B and Class C office stock out there that could be convertible. We've put together kind of a design team. We have a scorecard that we can kinda act on this. We'll see where this goes, but we think this is another potential growth area. In terms of the platform going forward, just to kind of summarize. We are dedicating resources, myself included, to growing this business.
We think our current portfolio, as I mentioned earlier, is performing quite well and will continue to perform quite well. We have an actual pipeline that can more than double that portfolio in sites we control and that are entitled, and we're dedicating time and resources into that. We have additional land holdings that are vast, and we'll see what that could yield residential-wise. Some of those locations, if we can get residential zoned, we think will be quite attractive. The key is kind of, again, using our existing resources, brand, sponsorship, you name it, to source new opportunities and to fund those through joint ventures with other partners. The office to resi conversion play could be part of any of the strategies.
Sorry to go through that quickly, but wanted to get, keep on schedule. Are any questions? I'd be happy to answer. Sure.
Just on the conversions and the scorecard that you mentioned.
Sure.
Can you quantify maybe the percentage of the office portfolio that screens as potential for conversions? I guess the biggest hurdles you might face in terms of converting these properties.
Yeah. I think in terms of the scorecard we created, really, and this is not a science, it's somewhat subjective, really gets into column spacing, slab-to-slab heights, skin, et cetera, and kinda comes back with a for us, a score that if you're within a band, it's worth kinda taking to the next level of analysis. There are metrics out there in terms of what percentage of the stock is convertible, that, anywhere from 30%. I think Boston's actually a lower percentage, 22% I've read. That is coming from third-party sources. I think D.C. as an example is a good example. It has potentially a higher percentage given kind of the way buildings there lay out.
Our scorecard is more about once you've identified a building, is it worth taking to the next financial feasibility level? 'Cause if it doesn't meet some of those things in terms of, you know, column spacing and slab-to-slab, residential is just not gonna work from a unit layout perspective, et cetera. Did you have a second question? I'm sorry.
I mean, just the biggest hurdle.
Well, I mean, I think current construction costs aren't helping the whole. Basically, an existing office Class B or Class C building needs to get to a certain valuation to kind of make a conversion work. I think the biggest fear in any conversion, not even just a conversion, but a renovation, is the unknown cost, if you will. I think the biggest thing there is just what are you getting into? Can you live with not having operable windows, as an example? 'Cause that could be a non-starter budget-wise. It's a complicated thing, and lots of people are starting to do it. We'll see how many of them make money at it. We hope to at least study it and see where it takes us. Anyone else? Great. That's it. Thank you very much.
Please welcome Ben Myers, VP of Sustainability.
All right. Good afternoon. On the way out, Franklin told me that a lot of famous people have been on this stage, including Snoop Dogg. I can confidently say this is the first stage I've shared with Snoop. Today I'm gonna try to be the Snoop D-O-double-G of ESG. Please bear with me. I'm gonna talk about the E of ESG primarily today, but I wanted to mention that sustainability is part of a broader ESG framework. We're focused on driving positive impact, economic, social, environmental. For me and my team, that means focusing on healthy, high performance buildings while also mitigating the external impacts of energy, water, emissions, waste, and climate change. Lastly, I wanted to say that we have three pillars of our program, climate action, resilience, and social good.
I'm gonna primarily focus on the climate action and resilience aspects today. Happy to answer questions at the end. A lot of content to move through. Our ESG program is aligned with the UN's SDGs, the Sustainable Development Goals. Everything we do, we try to communicate to our stakeholders this alignment through our ESG reporting and other efforts. Sustainability is very much a collective action at BXP. We're a small but mighty team of three, and the reason we can be so small and mighty is because we have a focus on sustainability and ESG that extends from the boardroom to the boiler room. Owen and Doug and Mike LaBelle have been tremendously gracious and supportive through my eight years leading this program and 10 years at BXP. For that, we have grown our governance of ESG and sustainability.
We have a board level dedicated sustainability committee. We have an operational committee at all the regions, representation from senior directors of engineering, other property management professionals. Then we have a corporate steering committee of HR, legal, marketing, IR, and other functions. We're very much focused on driving impact, so our team has been goal-oriented. We began establishing public goals and disclosing progress towards those goals in 2015. We have energy goals, emissions goals, water goals, waste goals, and we measure progress against a 2008 base year on an intensity basis. This includes all of our actively managed office buildings primarily, which today is about 42 million sq ft of our portfolio. Two goals I wanna highlight, and I'll talk about today is our carbon neutral operations goal, which includes driving scope one and two emissions down to zero by 2025.
A second goal that we have is a standing science-based target. We were the first office company in North America to set a science-based target at the 1.5 degree C level, meaning that we are gonna do our part to align our emissions reductions with the rate necessary to avoid 1.5 degrees of global warming. Some of the impacts I wanna highlight is a 27% energy use intensity reduction, a 70% reduction of scope one and two emissions, again below a 2008 base year measured in kBtu, or kilograms of carbon dioxide per sq ft. A 30% reduction in water use, that's gallons per sq ft. A 38% increase in waste diversion, so that means waste that's going to composting and recycling versus landfill. 84% of our portfolio is now certified ENERGY STAR, LEED or Fitwel.
58% of our LEED-certified area of our portfolio is certified, and 98% of that 58% is certified at the highest gold and platinum levels. Energy use reduction is not only the right thing to do, but it's good for business. Our energy use reductions to date have resulted in $31 million of annually recurring avoided energy expenses. We also avoid around $3 million through water conservation efforts of operating expenses. We've issued $3.6 billion now of green bonds in four separate issuances with restrictions on use of proceeds to eligible green projects. We've been widely recognized as a leader in ESG and sustainability. We're an EPA ENERGY STAR Partner of the Year for sustained excellence. We've been now named as the first year to the Dow Jones Sustainability Indices. We're also included in the S&P Global Sustainability Yearbook.
In the GRESB assessment, the Global Real Estate Sustainability Benchmark assessment, we have now for 10 years achieved a green star and a full five-star rating, the highest rating available, and perform around the top 5% of all global participants, public and private, in the GRESB assessment. We're a Green Lease leader at the platinum level, meaning we've integrated green lease clauses into our master lease form. We're a Best in Building Health winner for integrating Viral Response Module, a product from Fitwel, across our entire portfolio, operationalizing policies and practices meant to mitigate the spread of respiratory infectious disease. We've been named by Newsweek in the America's Most Responsible 2022 list at the very top of the real estate category. Of 499 total companies, we rank at the top of real estate. Both Barron's and Forbes have named BXP among the most sustainable companies.
Barron's, we rank third of the top 10 most sustainable REITs, and Forbes has named us fourth out of 50 for green growth, meaning that we've demonstrated that we can grow revenue while also simultaneously reducing carbon emissions. A lot of what we do as a team on sustainability as a company is driven by stakeholders. We have customers that have set very ambitious sustainability goals and policies, and they're aligning their real estate decision-making with those policies. We have employees that want to work for a company that's doing well by doing good. They want to work for a company with purpose, and action on climate change and diversity, equity, inclusion matters to the employees at Boston Properties. Our communities have set net zero targets by 2050. In fact, Cambridge is considering rolling it up to 2035.
These net zero ambitions that are set at the city level are informing policy. You have a public that's very aware of climate change and wants government to take action, and we have responsive government now, mostly at the local level, at the city level, and the cities in which we operate happen to be the cities acting the fastest of cities in the United States, but many others are starting to act as well. Then investors. More and more of our investors are asking us to demonstrate decarbonization. They want us talking about science-based initiatives and what we're doing to reduce carbon emissions. We're having more and more meetings with investors that want BXP to be a leader in ESG.
I'm gonna talk about why BXP is a leader and some of the ways we differentiate at a high level, but also a few project cases. First is a very robust data management system. If you talk to any sustainability leader, they'll tell you data, data. It's very hard to collect data in real estate, but because we're a vertically integrated company with full service, we have active management, and active property management allows us to gain a very clear understanding of our portfolio, and that's an absolutely differentiator for Boston Properties. We use tools like EPA's Portfolio Manager, Measurabl, Nantum, and Senseware to benchmark performance at the asset level and monitor and become active managers monitoring key performance indicators like energy use. We have performance scoring and benchmarking frameworks like GRESB and LEED and ENERGY STAR and Fitwel that we've adopted across our portfolio.
We do a lot of disclosures to third-party ratings. Some of you use ratings, and we're trying to make sure that we're intentional with which rating systems we align with and provide full, transparent, and comprehensive data to the raters. Finally, performance assurance, reporting, and disclosure. This is even more important in an era of SEC climate proposed rules that may require disclosure of emissions. We've proactively done a lot of that disclosure and the preparedness for the SEC's proposed climate rules, and we've been issuing a very comprehensive ESG report now for several years. If you want to get a real detailed understanding of BXP and ESG, I suggest you check out our ESG report for 2021 if you haven't already. I'm gonna talk about a few initiatives that are important and are top of mind for our sustainability team.
First is net zero leadership and our carbon neutral operations target. This is our emissions inventory for 2021. For those of you who have not as familiar with emissions, there are three scopes of emissions, 1, 2, and 3. Scope 1 emissions are direct emissions on-site. Scope 2 emissions are emissions from the grid, so these are emissions associated with electricity and steam. Steam is a unique source of emissions for a company like Boston Properties that uses a lot of district thermal in cities like Boston and New York. Scope 3 emissions is been referred to as the Wild West of emissions. It's everything else. For us, when you look at this pie chart, Scope 1 is 7%, Scope 2 is 58%. Excuse me, Scope 2 is 35%, and Scope 3 is the balance.
Scope 3, the primary source of Scope 3 emissions for Boston Properties is embodied carbon from new development, so emissions associated with building materials, and also downstream leased assets. These are triple net assets that our tenants operate where we don't have operational control. Our carbon neutral operations includes energy efficiency, renewable electricity, electrification, and carbon offsets. About a third of our total commitment to carbon neutral operations, this is from 2008 to 2025, will come from energy efficiency at our existing buildings. Next, we need to procure all of our electricity from renewable sources, and there's a variety of ways to do that. Third is electrification, so moving away from fossil fuel combustion, moving away from steam, or at least reducing reliance on steam. What we can't abate, we will offset. And I'll talk about the extent of offsets.
It's a really important issue. The graph on the right shows, on the dark blue line, energy use intensity over time. The light blue line is carbon intensity. You can see the decoupling of those two lines. That decoupling is the result of procurement of renewable power. Our pathway to carbon neutral operations includes energy efficiency, some grid decarbonization, the green power procurement I mentioned, renewable electricity, and then some carbon offsets. One of the really interesting takeaways when we're putting together some of this data is that we've grown our actively managed portfolio from 2008 31 million sq ft to 2019 42 million sq ft. 11 million sq ft of growth while simultaneously reducing absolute emissions 14%. That's the result of energy efficiency and a slightly greener grid.
We've also planned out how we're gonna get to carbon neutral operations, and we've been very intentional with this planning effort. It involves all of our regions buying in to plans that we have implemented at the regional level that roll up to the enterprise. Energy efficiency will gain another 13% reduction. Grid decarbonization will contribute another 6%. Green power from 2019 will contribute about 50% of the reduction. About 17% will make up the balance with carbon offsets. Move on to energy. Our primary objective with energy is to eliminate waste, then control costs, and transition from brown to green. One of the ways we control energy use is through active management of real-time energy use data across our portfolio. We have 245 meters where we're doing real-time energy management.
This is with a company called Hatch Data, now Measurabl. We have 150 users that log in an average of 12 times per month. Has resulted in 13.4 million kWh of energy savings. It's about $1.4 million of avoided annual energy expenses. These load curves, if you follow them, you very quickly see where buildings are performing outside of their optimal conditions. So it creates alerts and recommendations for how buildings can be operated more effectively. I think this kind of technology is gonna get better and better as we have more granular data from more points within buildings. It doesn't wanna go one, but it'll go two. All right. Another way we've conserved energy is the execution of very high performance projects.
One of the real pleasures in my career was being called into Bryan Koop's office, and he said, "Ben, we wanna build Boston's most sustainable office building. What do we have to do?" A team of us got in a room and put everything on the wall we could think of, and it resulted in 888 Boylston Street, Boston's most sustainable office building we delivered in 2016, LEED Platinum. We followed up with Salesforce Tower in 2018, also LEED Platinum. This was the highest rated LEED skyscraper in the state of California when we delivered it, which is saying a lot given all the green building focus in the state of California.
Then 145 Broadway in 2019, headquarters for Akamai, really brought together a lot of what we had learned from these two projects, 888 Boylston Street and Salesforce Tower, with active chilled beams, a very efficient mechanical system, heat recovery, solar on the roof, to create the most efficient building we'd built in the Boston region. 145 Broadway was rated LEED Platinum under the version four LEED system, and it was the third project in the United States to earn that distinction. We can talk about brand-new flashy green buildings. The real challenge for sustainability professionals is what to do with the existing building stock. We have three projects, three buildings, they're wonderful premier assets, but they're 1970s era that we've had to refresh.
One of the strengths of BXP is continuing to maintain these buildings for class A performance. At 200 Clarendon, when we acquired the building in 2012, we underwrote $13 million of mechanical system improvements. We executed those improvements, cutting energy use in the building about 20%. That not only made the building more efficient from an energy perspective, but also made the spaces more comfortable for the occupants. That had a double impact. Then we have 100 Federal Street. We replaced old steam-driven chillers with electric drivelines, modern drivelines, and we were able to demonstrate a 35% reduction in carbon emissions in that building way back in 2014, and we earned the Mayor's Carbon Cup in the city of Boston.
It was good recognition for the firm and our efforts to be more sustainable. At Embarcadero Center, right now we're modernizing the chiller plant. We've done a lot of projects, variable frequency drives, a new BMS, and that building is LEED Gold under the Existing Buildings program, and we're continuing to make modifications to that building to make sure that we're meeting the energy use intensity and carbon use intensity expectations in a San Francisco marketplace. I wanna talk a little bit about 601 Lexington Avenue. 601 Lexington Avenue is 1.7 million sq ft. This is another one of those gems from the 1970s, and we've been actively working to reduce energy and carbon emissions in this building going all the way back to 2011, 2012.
We added variable frequency drives to all the motors and pumps. We put in a new BMS. We changed out the facade and back of house lighting and made improvements to the other lighting within the building. Then the big mover was in 2016 with the chiller plant modernization and the controls optimization. Through 2016 into 2017, we pretty much cut this building's energy use in half from an energy use intensity of 130 or so down to the 60-70 range. We've also got a project now we're working on with the state of New York to recover heat from the condenser loop in this building and move it to the perimeter, which will reduce the reliance on this building from steam and tees up in the future full electrification of this building.
601 Lexington is gonna be a great case study for the company on this theory that we need to go all electric in our cities. If we can do it anywhere, I believe we can do it here, but we need to prove it out, and we need to work with policymakers. We need to work with energy experts in cities like New York, and we need to work with, frankly, very strong designers, including our own team, engineers in the field, to make this kind of project happen. I think Boston Properties is uniquely positioned, given the expertise of the company, to make this transition to all electric modern buildings. I will say that steam in cities like New York is gonna be very valuable as the peak demand shifts from the summertime to the wintertime.
We're also working with policymakers on green steam. Con Edison has a plan, Vicinity Energy here in Boston has a plan, and we are working with those steam generators to advance the transition to clean steam, presuming we can move to clean steam and electric generation of steam away from natural gas-fired steam generation. One of the projects at 601 Lexington that was the most impactful, you may have seen, was the chiller plant modernization. Moving away from 1970s-era steam chillers to modern electric drive lines increases the coefficient of performance, reduces the amount of energy needed to produce cooling in the building. We invested $6.9 million in that chiller plant and cut steam use 60%. It had a huge impact on steam consumption.
It provides about $1.3 million in annual savings for a 19% yield on cost. This is not an atypical return we see on energy conservation measures like this, where we're going into a building that has older systems, and we're modernizing them, near end of useful life. Another project that I'm very excited about is a net zero project that's been alluded to a few times today. It's 140 Kendrick Street, Needham, Massachusetts. We're working with Wellington Management, who has been a great client ever since we built Atlantic Wharf with them, Boston's first green skyscraper, the old Russia Wharf building in the financial district. They had a need for office space in the Needham market, and we brought them this building A. It's the one highlighted red, and we gave them three options.
They could do a green retrofit, a deep green retrofit, and a net zero retrofit. The net zero retrofit involved a few extra steps. We cut the gas to the building, so no fossil fuel morning warm-up. We're going all electric with a variable refrigerant flow system. We added extra heat recovery at the air handling units, and we added 1.4 MW of solar to the site to provide all the energy needed for the building. The mantra with Koop and the team, Pat Mulvihill, was build tight, ventilate right, energize with sunlight. That's what we went for on this project. Full net zero, all on-site, and Wellington worked with us closely to get this deal done, and it's under construction now. Other projects that I think are a real opportunity for real estate is garage covered solar, so solar canopies on garages.
This is a project at Bay Colony in Waltham, Massachusetts, where we took this garage and added 842 kW of solar, which provides covered parking for the tenants of the building. I always keep going. This is a similar covered parking system. This is a surface parking system at Carnegie Center in Princeton, New Jersey. There are four sites in Princeton that we did similar solar arrays. We wanna move to 100% renewable electricity, but there are limitations to what you can do on-site. This chart, the bubble, shows all the solar projects we've executed. Now it's 13 projects, 8 MW of on-site generation. Each one of these was done through different forms of agreement, but primarily a PPA, a power purchase agreement, with no capital outlay.
We agree to host the system, and for a fixed price, we pay for power below the utility rate. Every one of these projects has delivered savings throughout its 20-year, 25-year life. We're also looking off-site, and there's a variety of ways to do renewable energy procurement. The easiest way is through the utilities, where they offer a product that's cost-effective, but there's more complicated ways like virtual power purchase agreements and off-site procurement that we're still exploring. To date, 70% of our electricity comes from green sources, and we will get that to 100% by 2025. We're looking at a variety of measures, but we wanna make sure that we're having an impact, and we wanna make sure that we're doing it cost-effectively for our customers and for the enterprise.
That time we got 3 slides. I also wanna mention embodied carbon. This is a growing issue. I think this will impact permitting and policy in cities in the U.S. We're already seeing signs of that in Europe. Embodied carbon, as I mentioned, is the emissions associated with materials, so it's extraction, transportation. It's everything that's required to get that product to the site. Embodied carbon measurement has not been easy, but it's. We're really working with our supply chain, our contractors, all of our development project teams to do life cycle assessment of embodied carbon because you can't manage what you don't measure. We're trying to get more and more accurate benchmarking of embodied carbon, and from there, we've set a 14% reduction.
We believe we can achieve that reduction through procurement of lower carbon concrete, which seems to be the low-hanging fruit in this space. Concrete is responsible for about 6% of global emissions. We're also looking at higher content recycled steel, more recycled steel from different steel providers can provide lower embodied carbon for the steel. Steel and concrete are culprit number one and number two. Also, as a result of the pandemic, we've had a huge focus on healthy buildings. I mentioned the Fitwel certifications. We did the Viral Response Module across our portfolio. We've done about 17 million sq ft of Fitwel full building certifications. There's, I think, an enduring and heightened impact, a heightened focus on indoor air quality.
We've worked across our portfolio to verify the level of filtration in building mechanical systems, verify the capacity of base building mechanical equipment to deliver higher ventilation rates. We work closely with Dr. Joe Allen on our whole healthy building strategy, including IAQ. One of the pilots we're working on right now is the deployment of 500 real-time air quality monitoring sensors across 40 buildings across our portfolio. We used to just dump ventilation air into a building, and you test it twice a year with a professional who would come in. Now we have real-time IAQ data across 500 points at our portfolio, looking at CO2, looking at total VOCs, fine particulate. We wanna use and operationalize that data, and that's a work in progress. How do you now use this data?
We like what we're seeing, but how do you use it with customers to reinforce messaging around the IAQ, the indoor air quality that Class A office buildings offer? Some of our priorities going forward. We're gonna continue to plan for the low carbon future in our cities, and that includes studying our exposure and planning to mitigate exposure to building performance standards. We have building performance standards in New York, D.C. We have building performance standards in Cambridge, Massachusetts, and Boston. Those markets is where we think we can comply over time, but we need to pay attention to what these standards are. We need to continue to engage policymakers on the standards, how the thresholds are set, and we're doing that work now. We also need to continue our focus on climate risk assessment.
We've partnered with Moody's ESG Solutions, and we've made a lot of disclosures that are aligned with the Task Force on Climate-Related Financial Disclosure recommendations, the TCFD. We're gonna continue to look at new acquisitions, development sites, to make sure that we're future-proofing our investments in our existing buildings and also new development against more severe impacts from climate change. We're gonna continue to work with policymakers at the city level on their plans for adapting to the impacts of climate change. We're gonna prepare for the SEC proposed climate rule adoption. As I mentioned, we've done a lot of that groundwork, and we're continuing to work with our auditors. We're continuing to work with our peers across the industry, including the Real Estate Roundtable on how organizations prepare for the SEC proposed rules.
We're doing a lot more supply chain engagement on two fronts. One is this embodied carbon issue. I think this is the elephant in the room. People have not been paying attention to embodied carbon and building materials, but also on renewable energy. That landscape is changing pretty rapidly with more projects becoming available and different methods of procuring renewable energy. We're staying focused on that and trying to opportunistically get the remaining 30% of our renewable energy procurement done. We're also focused on the implementation of affordable electrification. I say affordable, but it's also practical, right? There's a certain amount of electrification that can be done rather easily in residential buildings, in low-intensity buildings, but in life science buildings, it's a real challenge.
Buildings where you have higher change rates in cold climate zones, there just simply isn't enough distribution and power to do fully electric life science yet in Boston. We believe that there are hybrid approaches, and we're implementing those hybrid approaches, where you can reduce 80%-90% of your scope one emissions, that's on-site gas, with air source heat pumps and electric systems. In some cases, in high-intensity uses and where there are physical constraints or power constraints, I believe the future of electrification is gonna be hybridization. I think there was one more. We're gonna execute on our carbon neutral operations target. That's the last one. I'm open to questions. I've met with many of you, some of you offline.
I was happy to see a few familiar faces here, but please feel free to ask questions.
Hey, this is Ron Kamdem from Morgan Stanley. Just for the New York portfolio, can you talk about sort of Local Law 97, what you guys have done to get ready and for the 2024 deadline as well as for 2030, what you're looking at?
We have another half hour? No. Local Law 97, it was the first major carbon emissions law, and we have done a really robust analysis of our portfolio, and we do not see any exposure through the first compliance period, which goes out through 2029. So we do not expect any fines from Local Law 97. Now that said, we're executing some projects, right? We're looking at our operations. We're using real-time energy management, and we also are accelerating and implementing right now a chiller plant modernization of the GM Building. That's an older building. It had older systems like, you know, 100 Federal, like 601 Lexington before we made those improvements. So with those improvements, we'll avoid fines, and those are an end-of-useful-life improvement that we would already be making.
The real uncertainty with Local Law 97 is whether or not the CLCPA targets will be met by the NYISO. If they're met, right, we could see the grid 50% greener than it is today in 2030. If that's the case, office buildings, particularly our portfolio, is gonna do quite well, 'cause we use a lot of electricity, and if that electricity is green, our carbon emissions come way down, right? You know, I said this on the run this morning, but I view these performance standards as they're having their intended impact. They're starting conversations within the real estate community I think are healthy. They are a regulation on building owners for the carbon emissions of utilities to a large extent.
We need to work with our utility service providers, but we also need to look at our own operations, and somehow those two have to meet in the middle. I think the utilities have to do a lot of that lifting as well. If they execute, we will definitely be making sure that we're paying attention to that. Any other questions? Yes.
Is there a risk, maybe not risk, maybe an opportunity to see a lot of buildings, let's just use New York, for example, a lot of class B, class C buildings that just can't be, you know, improved, and probably best course of action is to knock them down or do something completely different. Could this be, like, a situation where the competitive set for Boston Properties gets a lot smaller just because people can't, you know, address the E in the ESG?
Yeah. I don't wanna speak too specifically on how catastrophic it's gonna be for the rest of the office industry, but I can say that Boston Properties, because we've been so focused on Local Law 97 and compliance, it is a differentiator for us and a competitive advantage. A lot of people have their head in the sand and haven't been paying attention to this. I think that honestly, the people who are gonna be hurt the worst are condo associations that are completely ignoring this or not aware of this and don't see it coming. But there's a lot of property companies that are passive and not as active as Boston Properties, and that is true for not only Local Law 97 in New York, but BERDO 2.0 here in Boston.
Our team is very focused on these regulations, and we're taking steps to really do a detailed analysis of what can be done cost-effectively to avoid fines and penalties. I tend to think it's a strength for Boston Properties because of our team and how focused our team is on building performance standard compliance.
That's it for questions. Just a quick short break, and we'll be back at 3:15 PM.
Thank you very much.
Mirror, mirror on the wall, don't say it 'cause I know I'm cute. Oh, baby. Louis down to my drawers, LV all on my shoes. Oh, baby. I be drippin' so much sauce, gotta lookin' like Ragu. Oh, baby. Lit up like a crystal ball. That's who, baby, so is you. That's how I roll. If I'm shinin', everybody gonna shine. Yeah, I'm goals. I was born like this, don't even gotta try. You know. I like champagne, get better over time. Now you know. Heard you say I'm not the you lie. Ain't my fault that I'm out here gettin' loot. Gotta blame it on the Goose. Gotta blame it on my juice, baby. Ain't my fault that I'm out here makin' news. I'ma put it in the proofs. Gotta blame it on my juice. Ya-ya-ee, ya-ya-ee, ya-ya-ee, ya-ya. Blame it on my juice.
Blame it, blame it on my juice. Ya-ya-ee, ya-ya-ee, ya-ya-ee, ya-ya. Blame it on my juice. Blame it, blame it on my juice. Oh, baby. No, I'm not gonna snack at all. Look, baby, I'm the whole damn meal. Oh, baby. Baby, if you ain't being slick, don't dare try to cop a feel. Oh, baby. The juice ain't worth the squeeze if the juice don't look like this. Like this, like this. Hold up, baby, please, don't make me have to take your piece. How I roll. If I'm shinin', everybody gonna shine. Yeah, I'm goals. I was born like this, don't even gotta try. You know. I like champagne, get better over time. Now you know. Heard you say I'm not the you lie. Ain't my fault that I'm out here gettin' loot. When we came home, worn to the bones.
I told myself this could get rough. When I was off, which happened a lot. You came to me and said, "That's enough from all these veins. No. I'll leave the lights and you lock the doors. We ain't leaving this room till we both want more. Don't walk away, you're almost mine. Say if this burns, then, darling, let's burn. When you came home, oh, unto the bone, I told myself that this could be love. Oh, I know it feels insane. Tell me something that I can't explain. Oh, I'll leave the lights and you lock the doors. We ain't leaving this room till we both want more. Don't walk away, you're almost mine. Say if this burns, then, darling, let's burn. If this love is burning, then, darling, let's burn. Oh.
When you're a hustler, you've got to hustle. There ain't no time for sleep. Just keep on moving, do what you're doing. You always play for keeps. Ain't backing down, no, we're going big. Ain't stopping now, we get after it. Get after it. Get after it. Light that fire. Get after it. Light that fire. For my survival, take down my rival. No, I ain't gonna stop. If I am beaten, I'm not defeated. Back to the top. Ain't backing down, no, we're going big. Ain't stopping now, we get after it. Get after it. Get after it. Light that fire. Get after it. Light that fire. Put it all out on the line. Give it your all every time. Put it all out on the line. Give it your all every time. Get after it. Get after it. Light that fire. Get after it. Light that fire.
Diesel's got the music, music. Diesel's got the music, music. Diesel's got the music, music. It's getting late. I'm making my way over to my favorite place. I gotta get my body moving. Shake the stress away. I wasn't looking for nobody when you looked my way.
Sorry. If everyone could take their seats, we're gonna be starting momentarily.
Yo. Just waking up in the morning and to be well. Quite honest with you, I ain't really sleep well. You ever feel like your train of thought's been derailed? That's when you press on, lean in. Half the population just waiting to see me fail. Yeah, right, you're better off trying to freeze hell. Some of us do it for the females, and others do it for the reads.
Please welcome James Magaldi, SVP of Finance & Capital Markets.
How we doing, everybody? Thanks for the song, Helen. I am seriously missing a little Avicii in my life, so it's always nice to start it off the right way. I would suggest that as we get into a discussion about the balance sheet and capital markets, it's about that time. Is there any way we can open the bar? It's probably be a good time to do that. No? Okay. Everyone that participated in the run this morning, thank you. Sincerely appreciate it. Usually, today, 30 people signed up. I think about 15 showed up. I did wanna make a special mention to Alex Goldfarb because Alex was there. No, no, we gotta do this. This is now a collector's item. Alex, it's got Boston Properties. I'm not supposed to say it. This is for you.
For your participation this morning, thank you very much. For those who don't know me, and they might be wondering, who is this guy that they let out of his cage every five years to talk to us at the investor conference? It's a really good question. I actually ask myself the same question. My name is James Magaldi. I'm Senior Vice President, Finance & Capital Markets, and my primary responsibility for BXP is to raise debt and equity, public and private. You can think of me as the treasurer by function, not by title. Mike has that title. Or you can call me the wallet, whatever one you want to. I'm fine with either one. What am I here to talk to you about today? Some pretty incredibly riveting stuff, the balance sheet and the capital markets.
Apparently, my team tells me I'm supposed to be funny while I do this. Does anybody wanna trade? 'Cause this is just a little dry, but I'll do the best that I can. I think the joke's actually on me at this point. Where we're gonna start off is we're gonna have a little icebreaker. Everybody needs to participate in the icebreaker. Okay? We don't have tech. You just have to raise your hand, but I need you to help me out with this. Everybody ready? Yes. Everybody ready?
Yes.
Perfect. Who has Netflix? Who steals it from their neighbors or their friends? Okay, everybody's got it. Who's seen Stranger Things? Fans? No fans? Okay. Just remember that. Let's get to a few data points so I can set the tone for the day. 8%-9% global inflation. The Fed and the ECB being historically aggressive about increasing interest rates at what? 50, 75. Anybody wanna bet what next week's gonna bring? 75, 100, or this week, rather. Rates are rising. Credit spreads are rising at the same time. The yield curve is inverted. We have recessionary fears, supply chain dysfunction, the war in Ukraine. Dramatic equity sell-off, which we're experiencing at what feels like a decade of positive returns. A tech bubble burst. Political and societal polarization, what feels like unprecedented levels. Climate change, droughts, fires, floods, the pandemic thing. People remember that?
I, by the way, just got my Omicron and my flu. You can do the left and the right now, so get out there and get yours. Work from home, and I'll call this a danger. Here's why I'm gonna call it a danger. A lot of us are living our personal lives through virtual reality, right? Facebook, so, for the old folks like me. Instagram, TikTok, take your pick. Now you've been working virtually for two and a half years. Now your personal lives and your professional lives are all virtual. Who's seen The Matrix? You're one step away from the tank, people. Keanu is not gonna come to save you this time. Don't be a battery. I think we actually have a new branding opportunity. DXP, the opportunity. Don't be a battery, people. Come on, help me out here.
Okay, last one, just example of what's going on is you can. I'm a car junkie. You can buy a car. If you can get it at MSRP, that's a big if, you can trade it back into the dealer at a $10,000 profit. Pretty interesting stuff, right? We are in a confluence of events right now that I just mentioned are just extremely unusual. How would I characterize this in getting back to my Stranger Things reference? Grace? We are in the upside down. Since Eleven is not coming to save us from the upside down, what does BXP have to battle the upside down? What do we have? We have a strong balance sheet.
We have the ability to raise capital, and we have this guy. It's not every day that someone's able to capture the elusive Doug Linde with a smile on his face. You should consider yourself very lucky. He does truly warm the room with his smile. By the way, that is a nice cutthroat, if I do say so myself. Doug and I had a lot of debate on which picture to use for this, and I would tell you they all focused on how big the fish was. There is that cliché that says, "Size doesn't matter." Well, there you go. Second part of my quiz. Ready? Show of hands again, please. Who loses any sleep thinking about the BXP balance sheet? That's the... I knew Stafford was going to raise his hand.
It's always the fixed income guys that focus on the balance sheet. I lose it occasionally, but not really. You shouldn't lose any sleep about our balance sheet. Our leverage is modest. We have ample liquidity. Our maturities are well-laddered. We have modest amounts of floating rate debt, limited exposure today to rising interest rates, and we enjoy access to capital. Let's explore all this in greater detail. Sorry, Helen, I'm probably using up half of my time with just fluff at this point, so I'll try to pick up the pace. Let's start with the balance sheet. This is Owen at its latest. Crew cuts are really in, Owen, by the way. It looks good on you. Great, our ratings, Baa1, BBB+. We're in regular discussions with the rating agencies. We feel really good about our ratings. Next one, great. Covenants.
Won't bore you with this too much. We're well within compliance of all our corporate covenants. You can go to the next slide. As far as liquidity is concerned, these are second quarter numbers. We have $1.8 billion in liquidity, which is comprised of the revolver, $1.3 billion and half a billion in cash. I would mention that this is not reflective, obviously, the second quarter. It doesn't include the sale of 601 Mass Ave. It doesn't include the purchase of 125 Broadway, which we announced this morning. We're actually closer to $1.3 billion today, with the majority of that comprised of credit facility availability. As far as the debt portfolio is concerned, this is, again, the same story that we always have.
Portfolio is extremely well aligned with our long-term weighted average leases, well insulated from economic cycles, and nearly 90% fixed rate. To my fixed income friends out there, Bill, you know we're a serial issuer in the investment grade bond market, as evidenced by the fact that 76% of our portfolio is unsecured, and its majority of that is 10-year fixed rate bonds. Next one, Grace. This is my favorite slide. I think Mike likes it, too. I think we both like it. It's kind of the Mike James commercial slide. It talks about or represents all the capital that we've raised, both the debt market, dispositions, and private equity, and stacks it up.
You look at how we've been active, $2 billion in 2019, $2.1 billion in 2020, almost $3 billion in 2021, and $2.2 billion thus far in 2022. That's a pretty good run rate for the past several years, particularly in the context of a global pandemic. Again, that's number one commercial slide. You should expect to see a few more. Not to be a spoiler of the next session. Grace, can you just go back for one? I just want to point out the private equity plugs here because we're going to have a panel in our next discussion, and we're going to get into this in a little bit more detail. We've been utilizing our strategic capital program to fund core and core plus value add opportunities.
You can see how we've been very active with that since we closed it. Thanks, Grace. Next one. So leverage. Our target leverage range, 6.5-7.5 times. You can see that we've recovered pretty well from the pandemic highs. We were at that high point because we were dealing with the loss of, you know, the retail income, the parking income in our hotel. That's all recovered. This trend line is continuing to have a downward trajectory with the delivery of our development pipeline, and you can expect to see that over the coming quarters. As far as maturities are concerned, Grace. What do we say to debt? Not today. What do I mean by that? We got nothing on the next slide, please.
2022 is quiet, so we don't have anything to deal with this for the rest of this year in terms of debt maturities. 2023 is, despite the fact that it's $1.8 billion, you have to look at it a little tighter. It's a pretty easy stack for us to address. Fairly modest. The majority of it is unsecured. It's comprised of our term loan, which we used to acquire in Madison Center. It also includes half a billion dollars in bonds that come due in September of next year. Most of the secured debt is on this property and on the Marriott headquarters building in Bethesda, Maryland. We have embedded extension options for both of those deals.
If we decide that we don't like the capital markets, whether it be pricing or proceeds, then we can basically hit the bid and extend those because we qualify for them. Then relative to the Verizon and the Marriott credit, if you think about a more stable capital markets, I mean, lenders will find those projects extremely attractive to finance given the credit quality of the anchor tenancy. Next one, please. Weighted average cost. This is the second commercial. Just shows the progression downward in terms of the cost of our debt over the past couple of years. We're anticipating with the increase in interest rates and the relatively modest refinancings that we have to do next year that we're gonna see a modest uptick.
These things take a long time to come down, and they, based on the fact that our maturities are laddered, they're not gonna jump up extremely quickly. We do expect things to increase over time. Next one, please. Where are we heading in terms of interest rates? Are we in a recession? Are we not in a recession? I know the cliché, if I knew the answer, I probably would not be up here talking to you all right now. Seriously, let's start where we are just to paint a picture. I was basically thinking of just dropping the mic because rates went up another 10 basis points today before I came up on stage, and now all my slides are bunk. We'll just kind of work through it.
Anyways, let's start where we are and go to the next one. It's LIBOR, SOFR equivalent, and the 10-year Treasury. We're above 3.5% right now on the 10-year, and LIBOR is about 3%. But I think that people are, you know, before everyone does have to belly up to the bar for another Buffalo Trace old-fashioned, if you think about where we are in terms of history relative to where the 10-year has been, hopefully this like will back you away from the ledge a little bit. This is two decades of the 10-year with an average of 3%. When you're talking about a 3%-3.5% 10-year, it's not at all unusual.
I think that we're in a period where we've got muscle memory of a year or several years of 0% interest rates. Now that we see this jump, everybody seems, you know, more uncomfortable. I think that we can look back at history and say, you know, a 3% 10-year or 3.5% 10-year is fairly normal. If you want to point to credit spreads being wide, that's a different discussion. I think we just need to keep things in context. Where are rates going? What is the future gonna bring? You can go to the next one. Anybody remember Schoolhouse Rock!? Sure. Anyone? Anyone? Three is the magic number. This is definitely dating me, so let's go to the next one. This is the forward curve.
Basically, you can a 10-year swap today, spot is 3.5%. If you go forward 10 years, the market's telling you it's gonna be 3.3%. It's negative in terms of the forward curve on the 10-year. The market's telling you right now that interest rates are not gonna be the 10-year is not gonna be higher than 3% in perpetuity, basically. You can poke as many holes in that as you want to. That's fine. It's open for discussion. But if you wanna debate them, and I think I'm not sure where Doug is, but you can go to the smiling fisherman over there, and you can debate them with him. We'll see what happens, but it's 3% across the curve for the next 10 years.
As far as what that means in terms of our own portfolio and what do we expect to happen over the medium term, let's go to the next one. Thinking about floating rate debt. We've got $1.7 billion in floating rate debt. This is really basic math. If interest rates rise by 50 basis points, so short-term rates, what's the impact to interest expense? It's a negative $0.05 per share, you know, negative impact to earnings. You can just follow it across and just double it for each incremental increase, 50 basis points in rates. You can go to the next one. We can think about our fixed rate debt. We've got two fixed rate obligations that come due next year, current weighted average rate of 3.2%.
Assuming a refinancing rate of 5.5%, what does that mean in terms of an increase in annual interest expense? About $12 million or $0.07 Per share. Again, you can do the sensitivities or stress it how, however you see fit, but I'm just suggesting that our exposure to rising interest rates at this point is fairly modest. Okay, next one. Anybody who knows me, I'm pretty much a tool guy, and I love tools, so this is usually my reference to the debt capital markets, and we have access to all the tools in the toolbox. As far as the bond market is concerned, I would say ask Mark Streeter, but he's not here, so I'll just say ask Bill Stafford because he is here. Thanks, Bill, for sticking around. The bond market is working.
It's off pace from 2021. This is a little tough to read, but I would tell you that we're over $1 trillion in issuance thus far this year. If you look at the primary market post-Labor Day, it was the busiest day in 2022, with $35 billion in one day pricing across 19 deals. I think it was actually the third most active day on record. Regardless of that activity, deals managed to tighten about 25 basis points from initial price talk and recorded new issue concessions ranging from 0 to 15 basis points. These deals went off pretty well, and that also came on a day when the U.S. Treasuries rose considerably. If you go to the next one, I acknowledge that the investment-grade market broadly is different than the REIT space specifically.
Why is the REIT space different? I would suggest, you know, you talk to the folks that you cover. Everybody's been extremely proactive over the past several years about bringing forward maturities with liability management strategies. I think that a lot of the REITs have taken advantage of short, low interest rates over the past several years. They don't have a lot of maturities to deal with this year. I mean, certainly we're an example of that. We don't have a lot. I think if you see REITs issue, and there's been $12 billion done this year relative to an annual number of $40 billion last year. If you go to the next slide. I'll get to this one. There's you know, REITs are being selective about spreads.
They're being selective about accessing the market unless they have maturities to deal with or if they need to bolster liquidity. We are not in any of those positions. Spreads are elevated right now. How elevated? Look at where we are trading in the secondary market. It's almost 210 over. Last year in September, our secondaries were trading at 110 over. We have about 100 basis points increase in our underlying 10-year spread. Now, if we were to do a new deal, you have to add a new issue concession to that, so we would be pricing a new deal in the area of 5.5%-5.75% today. In comparison, our green bond that we did last year, $850 million, priced at 245 all in.
You think about how that's changed over a pretty short period of time. Another interesting data point which is reflected up here is the fact that our credit spread is on average 134 basis points over the past 10 years. I point this out because I think we can be comfortable with a 3%-3.5% 10-year, which history tells us is normal. If you remember the prior slide over the past two decades, it's 3%. What I'm not comfortable with is a new issuance credit spread of almost 250 basis points. As a reminder, we don't have anything to deal with, we don't have to access the market, and we will be opportunistic about doing so. All right, CMBS. CMBS is a four-letter word in 2022.
If you look at total first half issuance, however, because I know a lot of people say the market's not working, it's not functioning, $52 billion in the first half. That's quite a bit. Right. What happened in the CMBS market is things changed pretty dramatically in May with the geopolitical volatility that occurred because of the war in Ukraine. Credit spreads gapped out, and basically that market you know, dried up pretty significantly and credit spreads are just not stable right now. Put that in a little bit of perspective. If you could go to the next one, Grace. I mean, this just again shows you the amount of deals that were done across product types. Look, surprisingly enough, there's some office deals that got done in the CMBS market, not necessarily long-term fixed rate, but they are getting done.
Can you go to the next one? Credit spreads. This is AAA's conduit. What have they done? We closed on our deal on 601 Lex, which is a billion-dollar CMBS SASB issuance. AAAs were pricing at 80 basis points in December 2021. Those same AAAs are pricing in the area of 150 - 160 over today. That's the most high quality tranche of the capital stack. If you move down the stack, spreads gapped out even further than that. The all-in rate for our 601 Lexington financing was 2.8%. Can you put Avicii back on for another commercial for me? Thanks. I'm losing track, though. Is that my third or fourth commercial? Keep going with these.
Clearly, there's been a tilt in CMBS from fixed rate to floating rate because what's been going on in that marketplace. From a volume perspective, the market will be fairly well off activity from the prior year. Go ahead on the next one. Mortgage market, and I'll get to the banks last because they're the most interesting right now, so I'll just cover these quickly. The debt funds not taking syndication risk, limited by financing for their own facilities. CMBS, as we covered, is gapped out to the mid-100s. Life companies are active. They're interested in low leverage. They're being snooty about product type, multifamily, industrial, stuff that everybody seems to love these days. They're cool on office. Now to the banks. How are we doing? Next one, Grace.
This was supposed to be a picture of Jon Snow, and I was going to say, "Winter is coming," but it didn't seem to pass muster with the lawyers on our team. It's winter is coming for the banks. They've had a bang-up year. The first half has been very busy. They've filled the voids in that have been created by the bond market and the CMBS market for REITs. Banks have been doing mortgage loans, construction loans, a ton of unsecured paper, lines, bridge loans, term financings, and so far, spreads have held. Specifically, what have we done in the bank market? We did a $140 million non-recourse construction loan for the project that Rich was talking about in Reston, Virginia, on block D. I did say non-recourse construction loan.
We did $185 million fixed rate financing on our Hub on Causeway project here in Boston. I did say 10-year fixed rate bank loan, which is highly unusual as well. We did a $730 million term financing for the acquisition of Madison Center in Colorado, in Seattle. Where are we now? The winds of change have started in the form of regulatory stress testing, and the money center banks are needing to pull back on originations to meet those stringent asset allocation and capital ratios on the heels of massive first half volumes.
Winter is coming. Now what? The large domestic banks are on the sidelines. There's little appetite for syndication risk. Office headwinds from both a recessionary and from a work from home sentiment standpoint. Limited availability for financing for the debt funds. Could see pressure on pricing spreads for the corporates and the REITs as volatility continues, and there's upward pressure on short-term rates. As I mentioned, given all the deals that we've done this year, despite all this volatility, capital is available to top-tier borrowers like BXP at modest leverage. What are the takeaways? You can just go to the last one. I'm obviously not as funny as you think I am, Owen, because I'm just not reading the room today, my friend. Sorry, boss. You all were supposed to help me out with this. A little golf claps, a little chuckle, something.
You can rest easy. There's still no need to lose sleep over our balance sheet. We have best-in-class investment grade ratings. Our leverage is modest. We have strong liquidity to fund development to be acquisitive. We have no material interest rate exposure for 2022, 2023. We have no near-term debts coming due and a well-laddered maturity schedule. We have access to all the tools in the capital markets toolbox as we have in the past. I'll see you all in three years. Hilary and Mike, if you wanna come up.
Okay. Are we on here? Excellent. I can hear myself. Great job, James. I thought it was funny.
We were laughing.
Thanks. Thanks, guys. I, you know, for the next 20 or 25 minutes or so, we're gonna talk a little bit about private equity. You know, we've got a little panel here. I've got a few canned questions that I'm going to ask, but you all can also ask some questions. Before we start, you know, private equity is still a very, very important part of, obviously, our marketplace. It really dominates commercial real estate. Private equity owns about $16 trillion, I think more than $16 trillion of commercial real estate. It's over 90% of the market. If you look at the office market, it's over 95% of the market is owned by private equity.
Really, really important to our marketplace, and something that we've been utilizing more and more, recently. Owen talked about it when he went through his presentation, that private equity has now become 22% of, you know, our company. 22% of our assets are held in joint ventures. That's a trend that is going to continue, I believe. These investors are very important to us, and I think it's a real opportunity for us to raise capital to fund our new investments. I think it's gonna continue. You just heard from James on the debt capital markets.
You may not know that James is also responsible, Cole Pinney, who's also here, for managing our private equity relationships, in addition to the debt capital relationships and the equity capital relationships. I also have here Hilary Spann, who I think most all of you probably met today. Some of you have not met previously, because unlike many of us who have been at this company for 20+ years, Hilary's only been with us for about a year.
As of last week.
It's been a year as of last week. But she's up here because she has a very, very interesting background in private equity. So we thought it would be really helpful for her to give her insights really from the inside. I think before, you know, I kind of get into questions about private equity, I'd love it, Hillary, if you could just kinda describe your background because you have a very global perspective, and a really interesting and diverse perspective that I think you can add. Not only is it great for our executive team to have that, but I think it would be great for everybody to hear from you.
Sure. Thanks. Thanks for having me, Mike. I spent the first 15 years of my investment career with JP Morgan Asset Management, and I wound up running the acquisitions team for the northeastern region for all of JP Morgan's real estate funds and all strategies, so every point on the risk spectrum. My primary markets while I was there were New York City and Boston, so highly relevant to our business. After leaving JP Morgan, I went to work for CPPIB, which is now known as CPP Investments, and I started out there running the United States for real estate investments and ultimately wound up running the Americas for real estate investments, which was about a $20 billion platform. I had teams in Toronto, New York, and São Paulo, and CPPIB had a value add strategy on investment.
They were really looking to generate outsized returns to create value over the very long term for their beneficiaries and their stakeholders. This is the excess reserves of Canada's federal plan. I sat on the Global Investment Committee while I was at CPPIB, so I was responsible for improving public and private investments in real estate globally. Also on the Capital Allocation Committee, which really decided how and where CPP was going to place real estate capital across the globe.
Those are some great insights and very helpful to us, you know, when we're dealing with our private equity relationships, to have somebody that has been on the investment side of that house and really understands how these investors think. It's critical to us and we appreciate the insights that you give us, you know, anytime that we're working on one of these big projects. James, you know, we've been doing private equity for a long time at BXP. You know, for as long as I've been here, we've always had joint ventures. They've changed over time. They've certainly increased over the last 5 or 10 years. I think it would be helpful if you could kinda talk through how you see our strategy and how you see that strategy evolving.
As you said, Mike, I mean, private equity has been in our DNA for a very long time. I would simply characterize our strategy today, and it's not really different than it has been in the past, into really two buckets. One, Owen refers to these as kind of the deal access joint ventures, and the other being the more institutional JV or capital partner joint venture relationships that we have. The deal access type transactions are ones like this project that we're sitting in right now. It's a local owner. Not really local necessarily, but a lot of times it might be a local family. In this case, it was Delaware North, right? Who is a global food service company. They're also focused in gaming and hospitality. They own the Boston Bruins, and they own the arena.
They own the old Boston Garden that was razed, and this was a parking lot, basically, for the players for a very long period of time. We chased this deal with them for almost two decades. Now you see what we've been able to create together, right? We leverage our platform, our management expertise, our development expertise, leasing, property management, and our ability to navigate the approval process with the city of Boston, and now we've delivered this incredible mixed-use project, or Bryan's team has, along with our partners. So that's the deal access. The institutional joint ventures, the largest one that we did was in 2014 with Norges, which was a recapitalization of a four-building portfolio in Boston and in New York, where we were able to raise a significant amount of capital for the company.
We were at the time crystallizing our NAV relative to what we saw as a pretty significant discount in the public markets, which is obviously still a problem that we have today. The shareholder benefited in that transaction, that recap, from a nice special dividend. How it's changed since then, it's evolved a little bit more in that we've now put together a program, the strategic capital program with CPP and GIC a little over a year ago, largely through all the efforts that Cole Pinney has put together, and worked on diligently. We've done a number of transactions that we can talk about in a minute with that program. Effectively, it's a way for us to capitalize acquisition core plus value add opportunities.
It helps us stretch our balance sheet, and what that means is it basically just allows us to do more 'cause we don't have to deploy as much of our own capital. We are able, and Rich Ellis mentioned this with the Block D residential project in Reston, we're able to enhance returns through fees. That's kinda where we are.
Great. So we're in an interesting time. You know, you've talked about it, James, before. You know, I guess, Hilary, I look to you. I mean, what do you think investors are looking for today, you know, for opportunities? How do you think they feel about office space and investing in office space? You know, are they on the sidelines? Are they looking to be opportunistic? Do they have capital to spend? I'm just kinda interested in your thoughts around those kinda subjects.
Sure. In general, the global institutional investors are looking to achieve a premium over whatever benchmark they've set for themselves. In some instances, they have a core investment strategy. In other instances, they can be value add to opportunistic. In every case, they're looking for what they perceive to be value for their money. In moments like this, I actually think that those very sophisticated investors see a lot of value in the market because some others that would ordinarily be able to transact are taken out of the market. Maybe the others need debt. These global investors do not need debt. You've seen a number of really interesting transactions take place recently, including in the office space. Our disposition of 601 Mass Ave was obviously a large transaction for the D.C. market.
In New York, you saw SL Green step into the equity at 245 Park Avenue. Another instance, which I think is also interesting, is Memorial Sloan Kettering just purchased a 425,000 sq ft condominium at the Lipstick Building to expand their service provision in their Midtown East campus. In all of those cases, those investors and buyers found value for their strategy in those acquisitions. I think that the global investment market is very robust, and I think that for folks with money, this is actually a really interesting time to go out and execute on their strategy.
Do you think there's a particular type of investor that is more active? I mean, those are three very different investors that you kind of just described.
Yeah.
Not necessarily kind of the institutional sovereign type of an investor. Are those investors as active as well?
I think the common thread is that the investors that have equity available to close transactions can be active right now. We've seen many instances where, you know, assets were being marketed or discussed for disposition, and the messaging was, "If you need debt, don't come. We need people who are well-capitalized and who we know can execute." The through line for all of those folks that I just mentioned is that they had ready equity available to invest. I think that that's probably, if I could draw a common thread, the biggest one. These very sophisticated global investors, some of whom are our partners, all have equity available at their disposal to invest.
What about returns? You know, I mean, what do you think expected returns are for investors on, you know, properties like the ones that we invest in? How have they changed?
It's a hard question to answer because their strategies do vary. I think on a direct basis, there's no impact from rising interest rates. They can close all equity. You know, they have a long-term view. They can look through interim market volatility. Of course, their benchmarks are somewhat predicated on the underlying base rate, so they're not completely indifferent to what's going on in the markets. As interest rates rise, I think that they will definitely take that into account in pricing opportunities. Again, I think the most important factor driving transactions today is the fact that competition has diminished considerably, which gives folks with strong balance sheets and ready access to equity capital a huge competitive advantage in executing their business plan.
Mm-hmm. Okay, great. James, you talk to private equity investors every week, every day. You know, we're out you know, trying to raise capital for different projects. We've been successful on many. I guess, can you describe some of the transactions that we've been involved in? Can you further describe kind of what is attractive about the opportunities that we provide, and about BXP to these investors? What are they looking for? What are we bringing to the table that drives them to you know, come into our deals?
Sure. I would start with what's attractive about BXP before you get into the specifics of the, or I get into any specifics on any of the transactions. I mean, it starts with our reputation, right? We have a very strong reputation. We have a strong management team that is very well known in the real estate community, the public and private. We have autonomous groups, regions that have development, leasing, property management expertise, and they are able to put the full complement of our abilities to bear on any specific transaction. I think that the fact that we have capital is hugely important to our investors. We are not a 5% LP without voting rights in any of these deals. We are deploying meaningful amounts of pro rata equity, whether it's 50-50, 45-55, or 33-67, however you wanna characterize it.
We're putting meaningful amounts of capital in co-investing along with our partners. I think that's the commercial for us. I do think we're selective about who we wanna partner with too, right? I think it's important for us to partner with people that are like-minded from the perspective that they're long-term holders, right? We're not the merchant builder. We want to own our real estate long term and create sense of place. I think it starts there. I think that we want to partner with folks that are comfortable and confident in the gateway cities where we're invested, right? The coastal cities, all of our markets, they're very attractive to the same investors that are partnering with us.
Thirdly, Hilary, you were touching on this. I think that the fact that we partner with folks that are opportunistic during different parts of the cycle, depending on what the market conditions are. Today, people are looking for, you know, a discount. They might be looking for a value-add opportunity versus when things are swimming, and maybe you just wanna either clip a coupon and look at core, or you're more focused on development or otherwise. We tend to align ourselves well with partners that move through the economic cycles and think about investing based on the market conditions at the time, and don't sit on the sidelines. That's, I think, how I would characterize the, call it, the dating that occurs between BXP and the private equity community.
I would just add to that, and I think it's implicit in what James said, performance. BXP's ability to outperform its underwriting and to deliver higher quality than what was pro forma, et cetera, is really important to the LP investor. It goes along with reputation, but I think, you know, just putting a finer point on it, they're in it for return on investment. They're not building, you know, a portfolio or a brand necessarily in the U.S. They just wanna make money. They're looking for investors and developers and owners that can help them maximize their returns, and BXP has been very successful in doing that for them.
You know, when I was at CPP, to your point about the balance sheet and the ability to scale, if you could not bring me the opportunity to invest $500 million-$1 billion of equity over a timeframe that was visible, so three years, we didn't have the bandwidth to deal with smaller operators. BXP's scale and balance sheet is incredibly helpful.
James talked a little bit about alignment, which I think differentiates us a little bit. You know, in your experience, I'm sure you've dealt with a lot of owners and sponsors where they had 5% of the money at risk, and you're putting in 95% of the money. That's not necessarily what we do. I mean, how important is that? And when you're, you know, an institutional, you know, partner looking into that, I mean, is that critical? How do they feel about that? Because the same investors are investing in situations where they're putting in 90% of the money as well as when they're putting in 50% of the money. There is a big difference.
Well, look, I mean, I think that if you're going into a 95/5 deal, you're going into it with the understanding that you might wind up owning it yourself without an operator at some point in the near term. That is simply not a risk that these global investors are willing to take on in the New Yorks and Bostons of the world. It's fine for a garden apartment complex in Nashville. It is not fine for a 2 million sq ft office building in Manhattan. I think that alignment and the expertise that BXP brings to the table, along with the capital to match what the investors are putting in, is incredibly important because of where we operate and because of the complexity of the markets that we're in.
Interesting. I think another transaction that was pretty interesting that we did where we brought in private equity was 360 Park Avenue South. That was kind of an example, James, you started to get into where, you know, I mean, it was kind of a more dicey situation, right? We're going into a building that's vacant. It's a turnaround. We've got a business plan to turn that around, lease that up, and generate, you know, an above market return for that. How hard was it to convince, you know, our two partners in that situation, to get into that deal when, you know, It was after pandemic. It was, you know, it's an interesting opportunity.
I think that speaks directly to we're aligned with partners that want to pursue opportunities that avail themselves during different times in the market cycles, right? That specific deal, we were able to leverage the fact that we're a public REIT and be able to, you know, issue ourselves operating partnership units and then bring in partners that wanted to take advantage of the Midtown South sub-market. It is a new sub-market for us, and it is a market that's more focused on, you know, tech and potentially lab users. They were aligned with the fact that we could get this building that had been owned by, basically, a family for a very long time at a fairly attractive price and achieve the yield that was satisfactory, and we're all in.
Now we're in the redevelopment phase, and we're gonna lease it up, and it's gonna be a successful project.
Hilary, how do you think that they viewed that transaction?
Well, I was there, so I can tell you.
Yeah. Exactly.
No, look, I mean, you know, 360 was able to be acquired at not the highest bid.
Yeah
because we were able to procure part of the transaction with OPUs. For LPs to have the ability to benefit from, like, wow, we weren't even the top bidder, and yet we still got access to this fantastic deal because of BXP's sophistication and breadth of strategies is fantastic. Look, I mean, it's a 450,000 sq ft building, and for people, investors that have $50 billion portfolios, the risk is you spread that risk over a very large portfolio, and you have to think about it in that context. I would say we weren't concerned about the leasing risk in that building so much as we were excited about the opportunity to have a building a half a block from Madison Square Park at a really attractive basis. It'll lease.
Yeah.
That wasn't the issue.
A nice value-add yield.
Yeah. Absolutely.
Great. I guess one more for you, Hilary, that I don't think is as well understood, and that's really kind of impact of funds flows into these institutional entities and kind of the pressure they have to put out capital. Now, they can put out capital in a lot of different places.
Mm-hmm.
I'm kind of interested in how they kind of think about how to deal with those fund flows coming in, how much pressure there is, you know, to put out capital every year for these types of investors.
Sure. When I joined CPPIB in 2016, it had CAD 280 billion of assets under management, and at that time, it was taking in about CAD 5 billion of net contributions a year. At the end of fiscal 2022, which ended in March 31st of this year, they had CAD 540 billion of assets under management and were taking in about CAD 8 billion of net contributions a year. Let's say over that five-six year timeframe, maybe CAD 40 billion was cash that they got, and the rest of it had to be generated through investment returns, which means their investors are in the market all the time looking for the best investments available to help them achieve their objectives for their beneficiaries and their stakeholders.
They have line of sight to $800 billion of assets under management, and in order to do that, they have to be in the market at all phases of the cycle. As we've already noted, this time in the market where there's a little bit of dislocation in certain areas is actually a really good time to find attractive pricing, 360 being a perfect example. They have to be in the market, and they can't just say, like, "Oh, okay, things are a little bit uncertain. We're gonna sit on the sidelines for the next nine months and wait and see what happens." There's too much money coming into the fund for them to do that.
Interesting. Great. I guess I'll throw it out to any questions anybody has. Happy to take any. Blaine, you have a question?
Yeah. Can you talk about typical lease structures in these ventures and whether or not you guys have seen those change much as you guys have done more with the private equity side?
I wouldn't say they changed, James. I mean, look, I'll talk a little bit about it, and you can jump in, James. I mean, obviously, we're doing the work, right? We get development fees for doing, you know, repositioning, redevelopment, and capital projects. We get property management fees associated with this. We get asset management fees for managing the whole kind of venture. Then generally, we're getting some sort of promote structure out of these deals. Since we're long-term holders and our investor, co-investors are also long-term holders, you know, we try to create that promote structure out of some sort of, you know, crystallization or valuation event at some point during the, you know, period that we're involved with the deal.
You know, depending on the deal and how much work it takes, you know, a development deal or a deal that has heavy repositioning, like a 360 Park Avenue South, could add 100 basis points to our yield. A deal that is a little bit more straightforward, not as much. It might be 50 basis points. It certainly adds meaningful amounts. One of the reasons that we're focused on, you know, using more private equity in kind of our acquisition pipeline as opposed to our development pipeline, is that the acquisitions have a little bit lower yield. Getting a little bit of boost for us, given our cost of capital, really helps us make more sense of the accretion associated with that activity.
You know, versus a pure development play where we're getting, you know, 7+%, you know, on a yield, that's pretty good for us. We're not necessarily, you know, sharing that type of transaction. When we-
And I-
Go ahead.
Yeah. I would add on the LP side of it, that trade is very well understood, and it's actually really great value for the LPs as well. My team running the Americas was 30 people. You know, to have access to the entire suite of services that BXP provides, and James detailed them earlier, is incredibly valuable and not something that's easily replicable. That fee, you know, payment and promote structure is actually really, really money really well spent.
Hey, it's John Kim from BMO.
Hey, John.
Given the disparity between public and private pricing, why doesn't a CBP or GIC directly invest into, like, a BXP, like, a 10% stake, or another company trading at a big discount, rather than going out and buying new assets in the market at very high prices per sq ft?
Well, they actually do. I can't speak to all of the individual investors that are in BXP's stock because that's not my job. Mike, maybe you can talk about that more. They do invest in us and others like us. I think that, you know, they did a fantastic job during the initial stages of the pandemic, when all private equity transactions ground to a halt, of putting money into the public markets to achieve those objectives. I don't know, maybe you have more to say about.
Well, given where we're trading, I would think that they would want to invest more in public equities instead of into private real estate. As you said, most of the major investors that we deal with do both.
Yeah.
There's no doubt about it. They do both. They have these, you know, divisions of people that are designed, right, to invest in direct real estate. They have a group that's doing that and has, you know, power within these organizations. You know, they're able to get access to a certain amount of that capital, so that, you know, they have the ability to invest. It is hard.
Sometimes it's confusing to us because we go to these investors and say, "You know, it doesn't necessarily make sense that you want to invest in, you know, an acquisition at a 5% cap rate or something like that, instead of in BXP at a 7+% implied cap rate." But again, it's kind of like, well, this is what we do with this part of our business. And this is the capital we have allocated to this part of our business. You know, our job really is to access both parts, right? So we're accessing the public equity parts, which is kinda one division of these groups. And then, you know, James and Koop are talking to the other side of these companies on their private equity side, so we can raise both kinds of capital. It's,
We continue to try to convince them to invest more in our public equity. You know, sometimes you're talking to somebody who says, "No, this is what I do." You know, that's what they would say. "Okay. Well, we'll try to access, you know. We'll try to provide you with some opportunities, where you can, you know, utilize some of that capital on projects that we have.
They're also focused on the debt markets right now because of all the fracturing. You got the CMBS market that's quiet. You've got the bank market that's quiet. You know, CPB or GIC, they can focus on getting pretty attractive yields, 'cause in many cases, for deals that need to get done that are of size, they might be the only show in town right now. If that's the case, then they're able to really charge effectively whatever yield that they want because the market needs it. I would say it's thinking about balancing between IRRs for some direct investment, public equity, and debt. They're picking and choosing right now because they have capital put to work, and it's an opportunistic time for them. They really have the full spectrum available.
Last one.
You know, there's also part of it that, you know, they don't have to see the value every day. Right? I mean, it's the mark-to-market is done over time.
Right.
It's in arrears. They're looking in the rearview mirror a little bit. If they look over a long period of time, they do better in public equities than private equities. I mean, that's kind of been documented. Still, I think many investors are focused on not having to worry about that.
Last question.
Any other questions? Michael?
Thanks. You kept mentioning how joint ventures represents about 22% of the portfolio. I'm curious how you see that growing sort of longer term or are you just going to look opportunistically to grow that? I don't know if you have a number in mind for the size.
My view is there's no number in mind. I think it's just as I tried to express, it's a way for us to extend the balance sheet, right? And enhance returns through fees. We're gonna continue to do it. It's been a pretty attractive source of capital for us to fund our acquisition activities and potentially development as well. I don't think we have a target percentage of the portfolio, but it's gonna increase, I can assure you of that.
I think it's gonna grow incrementally.
Yeah.
You know, I don't see it going from 22% to 45% or something like that. I mean, it's gonna grow incrementally as we have investment opportunities, in my view. Great. Thank you.
Thank you both. Okay. Are we ready to go, Helen? This is the last presentation. Congratulations. I know it's been a long day, so, again, you know, we really appreciate all of you being here. I hope that it's been useful. There's been a lot of different things that we've talked about. I think it's been great. Honestly, we're now to the good stuff. This is the BXP opportunity. First thing I wanna ask is, what are the three most critical investment metrics or three of the most critical investment metrics? You guys, maybe you have a few more than this, but these ones are pretty important. Earnings growth, dividend yield, and the valuation entry point. One thing I would say is, I believe BXP has all of these investment metrics, which is good.
I'm gonna start with earnings, talk a little bit about earnings. BXP has historically generated pretty strong earnings growth. As you know, given our guidance last quarter, we're projecting 14% growth this year at the midpoint. We're not gonna give guidance for 2023 today, sorry, but we'll be doing that in the third quarter. Look, our earnings have increased 40% in the last six years. That's from $5.36 to a midpoint of $7.51 in 2022, and that's a CAGR of 5% per year. That includes the interruption of the pandemic. If you look at our cash flow, which is the next slide, which is depicted here by our FAD, which is also known as AFFO, that's grown even stronger.
Even faster, by over 60% in the past seven years, our AFFO has grown, and that's a CAGR of nearly 7%. This is a pretty fast-growing real estate investment trust in my opinion. We've. By the way, we have achieved all of that growth without issuing a single share of common stock to the public during that timeframe. If you go to the next one. The problem is, in 2015, our stock was $128 a share, and today our stock is. Well, it was $83 a share when I wrote this slide. I think it's like $79 a share right now. I mean, that's certainly a point of frustration for me sitting up here and us here, but that is also an opportunity.
Our earnings growth, if you think about our earnings growth, it's coming from multiple places. We've got internal growth that comes from our existing pipeline of portfolio. We've got external growth that comes from our development pipeline and also comes from our acquisitions. Like our acquisition that we announced today of 125 Broadway in Cambridge. Talking about internal growth for a little bit. We talk about internal growth, it's really our same property NOI growth. The same property growth, it changes over time. You know, it depends on how many lease expirations we have in a given year. It depends on our occupancy, it depends on our mark to market, on our leasing activity.
If you look at this chart back in 2017 and 2018, we had some pretty meaningful lease rollover that was in some pretty high cost, high value space. A lot of it was at 399 Park Avenue, and I remember talking to many of you about this. Well, we leased up all that space back in 2019, and we had above average growth in that timeframe. We get through the pandemic, and we were impacted by the pandemic, clearly. We experienced a disruption in certain of our income streams, our retail income stream, our parking income stream. We had one hotel that, you know, was impacted. If you look at the performance of our premier workplace portfolio during that timeframe, it was pretty darn resilient. We've got long-term leases. We've got high credit tenants.
We did pretty well in that portfolio during that timeframe. If you look at the past two years, our portfolio has grown pretty significantly through positive mark-to-market in the leasing, improvement in our occupancy, and the recovery of our ancillary income streams. If you look at our mark-to-market, which is the next slide, again, this kind of varies quarter- to- quarter, but this is a long-term view of what our mark-to-market is over the last six years. Pretty impressive. Average of 16% positive mark-to-market in all the leasing that we did over that timeframe. I would say as we look forward over the next, you know, two, three, four quarters, I think this is gonna moderate. I don't expect it to be 16% over the next two, three, four quarters.
I think I look at it and, you know, rental rate, rental rates in our markets are pretty stable. I think that'll moderate a little bit. Most of our growth will start to come from occupancy improvement. Overall, if you look at the overall portfolio and you assume no rental rate growth from here, we believe that our overall portfolio mark-to-market is about 5%. We'll get a little bit of growth from mark-to-market, but I think most of it is gonna come from occupancy. If you go to the next slide. Doug described a little bit, I think occupancy is the opportunity. Our lease expirations are pretty moderate in 2023. Next six quarters, 3.9 million sq ft, about 650,000 sq ft per quarter. You know, some of the expirations are front-loaded.
As you see, they're in, you know, the Q3 and Q4, and I mentioned on our last earnings call that, you know, our occupancy might dip a little bit. But it's pretty low in 2023. We think we have a real opportunity, you know, here, and that we should be able to gain occupancy over this time horizon. If you go to the next slide. You've seen this slide. You've seen this slide several times. I think it's because it's the most important slide, in my view from a trend perspective, because you can see why we have confidence that we're gonna gain occupancy if you look at this slide. During the pandemic, our leasing volume declined. It was about 800,000 sq ft a quarter.
If you look at what happened, that lower lease volume, that contributed to lower occupancy that we got in the portfolio. Now we've clearly recovered. We've got five quarters in a row where it's averaging 1.3 million sq ft. This quarter so far, we're over 1 million sq ft already. We've got a couple weeks left to go. I'm sure we're gonna sign more leases by the end of the quarter. With these lease volumes and facing an average of 650,000 sq ft of quarterly expirations, we should be able to gain occupancy. That is our goal. That's one of our opportunities. Go to the next slide. Long-term average occupancy over this timeframe is 91%. You can see we entered the pandemic higher than that. We entered the pandemic at 93% occupancy.
That's a pretty high point for us. I mean, you can go pretty far back, and we've only been 93%-94%, you know, in brief periods of time over 20-25 years. The pandemic was a challenge. You can see the line going down. We lost 400 basis points of occupancy, and there was three real reasons for that. 100 basis points was retail tenants going bankrupt. We were hit with a few of these retail tenants just could not get through the pandemic. Second big one was 100 basis points due to delivering Dock 72. Dock 72, we only own 50% of it, so it's a joint venture. It's our project in Brooklyn.
It has 450,000 sq ft of vacancy when it delivered, so that immediately added 100 basis points of, you know, vacancy to our portfolio. 200 basis points occurred due to the slowdown in leasing over that timeframe that we saw. You know, that six-seven quarter slowdown in leasing kinda leaked through the rest of the portfolio and cost us some occupancy. If you turn to the next slide. The increase, you can see it's already happening. We've seen increasing leasing volumes over five quarters, starting to have an impact on our occupancy. There's a little bit of a lag effect, two-three quarter lag effect, but it has started to move up. It's increased by 70 basis points so far in 2022. I think that's pretty good.
As Doug mentioned, we have 1.8 million sq ft of signed leases that have yet to commence. We've got over 600,000 sq ft of leases in negotiation. Again, all of these things point towards us feeling really good about gaining occupancy. The last thing I wanna point to, and you know, a lot of people ask about mark-to-market. It's like on every call, people talk about mark-to-market. Mark-to-market is important. You know, you increase your rent by $10 on, you know, the 4% of our portfolio that is rolling in a year, and honestly, it doesn't have that much of an impact on earnings. What really has an impact on our revenues and our earnings is growing occupancy.
You grow 100 basis points of occupancy, and you look at what our kinda average rental rate in our overall portfolio is, that's $37 million. That's $0.2 A share. It's really meaningful if we can push up this occupancy by, you know, 100 basis points, by 200 basis points, which is our goal. Next slide, Helen. External growth. External growth is mostly our development pipeline, okay. We've got a development pipeline in place under construction, 4.4 million sq ft, almost $3 billion worth of investment. In addition to this, and again, I don't think people give us a lot of credit for this, we have this land pipeline that's really our R&D, right? It's 17 million sq ft that we can build on this land pipeline. Now, it's not all gonna happen immediately.
It's not even gonna all happen in the next few years. There's some really exciting, great projects that is within this pipeline that we are gonna make happen over the next few years, which are gonna deliver in 2026 and 2027 and 2028 and will extend our growth trajectory. Our goal and our job, right, is to try to figure out, in this environment, how we can get these things started, how we can make these accretive developments, get them going so that they're delivering over that timeframe. If you look at our existing development pipeline, I've kind of broken it up into two pieces. The first one is this part of the pipeline, which is our premier workplaces, our residential, and our observation deck.
That totals $1.8 billion of investment, and we expect it to generate a return of just about 7%, maybe a little bit below 7%. You know, they include the Reston Next development. You heard about that in the Washington, D.C. presentation, which is the 500-unit residential project and the 1.1 million sq ft of office that is primarily leased by Fannie Mae and by Volkswagen. We've got 2100 Pennsylvania Avenue that delivers this, you know, later this year. Currently 61% leased. We've got WilmerHale, anchor tenant, who's gonna be taking occupancy later this year. We've got another major law firm that we have a letter of intent with that'll bring that leasing up to over 80%. We're working hard on getting that one through.
We just talked a little bit about 360 Park Avenue South and the repositioning of that, which we acquired as a vacant building at the end of 2021. That one's in our private equity vehicle, so we own 42% of it. We also recently commenced Platform 16 in San Jose that the San Francisco team talked about. Lastly, I'm gonna talk a little bit about View Boston while we're here, and a lot of you got to see it. If you didn't get to see it, I encourage you to come back, because it really is stunning, and we're gonna open this deck in the spring. It's the only observation deck in Boston. Boston gets over 20 million tourists a year. We think that this really has the opportunity to outperform.
We're extremely excited, as I think you can tell, with the opening of that project, you know, next spring. The other part of our pipeline is the life science pipeline that we've also talked about. It's you know $1 billion of investment, and the projected cash return on this development pipeline is approximately 9%, so significantly higher. You know, it includes 300 Binney Street, which we just talked about, where we're gonna invest $200 million to convert this building to lab. It's 100% leased. You know, even if you include the lost rent that we have to deal with because we terminated a lease, we still think our return on that is gonna be well north of 9%. A very, very exciting project for us.
We've got the three projects in Waltham that total nearly $500 million of investment. 880 Winter Street's 97% leased, and 103 and 180 CityPoint that you heard about deliver later next year. In South San Francisco, we have two developments with $275 million worth of investment. One's 100% leased, and the other one's gonna deliver later in 2023. We have land in both of these locations, so both in CityPoint and at Gateway, so that we can continue to commence buildings incrementally as the leasing market dictates that we should. We talked a little bit about life science and kinda where the demand in the market is. If the demand in the market is weak, we don't have to go forward.
If we see the demand in the market, we've got product that we can start and we can continue to develop opportunities at really, really nice returns. Why are these returns so strong? I mean, they really reflect the fact, right, that we've owned this land, or in some cases, these buildings that we're gonna convert at a low basis. It's really allowed us to take advantage of what we've seen from the life science market, which is very, very strong rent growth over the last three years, that has really kind of pushed up the ability for us to generate really, really high returns out of this development activity, and get great value creation out of it. If you go to the next slide. This is kind of the pipeline as a whole. The pipeline's gonna be completed by 2025.
We project on stabilization, it's gonna generate $2.3 billion of incremental value. That's about $13 a share, and it's gonna increase the growth rate of our portfolio NOI by nearly a 4.5% cumulative annual growth rate over the next 3.5 years. If you kinda look at what the in-service portfolio could do, and we've, you know, I showed you some stats that it's been kinda 2.5%-3%. You look at what we can get out of this development pipeline. You know, we have the opportunity to generate NOI growth that's in the, you know, high single digits. That's what our goal is. I wanna spend a little bit of time on the dividend. We don't talk a lot about the dividend. If you go to the next slide.
We honestly, we don't talk a lot about the dividend, so I wanna spend a little bit of time on the dividend because it's important. The current dividend yield is 4.7%. It's probably more than that today because our stock price went down. It's well supported by our cash flow. As you can see, you know, with this slide here, we haven't moved it in a while. We've elected to maintain our dividend steady during the pandemic. Even though we haven't increased it in, you know, a couple of years, if you kinda look back since 2017, so over six years, we've increased it by 29%. That's a 5.2% annual growth rate. We have increased the dividend. We just chose not to increase it during the pandemic period.
If you go to the next slide. This is our dividend coverage. Calculated by our FAD ratio. If you look kind of historically, and you can go back further than this, historic dividend coverage ratio is 70%-85%. That really gives us plenty of cushion to increase the dividend and also retain plenty of cash flow to put back into our development pipeline in the portfolio. During the pandemic, you can see it went up. We had an interruption in some of our income streams, right? It went up into the, you know, low- to mid-90s%. You look at that, and then you give the uncertainty of what the pandemic posed, and you can kinda understand why we decided to defer increasing the dividend during that timeframe.
If you look at what's going on now, first half of 2022, our coverage ratio has improved significantly. We're back down to historical levels, 73%. If you go to the next slide, Grace. This is another factor we consider when we think about our dividend. You know, our dividend policy really is when we think about it, we think about our taxable income, and we think about how that compares to our dividend. If you look at the black line here, it's taxable income per share. If you look at the dividends per share, that's the blue line. As a REIT, we've got certain rules we have to live by, and we're required to distribute at least our taxable income.
There's a few rules that allow you to kind of defer that and kind of carry forward some dividends that you haven't used in the past. In general, that's the rule. You know, when the black line goes above the blue line, you should expect us to increase our dividends. Pretty simple, right? Historically, you know, 2016 to 2019, we increased our dividend. Black line was above the blue line. Go into pandemic, opposite happens. There's no pressure for us to increase the dividend. We're in a period of uncertainty, so we kept our dividends stable. We have not included 2022 in this chart because we're still working on taxable income projections and things like that. You can see that these two lines are starting to come together.
Our earnings growth that we provided last quarter for guidance was 14% year-over-year. You would think that taxable income would also be growing. I would expect that these lines would continue to kind of close. The other thing to point out on dividend is, as a strategy, you know, we want to retain as much cash as we can because we're a growth company. We have new investments that we want to make. We've got new developments that we want to fund. Being able to retain capital and use it for growth is the cheapest form of capital. We don't necessarily want to dividend out when we don't have to.
It's not really unusual for us to maintain our dividend or maybe just have modest increases when we're not legally obligated, because we have a good use for the money. Valuation. I'll spend a few minutes on valuation. It is also a BXP opportunity. This first chart here, it depicts our implied cap rate over time, against an internal study that we maintain of over 150 closed sales of high-quality office buildings greater than $100 million in our markets. You know, we've done a study, and it shows that the average cap rates over this time frame are between 4.5% and 5%. Now, there's certainly some that are above that, and there are some that are below that.
In general, we believe that, you know, this reflects the cap rates for the best comps that we could find for our portfolio. Honestly, we demonstrated this with the sale of 601 Mass Avenue, right? We sold at a 5.1% cap rate. Our implied cap rate is now above 7%. It's now even further above 7%. It's higher than it was at the beginning of the pandemic, and it's over 200 basis points wide of where we think private market cap rates are. Then on a multiple basis, we can go back even further. You know, our current multiple as of last week was 11.3. I think it's 10.6 now, by the way. It's as low as it's ever been. Even during the GFC, the height of the pandemic, it's eight turns lower than our long-term average.
I mean, we acknowledge that there's uncertainty in the market about the future of the workplace, about interest rates, about the recessionary environment. Still, in our view, these valuations just don't make a lot of sense, honestly. Just to conclude. Next slide. We believe there's a real BXP opportunity. If you look at our financial metrics, they're favorable. We see future portfolio NOI growth. James talked about interest rates and the impact of interest rates on the company. They're a headwind to our earnings, there's no doubt about it, but they are manageable. Our share price is inexpensive on all the historical metrics. Over a 7% implied cap rate, 10.7 FFO multiple today, 4.7% dividend yield.
We have a lot of embedded value in our ability to create future growth out of our pipeline, out of our land portfolio, out of our existing buildings. Then on the subjective measures, and we've talked a little bit about this, I mean, we have a portfolio of exceptional properties. I don't think our portfolio has a peer out there. It's truly a superior quality portfolio. The assets we own are premier workplaces, and they've always outperformed. In this environment, they're clearly gaining market share. Our ESG performance, you looked at, you know, you heard from Ben. It's a key differentiator of the company. It's industry leading. We're making incremental investments in things like life sciences and residential that further diversify our, you know, our portfolio, and they drive growth. We have a portfolio of very high-quality clients. They're from many different industries.
They're in many different geographies. They have long-term leases. This really is the BXP opportunity. Again, I hope today's been helpful. I hope it's been educational. I hope it's given a better picture of BXP to you. I'm gonna ask Owen and Doug to come up, so we can all ask any kind of questions that you have. But we really do appreciate the support and your interest in spending the last day and a half with us. Any questions? Tony.
Yeah, thanks. You expressed a lot of confidence in occupancy increasing in 2023. What kind of job scenario would make that unachievable in your view?
I guess my perspective would be we have two sources of occupancy gain opportunities. One is t enants that are growing their footprints relative to job growth, and the second is tenants that have exposure to lease expiration. The majority of the leasing that we will see and that we have been seeing for the last, call it 18+ months, has really been in that second category, which is lease expiration driving marginal increases in jobs. I don't remember who said it this morning, but the private sector financial institutions or professional services firms have been net growers, and that's been evident in our Back Bay portfolio in Boston and our Lexington Avenue, Plaza District portfolios in New York City. I think we're not really as exposed from a macro perspective because I think our expectations are relatively modest.
I think many companies, I think their headcounts are still up, and they haven't taken space in the last few years. We see that somebody asked a question about Snap, right? The job losses that, you know, Snap was projecting. The fact that they still have more employees a year ago, even after the layoffs than they have. They have more employees now than they had a year ago, even after the layoffs. A lot of companies have added a lot of employees, and they haven't necessarily added space during this time frame.
Yeah. There's a bunch of several alternative asset managers that we serve have raised much larger funds. They've grown their staff. They're very much working in the office. They're taking more space. Then some of the more markets-oriented that are a little bit more flexible on work from home, that was the comment I made this morning, I heard over and over again. "We just have a lot more people in our company. We're not sure how we're gonna work in the future, so we're certainly not gonna give back space, and we might end up taking more, but we're not gonna make that decision right now.
Alex?
Question. I've got a question about how you allocate to different markets. I think a number of years ago at Nareit when Alexandria opened up their east side life science, I think, you know, a general question that was asked of you guys is what about New York life science? I think at the time you guys said, "Not enough demand, not a deep enough market." Today, you presented that, "Hey, you know, we're looking at life science." Obviously, we've seen companies like Avalon or EQR, which for years said, "No, we're not gonna go here, we're not gonna go there." Suddenly, they're doing that. Internally, what does it take for you guys to reevaluate decisions where years ago you said no to life science in New York, now you're saying yes. Years ago, you may not...
You were saying no to Seattle, then you entered it. What are the criteria that have to happen that suddenly cause you guys to say, "Hey, you know what? We said no before, but now we're willing to say yes"?
Yeah. Alex, I would say there are two components. The most obvious one is client demand. If we see there's a marketplace that we think we can serve because there is an, you know, a different set of circumstances relative to the demand picture, that's where we're gonna hone in our interest. But the other thing that's required is scale. For us to enter into a market or make an initiative, we need to have a perspective that we can put capital to work in a meaningful way. What I think Hilary Spann was describing this morning in the New York City presentation was, we think that the city of New York needs another job catalyst. We have an expertise to do some interesting life science work.
We also have an expertise and an opportunity to partner with the city and/or other semi-quasi-public institutions where we can create places with scale, where you can do a meaningful amount of development potentially over time in a particular area that would allow us to have sort of both of those criteria together. It's those kinds of things that I think would, you know, both be.
Yeah. I mean, the market's dynamic. I mean, we have to adjust with time and how the client preferences go. Doug described what's going on in New York life science. There isn't really a lot of demand there right now, so you know, we don't anticipate doing a new life science project in Manhattan anytime soon. We have had some interest in Carnegie Center, which is part of our New York region, and that's clearly something we'll pursue. But I would just say in general, from a strategy standpoint, as I said this morning, you know, we as the senior leadership, we try to establish an overall parameters geographically and business unit, and then the opportunities are driven by our teams. What do they bring? What relationships do they have? What client demand can they serve?
We're opportunistic from that perspective, and we deploy the capital into those best opportunities within the perimeter that we've defined. I think another thing that hopefully came out over the last day was all of the perimeter that we've established that we haven't fully fleshed out yet. I mean, look at Seattle. We're off to a great start. We've got two great buildings. That's certainly not our ambition. We wanna do a lot more. Los Angeles, same thing. You know, we're the largest landlord in Santa Monica. That's great, but it's still a small component of our company. We wanna grow that. Life science, you saw what the opportunity is there. Broadly speaking, it's about 6% of the company, and we've said publicly we wanna double that, or we think we can double it. Rich gave a great overview of residential.
That's even a smaller percentage of the company. That can grow. We've got the private equity business. We've got a lot to do, and I think there's plenty of opportunities. Particularly going into this recession, there's a, I think, a wealth of opportunities that are gonna present themselves to us within the perimeter that we've already defined.
Um-
Yes, sir.
Yeah. You guys talked a lot about your premier assets today and the difference in performance of those assets versus non-differentiated or commodity assets. Can you just talk about how much of your portfolio you would consider to be that non-premier or non-core assets, and whether we should expect sales of those assets to accelerate as we look forward?
In the slides that I showed, we did not rate our own assets, 'cause we think all our assets are great, so as you would expect. We asked an expert on the outside to do that, and CBRE did it. They did it for the markets, and they did it for our portfolio. When they looked at our CBD assets, it came in 94% of our square footage was in the premier workplace segment. By the way, they also said 17% of all office stock in the five CBDs where we operate is in the premier. We own 94% of our assets compete in the top 17% of our markets. We have not done that work. I was just talking to Todd McGrath about it at lunch on the suburban side or the exurban side.
I suspect given most of our non-CBD assets are things like Reston Town Center, my guess is we're gonna have a similarly high percentage of assets that will be in that premier workplace bucket.
Yeah, Blaine, I would just caution the following, which is we may sell some premier assets too. There's nobody at Boston Properties regional Washington, D.C. team who would even suggest that 601 Massachusetts Avenue was not a premier asset. It was a pretty slow growth asset, and we had the contractual income for 13 years, so we made a decision to reallocate that capital. You could see other opportunities where in our portfolio of premier assets, there may be an asset that has a lower growth profile that we may choose to use to fund some of the other opportunities that we talked about today.
Yeah. Like that one, that was a good example. I mean, we traded that asset. We did sell it, but we really traded it. 'Cause if we had sold it, you know, Doug gave you the gain, and it was huge. If we had just sold it for cash, we'd have paid out a big special dividend, and then we'd have less capital to do something else. The way we think about that is we had a premier asset in Washington that's lower growth, and we traded it for a premier asset in Seattle, which we think over long term is gonna be higher growth. To also address the question that Doug addressed as well, I do think we'll be selling more assets. I think the market bar for premier is going up.
We project $850 million of sales this year, and I expect next year, capital markets willing, and you know, we're not gonna sell if we don't like the price. I think we could be at a similar, if not higher level. Yes.
Yeah. Thanks for a great day of information, everyone. You touched on in the very last slide, Mike, with creditworthy tenants. As you discussed all day long, obviously the credit market's eroding a little bit more, credit spreads going up. That's true for your tenants as well. Can you maybe all talk about how the portfolio compares today versus the global financial crisis? Law firms were a big issue for you at that point. Maybe in a more draconian scenario where you're not able to keep pace, what worries you the most? What do you see most from a credit perspective among your tenants that worries you?
You know, I think our portfolio is in really good shape. I think we've gone into other periods. You know, you went into the dot-com period, and you know, there was a lot of tech crash tenants that didn't have business plans or revenues. During the GFC, I mean, you know, you got stung by unusual places like Lehman Brothers, and places like that. You know, we don't see. I mean, like certainly legal firms, we see them as being very strong. We've got a lot of asset management firms and large financial services firms. If you look at our tech exposure, right, it's Google, it's Microsoft. So most of our major tenant exposure are very strong high credit companies. You know, there is
You know, if you go into some of the suburban portfolio, you know, there's some younger companies in some of those that rely on venture capital to fund themselves. We are, you know, monitoring and watching some of those smaller tenants that we have. But they make up a very small kind of component of when you think about our overall revenue. If you look at our top 20 list of, you know, customers that I think they make up, like 58% of the revenue or something like that. I mean, they're a list of very, very strong financial service, asset management, consulting firms, large tech firms. There's not a lot of kind of issues that we're kind of worried about of any kind of sizable piece.
Yes.
Can you just clarify today's announcement in Cambridge? How much of the purchase price of $592 million was allocated to the asset itself versus the termination fee?
We did two deals in Cambridge. The first one was we purchased 125 Broadway. 125 Broadway was purchased for $592 million.
Yeah.
$2,180/sq ft. If John Varholak was right, that rents are $120-$130/sq ft, that's a 5.5% going in cash-on-cash return. Cambridge rents have a minimum of a 3% annual escalation in it. Sort of give you a ballpark there. The other transaction we did was we took back space from Biogen at 300 Binney Street. 300 Binney Street was a 195,000 sq ft building. It's now a 240,000 sq ft building. That's the lease that we signed. The company that signed that lease is the Broad Institute. They put their press release out about an hour ago, so we can tell you who that is.
The Broad Institute is basically an intellectual research organization that is funded by private donors, MIT, and Harvard University. About as good a credit as you're gonna find. Incrementally, we're gonna get somewhere between $95-$100/sq ft of additional cash rent. We're investing about $850-$900/sq ft of incremental cash. Mike said, "I'm comfortable that it's gonna be in excess of a 9% return." That's sort of the basic economics of those two transactions. They were.
Linked together, but because the counterparty was the same. You know, we look at them as individual transactions, although we did them at the same time.
My second question is, I've heard you correct yourself a few times when you referred to yourselves as Boston Properties. I don't know if that's a nuance or you're officially BXP. Can you-
Yeah.
Just clarify that.
Yes. We are BXP. We are deeply appreciative and respectful of our prestigious historical name, Boston Properties, but we've changed the name of the company to BXP. Because again, if you've seen here the Boston region, the company was founded in Boston. Boston's our largest region. We're very proud of it. It actually isn't a full reflection of what the company does. You know, you heard about all the things. You know, Boston is a third of our results. It's large, but it's not the whole company. We think BXP is a broader name. It's our ticker. I think people understand it, they know it, and it's a better reflection of what the company does because I think it's less geographically focused.
Then the other change, if you will, that we've hopefully messaged clearly to everyone is the fact that we compete in the premier workplace business. We've tried to explain the segmentation of the office business that we used to compete in, into premier workplaces and the rest of the market, and how our assets are premier workplaces, and we're competing in a different market. To really understand the markets that we compete in, you have to break out that segment of the asset base to understand it. Not only the new developments, but also how the existing properties are performing.
Thanks. I don't know if you've gotten wind of this analogy, but the question I hear and debate is the office business the mall business 15 years ago? Of course, the underbelly of the office business is not your business. It's not a direct hit to Boston. I'm sorry, BXP, all lowercase-
Yeah.
letters, by the way.
It's okay if you do.
But how would you characterize the next five years, not so much for Boston, geez, BXP, but for the office industry? If it truly is going the way of the mall business, which I don't necessarily agree with to that extent, is that a great scenario for you, or is that a bad scenario to be successful in a sort of a declining industry?
Yeah. I'll start, and I'm sure Doug and Mike may wanna pile on and add. First of all, with retail, I think fundamentally what you've got is you've got another channel of distribution which is grabbing a lot of market share, and less products are being sold and flowing through physical real estate, 'cause it's all going direct. I mean, we all trip over-
Through work from home capability and now.
Well, I'll come to that. That's what's happened in retail. You've had an external event that's changed the distribution of product. But that being said, even in retail, individuals wanna go to high-quality shopping centers. They wanna be together. They want the entertainment experience. For certain segments of the retail, I'm not as expert in retail as other asset classes, but for certain segments of retail, it's performing very well. You know, we've experienced it here at the hub, you know, certainly on specific nights. Now moving to office, I don't think you've had the same disintermediation for the client base that we serve. I think the clients that we serve are industry leaders in their spaces. Technology, legal services, financial services, consulting, accounting.
I think all of those businesses and business leaders believe that they need to have offices to be successful. I think they believe they need to have great offices to be successful. That's why we keep focusing on this premier workplace segment, 'cause that's where our clients operate, that's what they want, and I think that is reasonably healthy now. The unhealthiness of the premium workplace business today is, I don't think related to remote work. I think it's related to the recessionary impacts that I talked about. As those dissipate, I anticipate that the clients that we serve will continue to want space. However, to your point, I do think there is a segment of the office business that has been disintermediated by remote work. I think there are support workers, IT, accounting, some support legal services, HR.
Many companies are allowing those workers to work more remotely, and therefore, they need less space to house them. I do think there are segments of the workforce where this disintermediation is occurring. Hopefully what we've been able to communicate in terms of our strategy is we're doubling down, if you will, on the quality. I mean, as I mentioned this morning, you know, the founders of our company were always focused on quality. I mean, Doug should be talking about this, not me. Thank goodness, 'cause they were right, and they're really right now. Fortunately, we've embraced it and carried it forward, and I think we're gonna elevate it over the next few years.
Yeah, I would say, so we try and build our assets and position our assets and curate our assets, and I use that word sort of, you know, delicately, 'cause we do a little bit of it, not a lot of it, in a way so that our clients can use those assets to create both retention and recruitment of individuals, and to some degree, use their physical locations to help create brand affinity and culture, right? That's it. We've always said better architecture, better design, better systems, which cost more, will, as an additive combination, do that for many, many companies. Now, there are clearly companies who look at their real estate and their human capital as a cost center, and those companies don't give a about that stuff. They're gonna always be that way.
I think that's the way we're trying to force the company and other people to think about what we do in terms of being in the workplace, workspace business, not the office business. The one thing I would just add to what Owen said and, you know, to sort of agree with you to some degree, there will be less demand because of all of the things that are going on in terms of the growth in the utilization of office space relative to what it was in 2018 or 2019. Which I think will translate into a larger disparity between the haves and the have-nots.
Because the people who are gonna grow and the people who are gonna wanna utilize space are gonna find themselves geared towards better quality, better buildings, better locations, better amenities, better operators. There, there likely will be people and buildings that are left behind. Hopefully, cities will be able to figure out how to revitalize those buildings as some adaptive reuse and not have to take a wrecking ball to them. There may be some buildings that actually need a wrecking ball, and there's gonna have to be a reuse of that land because that land has a higher and better use than what it currently is as a B or a B+ office building.
I would just also say we're seeing it on the ground, right? We're doing the leasing volumes. You know, our leasing volumes are up. That's what gives us confidence. The pricing is, you know, stable. We're still getting great rents in 399 Park, in the General Motors Building, 200 Clarendon Street, the Prudential Complex, the, you know, in the Prudential Center. We're seeing it on the ground, the value that our clients are placing in, you know, these premier spaces.
I guess, following up on that, is it possible over the long run, say 10, 15, 20 years, to have rent growth in premier workspaces, but have a negative 20% mark-to-market on office? Because that's a pretty big disparity. If you have this fixed, you know, inventory of offices that are losing pricing power, losing tenants, can you really grow your rents over time in your portfolio?
I wish we had the slide up that showed our historical rent that's reported by the various brokerage firms market by market over a long term. In general, they're sort of in this 2%-3% range. If you bifurcated that data going forward to the 17% of the buildings that were defined as premier, you know, in Owen's opening remarks today, I am sure that there will be incremental rental growth in those buildings. In addition, the supply that is being added to the market is much more expensive almost in every case than the current market rents because people are paying a premium to be in those new buildings.
The average market rent leased in Manhattan on the Upper East Side, Plaza District, Lexington Avenue area is much lower than the rents that are currently being earned by the buildings, you know, the at like One Vanderbilt or 425 Park, which are these brand-new buildings. As the inventory gets better, I believe you will see market rental rate growth naturally push its way into the market because the overall market is gonna grow. I am much more optimistic that we will see continued over time rental rate growth as long as we can, to some degree, bifurcate the market into the premier and everything else. There is, you know, some incremental demand in these markets that are currently, you know, in pretty challenging supply conditions. Yes, sir.
Maybe just touching back on life science. Owen, you talked about, you know, doubling your exposure there. I'm curious if your timeframe around that achieving that has changed, just given the changing macroeconomic environment and just, you know, given the emphasis that we've seen on life science, you know, throughout our time here, could you see it even growing past that, you know, 12% of the portfolio?
Yeah. I think it's accelerated since we made our comments a year ago because we just did this major acquisition, number one or two acquisitions, really. I mean, one, well, one was a conversion to life science, one was an acquisition, so that accelerates. We've talked about it quite a bit. No one's ever said this at this conference, but the 250 and 290 Binney Street developments, plus the residential, on a dollar basis, that is the largest development that BXP has ever undertaken on a dollar basis. I mean, the Salesforce Tower, which is obviously a major development, that was $1 billion. This is $2.5 billion. That in and of itself. Now, I don't know if that'll come out.
You know, that won't be fully done in five years, but that's also gonna contribute significant growth to our life science business. The other thing that gives me so much confidence about it is these, all these deals I just mentioned, they're in Kendall Square. You know, they are in arguably, maybe not even arguably, the best life science market in the world.
On the globe.
You know, again, if you look at it, the building we bought is leased, the building we're converting is leased, and one of the two towers that we're proposing to build, assuming we complete all the pre-development requirements, is leased. You know, a lot of the risk from a leasing standpoint has already been taken out of the deal. I think we are accelerating our life science growth as a result of all these transactions.
Just to hone in on something that we don't spend a lot of time talking about, but may be beneficial to us in the life science world. We try and develop deep client relationships. We talked about, you know, the relationship we had, for example, with Wellington. We talked about the relationship that we're working, relatively speaking, with Biogen. We built a building for the Broad Institute, and they ultimately purchased from us. We were their fee developer, which for a piece of land that we sold them to do a building. Now we just did a third transaction with that institution. Owen gets a call from one of the major tenants at 399, or we can go. Not from a broker, but from the tenant saying, "Can you come over and talk to us?
We're looking for more space in the building. Can you help us with that?" Those kinds of client relationships, we think if we're good at operating these life science buildings and we have a team of people who are, we believe are quite good at it, will we hope foster additional business, if you will, from the growth of those companies assuming they're successful. I can't put a you know timeframe on whether that will in two years or five years or 10 years translate into additional quote unquote "business". It's those types of things that might allow us to more than expand just the physical real estate that we have, but go with our company clients to do things in the life science side because they believe that we are really good at what we do.
Yeah.
Yes. Yes, sir.
Question just on rent bumps. As we sit in this higher inflation environment that has the potential to persist for some time, how are you guys thinking about the escalators and the importance of those? I guess, how are tenants responding in those types of conversations?
We are in an industry that doesn't have pricing power, right? We can't say, "Well, you know, our cost of goods is up, so we're gonna have to increase our, the price of our product by 8%, and the consumer's gonna have to pay for it." We are in markets where the market supply is effectively creating the economics of how those leases are being structured. In the best markets, we are seeing a 3% annual increase in the contractual operating or gross rent or net rent, depending upon the way the lease is structured. In other markets, we're seeing, you know, over a five-year period of time, a 10%-12% increase.
Those market dynamics are what is influencing the bumps that we're seeing from a cash perspective, not our ability to say, "Our costs are up, therefore you have to pay more." Also remember that in an existing lease from an operating expense perspective, we pass along all of the escalations one way or another. You have a base year, and you pay all excess increases in operating expenses above that, or you have a triple net lease, and we pass through 100% of the operating expenses on a proportionate basis to that tenant. On an incremental basis, what's going on from an operating perspective is not really impacting our bottom line until we have a piece of vacant space and we have to reset if it's a gross lease kind of a structure.
One last question. Not.
Okay. If there are no other questions, I just have a couple of final comments. The first thing is I wanna thank Michael, Mike LaBelle, Helen Han, and all of my colleagues from BXP that are here that made all these wonderful presentations. I think we had, as I said this morning, over 35 people involved. Thank you so much for everything that you do. I think that's a great conference. Then lastly, I wanna thank all of our investors that are here and analysts. Thank you for gutting it out to 5:00 PM. I know the ranks thinned a little bit, but thank you for being here. Thank you for your interest in our company and your support of what we're doing. We appreciate it. Thank you very much.