Ladies and gentlemen, thank you for standing by, and welcome to the BXP First Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] And also please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Helen Han. Thank you. Please go ahead.

Good morning, and welcome to BXP's first quarter 2022 earnings conference call. The press release and supplemental package were distributed last night and furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the Investor Relations section of our website at investors.bxp.com. A webcast of this call will be available for 12 months. At this time, we would like to inform you that certain statements made during this conference call, which are not historical may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Although Boston Properties believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in yesterday's press release and from time to time in the company's filings with the SEC. The company does not undertake a duty to update any forward-looking statement. I'd like to welcome Owen Thomas, Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President; and our regional management teams will be available to address any questions. We ask that those of you participating in the Q&A portion of the call to please limit yourself to 1 question. If you have an additional query or a follow-up, please feel free to rejoin the queue. I would now like to turn the call over to Owen Thomas for his formal remarks.

Thank you, Helen, and good morning, everyone. Today, I'll cover BXP's operating momentum as demonstrated in our first quarter results. Important trends emerging in post-pandemic work and office use, current private equity capital market conditions for office real estate BXP's capital allocation activities, including a significant acquisition we just announced and our prospects for future growth. BXP's financial results for the first quarter reflect the positive impact of U.S. economic growth, the gradual reopening of the major cities where we operate, and increasing needs by our clients for securing high-quality office space. Our FFO per share this quarter was well above both market consensus and the midpoint of our guidance and we increased our forecast for full year 2022. We completed 1.2 million square feet of leasing more than double the space we leased in the first quarter of 2021 and in line with our pre-pandemic leasing activity for the first quarter, and our leasing momentum continues in the second quarter as Doug will cover. This success can be attributed to not only our execution but also the enhanced velocity achieved in the current marketplace for premium quality workspaces, which are the hallmark of BXP's strategy and portfolio. Finally, we just released our 2021 ESG report outlining the actions BXP has and will take to ensure continued leadership in this critical area. Highlights include remaining on track to achieve carbon-neutral operations by 2025, enhanced disclosures regarding Scope 3 emissions and diversity, achieving multiple financings tied to sustainability performance, inclusion in the Dow Jones Sustainability Index and recognition for our work from many sources. The report is available on our website, and I encourage your review. As the effects of the pandemic are increasingly behind us, there continues to be much speculation about the future of work and its impacts on…

Thanks, Owen. Good morning, everybody. So we're sitting here on May 3, pretty late for us to have a call, but obviously, we had a lot of news to report, and we wanted to make sure our own schedules worked out there. Most employers have begun their journey to discover how they're going to match their human capital with their utilization of physical space. It's clear that the census on public transportation and in our office buildings continues to be below levels in 2019. There are going to be organizations that make few, if any, changes to their space configuration, location or allocation of space per employee those clients will be and are in the market making long-term leasing commitments based on their growth and as Owen said, a lot of companies grew in their lease expiration schedules. There will be businesses that experiment with different models. These companies could sublet space, they could commit to more or less short-term space or they could simply watch how their business responds to their new in-office cadence and do nothing until their lease gets closer to its natural exploration. It's also true that the availability rate of space, defined by third-party brokers that look at the entirety of the market, and as Owen described, there are lots of ways to cut it. But in general, it's -- it still continues to be elevated in our urban markets. But as Owen pointed out, if you start to analyze the activity, the best buildings are getting more than their proportionate share of market demand. Despite these headwinds, on demand and supply the BXP portfolio had its third consecutive sequential strong leasing quarter. Our total activity was again spread amongst Boston, New York, San Francisco and the Metropolitan Washington region. Last quarter, we showed an…

Great. Thank you, Doug. Good morning, everybody. This morning, I plan to cover the details of our first quarter performance, the impact of our current and projected capital markets activity and the changes to our 2022 earnings guidance. Overall, as Owen and Doug described, we had a strong quarter. We increased our occupancy, and we continue to grow our revenues. Our share of revenues this quarter is up 4% sequentially from the fourth quarter and up 8% over the first quarter of 2021. We reported funds from operation of $1.82 per share that exceeded the midpoint of our guidance by $0.09 per share. The most -- the improvement mostly came from a combination of higher rental revenues and some lower operating expenses that aggregated to $0.08 per share. $0.03 per share of the revenue outperformance came primarily from recognizing revenue earlier than anticipated due to our clients completing build-outs and occupying their space faster than we expected. For example, at our Reston Next development, we delivered a tranche of 11 floors to Fannie Mae almost a month earlier than we projected, resulting in higher-than-expected revenue in the quarter. We also recognized $0.01 of revenue from restoring the accrued rent balances from clients that struggled during the pandemic, but have now recovered. We had previously reclassified these clients, which are primarily retailers and restaurants to cash basis accounting, and now their sales performance demonstrates the ability to pay their rent over the full term. On the operating expense side, lower-than-anticipated expenses contributed $0.04 per share to exceeding our FFO guidance. A portion of this was from lower-than-anticipated physical occupancy in January and February during the height of the Omicron variant. This resulted in lower cleaning and utilities expense during the quarter. We have seen our physical occupancy rebound and surpass prior…

[Operator Instructions]. Your first question comes from the line of John Kim from BMO Capital Markets.

Doug, you mentioned in your prepared remarks some large renewals you had at GM and 601 Lex, but with some rent roll downs. Can you comment on the impact that inflation has had on the leasing market? Has that basically encourage tenants to commit to longer-term leases at discounted rents? And going forward, are there any -- is there any impact to the annual escalators that you have on inside?

So thanks for the question, John. So I would say that there's been no real direct impact on inflation. The organizations that we are talking to are steadfast in their desire to have really high quality, great space. And they're obviously looking at the market and depending upon the particular submarket that they're in, they're able to cut whatever deal they can. And in some cases, that means that the rent that they're currently paying is going to be higher than what they're going to -- what they will be paying in the future, which is obviously a good thing for them. Our escalators are really pretty much market condition oriented. So in a market like New York, the increases are generally on a fixed rate basis every 5 years, and there really hasn't been any change and the escalators in our other markets typically are between 2.5%, although mostly around 3%. And again, to be quite frank, there's not enough pricing power in the office markets for us to dictate additional terms. So we're just being competitive with the market conditions that we compete against within each individual submarket.

Your next question comes from the line of Jamie Feldman from Bank of America.

Doug, I thought your comment on the Boston life science market comparing demand there to the biotech index was pretty interesting. When you shift -- when you think about the Bay Area, can you talk about whether it's on the tech side, small and large companies -- small and large tenants, and on the Life Science side, how are you guys thinking about? And what are you seeing in terms of either a pullback in leasing demand because of what's happening in either the public markets or even in the BC market or maybe you're not seeing a pullback at all. It would just be great to get more color on those 2 sectors, specifically.

Sure. So I'd answer the question in the following way, Jamie, I think that the West Coast, particularly the San Francisco market, is just behind the rest of the country relative to their commitment to push their employees back to work on a more consistent basis. and therefore, understand the cadence of their utilization of space and what their demand is going to be. So in general, it's just slower there. And that I'm describing both the CBD of San Francisco as well as the Silicon Valley and the Greater Bay Area. Right now, most of the demand that we are seeing for our gateway assets are, what I would refer to as VC-backed smaller companies. We are not -- because we -- the nature of what 651 is, it's not really geared towards a large, what you refer to as a bulge bracket life science company that's public in nature competing for that space. On the tech side, our demand in Mountain View, which is more sort of smaller companies, is consistent. It's not ferocious. We're not seeing companies say we have to make a decision because we have to bring our people back, and we have to have the space, I'd say there's a little bit more caution in their decision-making, but it hasn't really been a change relative to the environment that we saw 3 or 6 months ago, it's just generally slower in the Bay Area than it has been on the East Coast where people have been, I'd say, much more constructive about going back to work on a longer-term basis for a better part of, call it, a year. And even though there was the Omicron blip, things sort of move quickly back to where they were in October of 2021.

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

A question on development. You guys have been pretty consistent developing at 7% plus over the years despite rising costs. So my question is, is this just a function of either, one, development rents keeping pace or two, it's the legacy land basis that gives you that advantage? Or is there a risk that we could see yields come down because for BXP, the development is a key driver of FFO. So just trying to see how sustainable this is, given everything that's going on.

Alex, Yes, I think the -- as I mentioned, the developments that we launched quarter, we're above 6%, not at 7%. So that's -- it's not across the board. We still have some that are above 7%, but there is some pressure, I think, on development yields. I do think that customers have -- the markets where we've been developing have been very strong and rents have been rising. So it has been keeping up. But I agree, over the longer term, if inflation stays at these elevated levels, it will make development more challenging from a yield perspective. And Alex, if you look at where we started and what we're doing right now on our development pipeline, -- we are -- so we have a residential project that we're moving forward with in Reston. And we're moving forward with life science in the greater Boston market and obviously, with our venture with Alexandria and South San Francisco. But you don't see other than our San Jose Platform 16, us announcing major office developments at the moment. And that's largely because the supply of space doesn't allow us to get the rents that are necessary to take care of the rather significant escalation in costs that we're seeing across every single market. I mean we're generally seeing 1 plus or minus percent monthly escalation right now in construction costs. The reserves making some changes. We do think that there's going to be a meaningful pullback. We do believe that we're going to start to see the pressure on the supply chain in the construction industry start to alleviate. We do believe that the challenges associated with labor are going to alleviate in the trades. So we're optimistic that things will start to come back. But in 2022, where we just started a project we would be assuming a pretty significant amount of escalation in our cost structure going forward.

One additional advantage we have with our pipeline is that in Boston because it's not just the land basis and cost, it's -- we've got an active carburetor on when we can start and where we can start and what type of product because we've got existing buildings that we can convert to lab like we're doing at 880. But then we also have land at a great cost basis with permits in place. So we think that's going to be a real advantage as things go on, and we'll be able to judge the market better.

Your next question comes from the line of Michael Goldsmith from UBS.

I'm trying to get a better understanding of how you're strategically looking at leasing Are you more focused on getting occupancy back before emphasizing rate? Or anything to be patient on that rate may come back a bit before stepping up? I'm just trying to kind of understand how you're approaching, do you think is it a short, intermediate or long-term approach?

I would just say, as a general matter, we meet the market and our buildings to be full. Our income is how the company is valued, we want to create income. And if you go back historically, we have never tried to time the market. We take what the market will give us. And as you -- I think you look at our lease expiration schedules, we really try and get ahead of expirations wherever possible. And so we bring down our near-term exposure. And so in a "challenging market” we don't have that much in the way of expirations that we're dealing with on an annual basis. I mean, Mike, you tell me we're in the sort of 6% to 7% for the next 2 to 3 years.

5% in the next 2 years.

5% for the next 2 years. And so -- and then if we can, we will develop when the markets are better -- and there's -- we have less “rollover” in our portfolio, but we take what the markets will give us, and we are -- we believe in meeting the market. Obviously, we look for a premium because we have premium projects we have premium assets, and there are occasionally times when we have more than 1 customer looking at a particular piece of space, and we have a little bit of pricing leverage. And obviously, we take advantage of that whenever possible.

Your next question comes from the line of Rich Anderson from SMBC.

So when we think about the long-term viability of the office business, I get the point about flight to quality in your case. But if we were to get back to full -- to pre-pandemic demand for space. Does that just happen kind of broadly or do you as a landlord or the REITs as landlords have to adjust their tenant exposure pie charts. So I'm looking at your slide -- your Page 24, your supplemental and you lay out all the different industries that you have exposure to. Does it require Boston Properties to change this road map for you to get back to sort of full demand whenever that day comes for office space? Or do you think legal services will come all the way back and real estate insurance, whatever the case may be. I'm curious if you -- it requires you to be proactive to get back to that full demand profile.

I think the demand is going to continue to be driven by the growth of our client segments. So do the -- how many employees does the client have -- and do they need seats for those employees? I think that is a key driver. I went through what I felt were the key trends that are starting to evolve post pandemic and office use flexibility is clearly going to be a bigger thing going forward. But at the end of the day, what drives space demand is that require an office, albeit maybe on a more flexible basis. So since the global financial crisis, that has been primarily technology and life science tenants. That is where the growth has been. And if you look at our -- if you looked at that pie chart for us, 12 or 13 years ago, it would be very different, finance and legal services were a much bigger piece of it, and technology and life science are a smaller piece. So I think that is not going to change. .

Your next question comes from the line of Blaine Heck from Wells Fargo.

Somewhat related to that last question. Owen, I wanted to touch on some of your initial prepared remarks when you talked about the tight labor market being some of the cause of the delay in the return to office. I think you said as the labor market gets more competitive, it could accelerate the return to office as employers have more negotiating or bargaining power to bring employees back into the office. Just following that line of thinking, do you think that balance of power shifting towards the employer could have an effect on kind of the other part of your commentary in which you said employees want separation and their own dedicated spaces. Is that something you think could also shift as the labor market shifts and employers could require hoteling for some of the employees or other more kind of economically efficient configurations just as they're going to be requiring that return to office?

I think it's possible. I think it's very client specific. It's very segment-specific. All of our clients face different challenges as it relates to their labor forces, and their workers have different requirements. So I think your theory could be correct, but I didn't quite say it the way you said it, but I do think, as I have said before, I don't think. I have not spoken to a business leader that is -- thinks -- working remotely all the time is great and is good for their businesses. And so I do think as the labor market tightens up, I think you're going to see more businesses have more in-office work policies. Do I think that means that all companies go to 5 days a week? No, I don't. But I do think that policies will continue to evolve and there will be more in-person work as we move forward.

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

Earlier, you mentioned that peak day utilization is at 40% to 80% in the portfolio, which is a big range. So I was just wondering if you could go through the difference maybe in New York City versus San Francisco or any other characteristics that seem to drive 1 building versus another maybe utilization is higher at newer properties or something else?

So the -- obviously, it's our portfolio, right? So our portfolio is -- has its own unique characteristics relative to who happens to be in a building and where the building is. But in general, what I would say is as follows: On Tuesday, Wednesday, Thursday, the largest utilization of space is clearly in Manhattan, unquestionably, undeniably. And then second, it would be in the Boston CBD. And in the Boston CBD, interestingly, it's driven by the financial services firms. In Manhattan, it's both financial services and legal. So we -- in certain of our buildings, we have some legal customers who are very, very dogmatic about bringing their people back all the time. It drops off precipitously from those 2 markets when you look at San Francisco and you look at Washington, D.C. today. And so those numbers are much lower on a relative basis. And honestly, we don't have a lot of clarity on what's going on in our suburban properties because the suburban properties don't have turn styles and that those are open building atmospheres. And so yes, we can go out and try and count cars, but I think that's a pretty inefficient way to know what's going on in the building. And so we're just -- we're unable to really articulate what's going on in the suburban assets in a meaningful way because we simply don't have the tracking there.

Your next question comes from the line of Anthony Powell from Barclays.

I guess a question comparing Manhattan to San Francisco. You're seeing more activity in Manhattan, but your rents are a bit down there, but they're up in San Francisco. So what's driving that difference? What's your lease mark-to-market in New York versus San Francisco? And how are these rent trends impacting values in both of those cities?

Okay. I'm going to try and answer part of those questions because you're gaming the system by asking a 3-part question. Sorry about that. That's okay. So remember that when we are comparing our rents on a second-generation basis, what we're looking at is the in-place rent versus the rent that we're now achieving on that space. So it doesn't give you a good sort of indicator on what's going on with market rents at a particular time. What I would tell you is that market rents in Manhattan have been very, very stable for the last year. And if you go back and look at the calls, for example, that we did in late 2020 and early 2021, we said, okay, there's been a rent reset. We believe net effective rents, face rents, concession packages are down 15% to 20%. That is a truism that still holds today. So as we -- when we are doing deals today, depending upon the building, if we have to have a space that was leased at a higher rent, we're just marketing to that current rent. So what's actually going on with market rents really doesn't isn't -- you're not able to decipher that from the statistics I'm giving you. I'm simply giving you a sense of what's going on in our portfolio. So if you're sort of looking at -- so as my revenues roll over, am I going to be up or down, we're trying to give you indications of how you can get to that number. With regards to the portfolio, Mike, you tell me, in general, we still have a positive mark-to-market of a reasonable amount in San Francisco, and we've had sort of a flat to slightly negative mark-to-market in Manhattan for quite some time, largely because of the disparity of where the rents were achieved when those leases are rolling over, over the next 2 or 3 years.

Okay. I think that's correct. I think the reasoning is that in San Francisco, you saw a decade of rent inflation going into the pandemic. So our in-place rents were very low. And we've been replacing those with higher rents for the last several years, and we continue to replace those rents with higher rents. So we still have a strong mark-to-market positive in San Francisco over the next couple of years, it should be somewhere around 10% to 15% on the leasing that we expect to do. And I would say that the rents we're getting in San Francisco on the high-quality spaces that we have are stable. I mean we know what the rents are. We're able to get deals done. New York City on the alternative had a lot of development with the Hudson Yards before the pandemic, and it limited the rent growth that the market saw before the pandemic. So we didn't have the same kind of growth over that time frame. So then now we're looking at, as Doug said, rents went down a little bit. So we're looking at roll-downs -- and sometimes they're going to be higher this quarter. Sometimes they're going to be flat. I think overall in New York City, it's probably something around maybe 5% to 10% negative overall, something like that in the portfolio.

And again, that's why I'm trying to give you on the real deals that we're doing on a quarterly basis. I'm trying to give you the comparison, so you can sort of see what's going on, right? So I said in New York, we've had a couple of large deals that we've done, and it's been down about 7%. And in Boston, in the suburban portfolio, it's up by 40%. And in the CBD, it's been up by 15% to 20%. So we're just -- I'm trying to provide you with as much clarity as we possibly can and sort of what's going on, on a revenue basis as you think about modeling our portfolio going forward. Now Owen, you may want to talk about values relative to New York and San Francisco.

Values for assets capital markets?

Yes.

Well, look, I think as the comparable comp statistics, which I try to give on this call every quarter indicate, I think values are driven primarily by cap rates and the per square foot comes out as a result. And those cap rates, both in New York and in San Francisco, I think for a high-quality office building have been somewhere in the 4s, low or high 4s depending on what the rental structure is in the building.

Your next question comes from the line of Manny Korchman from Citi.

Just hoping to maybe a little bit more details on the asset sales. I think you mentioned they'd be in Boston and D.C. And also just how you're thinking about all-out sales versus JVing those assets?

Yes. So we will -- we are selling assets this year. Mike mentioned the volume that we currently have in our projections. If we're able to accomplish those sales, we will like kind exchange them into Madison Centre. And it's a very efficient way for us to reallocate capital. We've talked about and are frequently asked about raising capital through asset sales. And as we have described, that is an inefficient way for us to raise capital, because the gain is plus or minus 50% in most of our major assets and that capital would have to be dividended as a special dividend to shareholders, and we would not be able to keep it for corporate purposes. So if we can accomplish this like-kind exchange, then we basically will be reallocating investments that we have in assets in the Washington, D.C. and Boston markets to terrific building that we just bought in Seattle. There is a, we think, a slight FFO reduction associated with this because there could be cap rate differential, timing differentials, things like that.

And just to further comments, Manny. So first is you can't do a like-kind exchange with a JV unless it's the exact same JV and it's really hard to do that. So effectively, if we're going to sell an asset and do a like-kind exchange, it has to be a wholly owned sale. And two, the reason that we're doing this and not simply doing JVs is because we're trying to maintain balance sheet strength that we currently have, and we're looking at ways to fund our strategic initiatives as Owen described, which was to try and move into Seattle in a way that's leverage neutral. And so we're -- obviously, we're looking at ways where we can raise capital for things that we want to accomplish from a strategic perspective, not just raise capital and then dividend it out to shareholders.

Your next question comes from the line of Nick Yulico from Scotiabank.

I just wanted to turn back to the guidance, Mike, and the fact that, I guess, you got even in the first quarter revenue earlier than expected as tenants built out space faster. I mean how should we think about that impact in the guidance, kind of where you are today in terms of budgeting for that? I mean, is there a chance that you're still -- there's still some benefit that still has to come from that process that's not factored into guidance for the year?

Look, I mean, it's possible -- we've obviously provided a range, and that range has expectations for when we do believe leases are going to start for leases that we have underway, and it provides some room on either side for that to change. In certain cases, our tenants control the timing because they're doing the build-out. And if we can't recognize revenue until they complete the work, it can be a little bit harder to kind of judge exactly when it's going to happen. And if you have bigger leases starting like, for example, Verizon at the Hub or Fannie Mae at Reston Next, and you got a big chunk of space coming on, it can be meaningful if you missed by a couple of weeks or a month. So I think that's built into our range when we think about our range and what could or could not happen. We build that into the range as we kind of look at the 2.75% to 3.75% same property growth range, and then we provided the range as well on the non-same stuff, which is kind of as the developments start to -- tenants start to commence. But it is -- it's not perfect because obviously, there's challenges out there with supply chain and getting work done on time. And we've been -- and our clients have been pretty effective at getting that stuff done on a timely basis, but we have to kind of think a little bit conservatively about what the boundaries are. And that's what we do when we build our range.

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

Just sticking with sort of the guidance and specifically on the occupancy guide. Just when I think about where the in-service occupancy is today versus the guidance maybe can you help us sort of bridge maybe the upside and the downside given the amount of leasing that's being done, obviously, I would have thought that would have been more of an occupancy pickup this year? And admittedly, there's a lag between signing and commence. Just trying to get a sense if you could bridge that gap between the occupancy guidance and what you get you to the upside versus downside?

So let me describe why don't we don't get it immediately, and then I'll let Mike give you sort of the ranges that from an occupancy perspective. So let me give you an example. So at 601 Lexington Avenue, we have a tenant that's going to take space that's currently leased in the -- towards the end of 2022. We are going to demo that space. We're going to deliver that demo space to that customer and then that customer is going to build out that space. That space won't get built out until sometime in the middle to late part of 2023. And even though we have a contractual agreement with that tenant as to when their rent commences, we're not going to be able to start revenue recognition and therefore, add it to our occupancy until that date occurs. So as I said to you earlier in my comments, we have call it 975,000 square feet of leases that have been signed where revenue has yet to commence. Some of that's in '22 and a lot of it's in '23. And so we just -- we continue to have these timing issues associated with when we can recognize occupancy and therefore, show you revenue on a contractual basis, even if we're getting it, right? We have had situations where we're collecting cash rent and we're not able to record it because the tenant is not in occupancy. And that's going to happen, for example, and our building at 325 Main Street. We're going to start collecting rent, and we're not going to necessarily have a TCO because the tenant doesn't have all of their work done, and they're paying us contractual rent, and it's going to go on to our balance sheet, and it's not going to show up in our revenue stream. So these things just sort of happen on a consistent basis with us because of the timing of when we're actually "delivering space." And Mike, you can give the guidance in terms of the range.

Yes. I mean, look, there's a lag, as Doug is talking about. When we sign leases and we get occupancy. And during the pandemic, our leasing volumes were lower. So we weren't signing enough leases to replace what was going on, so we lost some occupancy. And for 3 consecutive quarters, our leasing volume has been strong, and Doug just talked about the April leasing volumes, which point to a pretty good second quarter. So that demonstrates that we should be able to gain occupancy. And we only have 2 million square feet rolling, and we're doing over 1 million square feet a quarter, we should be able to gain occupancy, but there is a lag of 6 months to 12 months to get the leases in place. So that's why it's a little bit slower at the beginning to kind of gain it, and I think it will accelerate later on as we do it. I mean, we feel very good about where we stand today. We have 2 million square feet expiring. We've got 975,000 square feet signed that is going to go into place over the next 12 months approximately. And as our expertise, we probably have 0.5 million square feet that we're working on deals as well. So I think we're really well positioned to gain the occupancy. I just think it's going to take a little bit of extra time. I mean, right now, we've -- our guidance, I think, is 88% to 90%. I think that I feel pretty good about that range. It's going to be hard for us to get in excess of 90% this year based upon what we see. And I think that we'll do a good job I think it's going to be hard for us to reach the bottom too, honestly, given where we are today. .

Your next question comes from the line of Amit Nihalani from Mizuho.

Are you starting to see any change in leasing activity from co-working providers across your markets?

Yes. Well, in terms of the -- they're doing primary leases. I would say that activity is zero. But I think the question you're asking is what's the occupancy of the co-working units themselves? And I think, yes, I think they're going up. We monitor It's hard for us to know exactly. WeWork is public now and they do state these statistics, and I do believe they have been reporting to their shareholders increases in occupancy, which makes sense to us. Our census is going up every week, theirs should as well.

Your next question comes from the line of Steve Sakwa from Evercore.

I guess, Doug, there was really no comments on the L.A. market. I'm just wondering if you could share your thoughts on the leasing the acquisition opportunities and whether you expect to start your 300,000-foot development in the Beach Cities anytime in the near future.

I'll talk a little bit about capital markets. I'll turn it over to Doug for the leasing. We have a strong interest in growing our L.A. footprint in our selected West L.A. markets. And we're actively reviewing a few things, but we don't see the same level of transaction activity in the L.A. market that we see in our other markets at the current time. But when things are available, we certainly pursue them.

And just with regards to our leasing activities, Steve, so we have -- we did a lot of leasing in calendar year 2021 in L.A. So our -- we have 1 primary piece of space, which is at Colorado Center. It's the former HBO space on the top 2 floors of 1 of the buildings, and that space is currently being demolish and sort of ready for tenant delivery I would say the activity on it has been light. There's been a decent amount of leasing that's gone on in West L.A. A lot of it has been musical chairs with a bunch of subleases that were available that are no longer available or that have been taken off the market, a decent amount of direct leasing in both Culver City as well as Playa Vista. And so I'd say we're constructive on the West LA market. We just -- we don't have a lot of action on our space at the moment. And in light of that, we just -- we're not able to sort of show you statistically things that are going on in our portfolio because we just don't have much in the way of available space.

Yes. And then you asked about Beach Cities. We're in the middle of designing that building. It's going to be an extraordinary project. I think it will be, by far and away, the best building in El Segundo. And we are still in that process, and we haven't really decided yet on what basis we'll launch the project, but more to come on that from us in future quarters.

Your next question comes from the line of Daniel Ismail from Green Street.

Owen, you started your comments off with ESG and sustainability. And I'm just curious from what you've observed in the portfolio, how are those green aspects influencing tenant decision-making processes. Are deals being won or lost because of any of those factors?

Yes, but not universally across the board. Doug described the engagement that we had with our great client Wellington in the suburbs of Boston, where providing them a net 0 fulfillment and also very limited scope 3 emissions relative to new build was critically important to their decision. I noted when AstraZeneca announced they're at least signing with us in Kendall Center. They talked about the sustainability characteristics of our clients, it's absolutely mission-critical, but I would not say that, that exists across the board. I think it's increasing. And I think we're going to see more of it in the years ahead. Koop, anything you want to add to that?

It's growing, as mentioned by Owen. With a client like Wellington, they entered with us with Boston's first green skyscraper. So as part of client partnership we've grown together and they've become more committed and so have we. But Owen is right, it's several of our top clients are getting more and more passionate about it, and it's bigger criteria, but not across the board entirely, but it is definitely growing.

Your next question comes from the line of Derek Johnston from Deutsche Bank.

A lot of good questions have been answered. In your opening remarks, you detailed recovery trends and thoughts were shared in your markets with admittedly some recovering faster than others. But meanwhile, Southeast Florida and Miami seem to be booming. I mean you have net migration, corporate relocations, large-scale job growth. Any interest in serving Southeast Florida with perhaps a small portfolio acquisition followed by your development prowess, really gaining scale and what we see as a strong gateway market?

We're excited about our gateway perimeter and footprint, and we have gone into several new markets and businesses over the last 3 or 4 years. We went into L.A. 3 or 4 years ago, it remains 1% to 2% of the company. We went into Seattle last year. We now have 2 buildings. It's probably 1% to 2% of the company. There's a life science efforts, we've talked about that currently at 6% to 7% of our revenue. And we've mentioned that we believe we can double that over the next 5 years in the gateway markets where we are. So we have tremendous growth opportunities. As hopefully, we've communicated on this call in the gateway markets where we operate. And at this point, we are not interested in expanding outside of those 6 markets.

There are no more questions at this time. Turning the call back to Mr. Owen Thomas for closing remarks.

Thank you, everybody, for your interest in Boston Properties. And I hope you enjoyed the 1 question system. I made for a more efficient call. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Presenters, please stay on the line for the post conference.