Deutsche Bank Downgrades Boston Properties Inc. (BXP) to Hold

Deutsche Bank analyst Derek Johnston downgraded Boston Properties Inc. (NYSE: BXP) from Buy to Hold with a price target of $74.00 (from $91.00).

The analyst comments "We downgrade Boston Properties (BXP) from Buy to Hold with a $74 TP as office CRE faces a secular headwind as companies right-size their footprint and a cyclical slowdown driven by an expected recession. We appreciate BXP's blue chip portfolio quality, but view office demand headwinds as too difficult and multifaceted to overcome near term. Landlords have been placed into a tough position, with investor sentiment mimicking Malls REITs in 2018/19, placing the property type in a prolonged 'show me' position where future leasing and rent spreads will determine Office REITs mid to LT invest-ability. Offices have a greater capex component than other sub-sectors as concessions of free rent and tenant improvements are required to lure tenants to sign long term leases. Further, forward thinking Office landlords are heavily investing in amenity packages which should act as a competitive advantage. We expect the pricing and vacancy bifurcation to widen between high quality, young, vibrant properties where tenants want to be vs older commoditized locations. Demand will continue to funnel toward the highest quality assets, largely owned by public REITs, but this transition will take time. We view 2023 as a challenging year for leasing velocity and spreads, even at Class-A offices, as recession uncertainty slows business leader decision making. We view the cyclical headwind as the single largest question mark for BXP and have become less concerned about the secular demand risk from hybrid work arrangements. Office REITs are staring down another difficult year in 2023, including the industry leader Boston Properties."

For an analyst ratings summary and ratings history on Boston Properties Inc. click here. For more ratings news on Boston Properties Inc. click here.

Shares of Boston Properties Inc. closed at $66.62 yesterday.

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