Douglas Linde
President & Director at Boston Properties
Thanks, Owen. Good morning, everybody. So as Owen said, BXP's regional leasing teams had an outstanding 4th-quarter and we greatly exceeded our 2024 baseline leasing expectation of 3.5 million square feet. We did a significant amount of future year expiration leasing during the 4th-quarter, which followed a pattern that we set over the last 12 months. This has had the effect of dramatically reducing our 2026 and 2027 expirations.
During the last 15 months, our 2026 expirations were cut by more than 1.5 million square feet. So as of 12/31/24, 2026 expirations sit at 1.86 million square feet, 3.8% of our portfolio and 2027 sits at 2.2 million square feet, 4.4% of the portfolio. And the largest exploration we have in 2026 is 134,000 square feet and the largest exploration we have in 2027 is 143,000 square feet. We are today in renewal or replacement client discussions on more than 500,000 square feet of the 2026 expiration. '26 and '27 will be exceptionally low rollover years for BXP. Why am I emphasizing this? Because if we continue to lease 2 million to 3 million square feet of vacancy and expiring space in '26 and '27, there will be a material improvement in our occupancy. 490,000 square feet is 100 basis-points.
Mike thought I should just stop right there today, but I'm going to keep going. Our in-service properties finished the year at 87.5% occupancy, a 50 basis-point increase from last quarter and slightly ahead of the estimate we provided on our last call. Remember, our occupancy reflects the square footage of space where we are recognizing GAAP revenue. Our leased square footage includes the addition of any spaces that have been leased but have yet to commence GAAP revenue. At the end-of-the 4th-quarter, we were 89.4% leased.
Our focus is on lease square footage since it captures all of our future revenue and eliminates the variability of the timing of completion of tenant improvements, which governs GAAP revenue recognition and occupancy. We start '25 with our leased square footage, as I said, at 89.4. We've just completed our bottom-up leasing projections, which emanate from the regions, little help for me as well. And the goal for our in-service and 2025 development deliveries is just over 4 million square feet. So that's our goal for '24 -- excuse me, '25. In '24, we completed leasing on about 1.5 million square feet of vacant space.
Our '25 estimate includes the execution of about 2 million square feet of currently vacant space and 1.3 million square feet of leasing on known 25 move-outs and 2025 expirations where we would believe we will be successfully renewing our clients. The remainder of the leasing will be on future year expirations, the 500,000 square feet I talked about earlier. Our current pool of leases in negotiation is about 1 million square feet. It covers 280,000 square feet of currently vacant space, 325,000 square feet of 25 expirations, 75,000 square feet of '25 renewals with the remaining transactions involving spaces with expirations after '25 and as Owen said, our second lease at 725 12th Street.
There's another 1.6 million square feet of active pipeline transactions, which include 550,000 square feet of vacant space. These are deals that are not in LOI stage, but where we have good clarity. We're off to a good start in '25. So we have 1.3.1 million square feet of contractual expirations in '25. If we achieve our budget of 2.3 million square feet of leasing of vacant and 25 expiring space square footage, our net lease pickup would be about 40 basis-points. The one adjustment to this number will be the impacts from changes to the portfolio, which will cause some quarter-to-quarter fluctuations, but will even out by the end of 2025.
Right now, we expect to take about 825,000 square feet of space out-of-service, which is currently 62% leased, and we're adding our three developments, 651 Gateway, Restin Block D and 360 Park Avenue South, which will all be in the in-service portfolio by the end-of-the year and they are currently 23% leased. I guarantee be a lot higher before we get to the end-of-the year though. In '25, we're taking a few suburban office assets out-of-service. This follows the path we took in '24. We are taking action where we have higher and better use for our assets.
There's pent-up demand for residential development and acknowledgement by local governments that affordable housing is critical component to a successful economy and development economics that can actually work for six-frame construction today. This is leading to a change in attitude towards the permitting of additional housing in some of our communities. We have been working in many of our markets for more than 25 years and have established constructive relationships in these towns and counties. We are working with the local communities to rezone commercial office to for rent and/or for-sale housing.
17 Hartwell Avenue, as Owen said, is the first example of this. This is a building in Lexington that we took out-of-service in '24 and where we have received the entitlements for 312 unit project in late December. We expect to be under development in early '25. We have also entitled a site in Shady Grove, Maryland for townhouses and have executed an agreement to sell the first phase to a townhome developer. We've done the same thing in, Virginia, where we have rezoned land holding two existing office buildings for a 359 unit rental project and a townhouse development, and we have already executed an agreement to sell the townhouse development sites.
This is what we expect to accomplish with the buildings that we are taking out-of-service in '25. Our office markets have either stabilized or are improving. Sublet additions have tailed off, leasing activity has picked-up in every market and the negative absorption spigot appears to have stopped in Boston, San Francisco, Northern Virginia and the District of Columbia following what we have already seen in Midtown Manhattan over the last year. Our two largest property concentrations, the Back Bay of Boston and Midtown Manhattan continued to be the strongest markets in our portfolio.
Availability is sparse, rents are increasing and concessions remain constant. While there's no meaningful job growth in-office using jobs across the US economy, the pace of job reductions has slowed. There are still technology companies that are reducing headcount, but there are others that are short of space and increasing their footprints. We are witnessing space utilization growth in pockets of industries, though they vary by market. Take the legal industry as a case in point.
There are law firms in New York and Boston that are expanding, while at the same time, law firms in Washington DC and San Francisco continued to reduce but upgrade their footprints. The improvement in business sentiment, the anticipation of deal activity and a more robust capital-raising environment are improving the confidence of our existing and potential customers. When our clients are confident they are more constructive about making long-term real-estate commitments.
While we don't think that '25 is going to be characterized as a drum -- by a dramatic pickup in-market leasing absorption, we are certainly on the right track. And our data on premier space illustrates the activity continues to the -- to migrate to the best assets. As Owen said, there's no better example of this than the transaction that he described at 725-12. When we began our pursuit of this opportunity, we identified eight buildings defined as Class-A premier by the brokerage community in DC, including one new development under-construction that could accommodate a 150,000 square-foot client.
Were they trophy? Do they have availability at the top of the building? Were they amenity-rich? Well, none of these buildings were deemed to be acceptable by our client. In order to bridge the delivery of the new development, the client also executed a short-term extension of 500 North Capital, a JV asset owned by BXP rather than relocate when their existing lease expired to the existing inventory in the market. The bifurcation is real. BXP's activity for the 4th-quarter was not dominated by any region. We completed 680,000 square feet-in Boston, 577 in New York, 571 on the West Coast and 494,000 square feet-in DC. 320,000 square feet was on currently vacant space, 626,000 involved 24 and '25 expirations and 1.2 million involved lease extensions for the space that we were scheduled to expire post 2026.
152,000 square feet was for the new development at 72512. The activity includes about 312,000 square feet of leasing on existing vacant space. Across the portfolio, the deals were executed this quarter had a markdown -- excuse me, of about 5% with a 3% increase in Boston, a 5% decrease in New York, a 10% decrease in DC and a 14% decrease on the West Coast, pretty consistent with what you saw in our supplemental for the leases that hit revenue this quarter. The bifurcation of client demand between the East Coast and the West Coast continues to exist and there are actions of the clients in these respective markets that are also different.
There is little large block availability in the Back Bay of Boston or in the Park Avenue submarket in New York. The lease extensions we completed with Ropes and Gray at the Prudential center this quarter begins in 2031. You may recall that we did an early extension with Bank Capital earlier this year and another was MFS at 111 Huntington Avenue in '23. At the moment, the rents necessary to justify new construction in Boston are considerably higher than the rents embedded in extensions. Our large clients recognize that if they want to remain in the Back Bay long-term, there are few alternatives to remaining in-place.
This quarter, we did two other larger renewals in Boston, one at 200 and the other at Atlantic Wharf. These clients had the options to go to vacant space in the greater CBD market, but that would have meant significant changes in quality and location. Our Boston CDB portfolio availability is as tight as it has ever been. We do have some work to do, however, in our urban Edge portfolio, which is where we have our largest concentration of vacant space, large known expirations and life science availability. These markets are focused on traditional technology and life science clients, life science tenant clients, and that demand growth continues to be weak.
Traditional life science demand is weaker than office demand. We are in discussions with a few life science companies that are looking exclusively for office space as they focus their capital on acquiring derisked products that are in trials rather than pure drug discovery and therefore don't need lab infrastructure. There is considerable lab sublease space available and the economics of these offerings make it very difficult for new developments with Shell Lab to compete even if we provide a significant tenant improvement allowance. Our availability in Midtown Manhattan for is almost none, but we have a concentration in Midtown South. We have 350,000 square feet of availability at 205th Avenue, where we are in lease negotiations with a non-technology client for 244,000 square feet.
At 360 Park Avenue South, demand is picking-up and there has been some improvement in small tech tenant inquiry, but overall tech demand in '25 is still less than 40% of what it was pre-COVID. We are in lease with another single floor tenant at 360 Park Avenue South. During the quarter, we leased about 200,000 square feet to financial firms in the Park Avenue submarket at the General Motors Building 599LEX and at 510 Madison Avenue. Each of these clients experienced growth in their footprint. There's no question that the activity we have seen at 599Lex is a direct result of the lack of availability on Park Avenue.
Our largest Midtown opportunity in '25 is at 510 Madison. We are finishing up an amended upgrade and have about 100,000 square feet of availability on 11,000 square -- 500,000 square-foot floors. The big news is that the small floor leasing market this quarter was made by CBRE who took multiple small floors at Leverhouse -- Leaverhouse earlier this month at Rents that position our offering at 510 Madison as a great value in the market. There was a sparse selection of large block space availability in the Park Avenue area, which portends well for our ability, as Owen said, to get a commitment at 343 Madison where the rents necessary to support new construction are only a slight premium to current market rents and we're leasing at rents that will be starting in 2029 and 2030.
The leasing excitement on the West Coast in '24 continues to be growth from AI organizations in the city of San Francisco. At this point, we're not sure what defines an AI company since it seems that even established technology companies are describing their proprietary large language models, computing power and storage of data and there are a number of organizations that are working on industry-specific solutions that rely on new training models. The critical point is that the technology ecosystem in the City of San Francisco and the peninsula is where the bulk of these businesses are operating and growing. In addition, the cost of office real-estate is significantly cheaper, the cost of housing is cheaper and there is more available talent than there has been in the last decade in the Bay Area.
Our largest availability in our CBD portfolio-wide is in San Francisco. Many of our traditional office users have continued to rationalize their space in the city, which has led to little, if any, growth in the traditional San Francisco CBD market. Mayor is just weeks into his new job and one of his priorities is bringing workers and shoppers and visitors back to the CBD. View space is in short supply, but space in the lower sections of buildings is widely available and very competitive. We completed a new amenity center in a center in December and are now focused on increasing occupancy there and at 680 where we also have a large block and are finishing up a new amenity offering as well.
Before I hand the call over to Mike to discuss '25 earnings guidance, I want to reiterate my comments at the top of my remarks. We accomplished a lot of leasing and a lot of early new rules in '24. We expect '25 will be a year of modest lease square footage increases as we focus on leasing vacant space and known expirations. When we get to '26 and '27, there is going to be very little expiration headwinds. If we lease at a pace anything like '24 and what we hope to accomplish in '25, we will see our lease percentage accelerate. Mike, it's time to talk about the quarter and guidance for '25.
