BXP, Inc. (BXP) Earnings Call Transcript & Summary

Good morning, and welcome to our session at the Bank of America Global Real Estate Conference with Boston Properties. I'm delighted to have with us today, Owen Thomas, Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer and Treasurer. Mike is live with us, but just dialing in by audio only, but he's on. And so my name is Jamie Feldman. I'm the Senior Office REIT analyst here at BofA. And what we're going to do is spend the next 35 minutes talking about business conditions with the BXP team. And I think to just get us started here, if I could just turn it over to the team to give a quick overview of the company and any update you wanted to provide at the conference. And just a reminder, if you do have questions, please enter them into the Veracast system, and we'll get to them as we go. Thank you. Sorry, Owen.

Yes. No, no worries. Thank you, Jamie. Pleasure to be with you and pleasure to present at the BofA conference this morning. Most of, I think, your constituents are familiar with Boston Properties, but a quick intro and a quick communication for this conference. We are the largest public company that focuses on the office segment. We have a Gateway market footprint. We're large, but we're focused on 6 cities: Boston, New York, D.C., Seattle, San Francisco and Los Angeles. We have, we believe, some of the highest quality office buildings in the markets where we operate. Importantly, Boston Properties is a fully integrated real estate company, including a significant development capability, which drives a significant amount of our external growth. And we have a very strong balance sheet, the highest ratings in our sector, with strong access to public and private capital and have recently announced joint ventures with major international sophisticated investors to do new business. The communication for the conference, Jamie, is we are very excited about the growth drivers that we think our company currently possesses. The first is due to the pandemic, we lost some variable income, which was $130 million and only $26 million of that has been recovered so far. And we think as our clients return to the office, things like parking and the retail and all that will come back and be restored. The second is we have a very active and well-leased development pipeline. We have 3.3 million square feet of office currently under development that will be delivered over the next 3 years. It's 87% pre-leased to high credit clients like Google, like Fannie Mae, like Marriott. We have another 1 million square feet of life science under development. Altogether, this represents over 4.3 million square feet of new development and about $2.5 billion of cost. Only about $1 billion of that capital is left to fund. It will create about $230 million of additional NOI over the next 3 years and adds over 4% annually to our compound annual growth in NOI. Our occupants and our leasing is strengthening. We doubled our leasing volume in the second quarter to the first quarter at 1.2 million square feet, and I think our occupancy has room for improvement. And then over the longer term, we continue to have a very significant portfolio raw material for development, including 17 million-foot land bank, including 5 million for life science. I think we're ready for questions.

I think I'm just going to break the silence since Jamie can't seem to hear us, Owen, or able to talk. So I think the $24,000 question everyone is asking is, so what happened with the return to work as of Labor Day. And I would tell you that the census in our buildings was at its highest level a week after Labor Day. So we continue to see a modest increase in the utilization of our space by our tenants. I think the gun that we all hoped that would go off on the Labor Day and everyone was going to "turn back to work." Clearly, there's been a Delta variant delay with a number of organizations, primarily in the technology-related businesses, the large employers, but the financial services sector, the professional services sector, small businesses, they continue to bring their people back to work. I'd say they do it with a very light touch. They're doing it in terms of encouraging people to come back to work, but not mandating people to come back to work. And so how does that translate into leasing activity? We haven't really seen much in the way of change in leasing activity over the past, call it, 3 or 4 months. So we were pretty encouraging when we had our call during the second quarter. We were seeing reasonable acceleration of leasing activity during the year. And I don't think we've seen a continuation of acceleration, but we've basically seen a continuation of that sort of that same steady state. And so knock on wood, we've got over 1 million square feet in the second quarter, and we hope to do over 1 million square feet of new leasing in the third quarter of 2021. And it's going to be a pretty wide disparity. It's going to be across all of our markets. It's going to be some small tenants, it's going to be some large tenants. Primarily, it's going to be in the professional services sector and in the life sciences sector. We did a couple of large media and technology-related deals during the second quarter in California, primarily in Los Angeles. So we can't do that again because we don't have the space to lease. But we're not discouraged with regards to how people are responding to the Delta variant. Our view is that companies are going to bring all their people back to work. They're needing their space, they want their space. I think there was an article today in The Wall Street Journal that noted that Google had just announced that they were buying on the new space that they leased down in New York City for over $2 billion. I think that's a pretty good indication that they view New York City, in particular, and owning real estate as an important tool for their success on a long-term basis. So again, we appear to be and feel very constructive about sort of the fact that things are going to get better, but it's being delayed and we have to recognize that there isn't the same acceleration that we, I think, all hoped for when we talk to people earlier in the year because of the, the nature of what the Delta variant has done to the pace of that recovery.

Thanks, Doug. I apologize. You guys can hear me now?

Yes.

Sorry about that. So along those lines, I mean, what would you say is just the latest conversations with tenants and how they're going to change their space usage? I mean do you think you'll see a meaningfully different footprint as people do come back?

So it's a question that we get all the time, and I will tell you that I'm a little surprised at the answer. But effectively, we haven't seen any companies fundamentally change the way they're laying out space. And I really think that's because the companies that are working on their space right now have a perspective that they're going to be bringing their people back in a very constructive and consistent way, with the way that we're utilizing space pre-pandemic. In other words, people are going to have dedicated workstations, they are going to have the same amount of space dedicated to collaboration and meetings versus the kind of spaces that are for "heuristic or individual work." I think the companies that are wrestling with, should we be hybrid, should we be all in person, should we be a remote company? They haven't made decisions yet on how they're going to utilize space. And so I think those are the companies, quite frankly, that are most challenged by understanding how their human capital and their physical capital are going to come together. And because of that, they're just not in a position to know what the right steady state will be when they come back. And I think those are the companies, and I've said this before in call after call, those are the companies that I think are going to be more comfortable experimenting and waiting to see what happens before they make incremental real estate decisions. Now they very well could actually need more space depending upon what they're doing. On the other hand, they could choose to reposition what they have and create spaces that are really for touchdowns or for people to come in on a periodic basis or they could go remote. I mean that's we think it's unlikely, but it's certainly going to be happening in some organizations. And those are the companies that just aren't making decisions yet.

I would just add to what Doug said is, I do think it is important for business leaders to get back to an in-person work environment at a minimum on a hybrid basis. We hear that from all of our clients. And I do think leadership is going to be increasingly focused on having great place in space. So I do think it helps to have a quality portfolio, the quality of the building is important. I think some of the amenitization of space that you've seen in the technology world is going to migrate to other industries to again encourage workers to come to work and have a great experience. And also I think commutes, single stop commuting making it easier to get to the office will be increasingly important in the years ahead.

So Doug, what percentage of your portfolio would you characterize as having not made that decision yet or "the confused companies"?

I honestly think in our portfolio, it's a very, very small proportion. I mean if you think about the geographic footprint we have and the kinds of organizations that are in our buildings we primarily have larger professional services, larger service industries and larger technology and life science companies, right? A company like Microsoft has made a decision, and they're building out space. A company like Salesforce has made decisions and they are utilizing their space the way they were utilizing it pre-pandemic at Salesforce Tower. The life science leases that we're negotiating now in Waltham and in South San Francisco are companies that are going to utilize their space in ways that are very consistent with what they would otherwise have been doing. But the 50,000 square foot new relatively newly formed technology company that had a very dramatic change in their revenue stream for a portion of pandemic. And I'll use an example of a company called Toast in Boston that's going public right now. They fired 50% of their people. That kind of organization, I believe, will have a more challenging time understanding what the right cadence is for their people to be in their offices because they're a relatively new technology. They've been successful during hybrid working or remote working, yet they're now in a growth mode again and they've got to create a culture, and they've got to create a reason for people who want to join that organization. And so those are the kind of companies I think are going to -- that are going to be slower to make incremental real estate decisions as we move out of this.

Okay. And then we just did have a session with Vornado, who even though I was a little surprised commented that they'll probably give people more flexibility maybe a day at home a week or they've accepted kind of the new lifestyle does require you're not at your desk 5 days a week. So for companies who -- we do hear kind of 3 days a week being common or maybe that's what a lot of companies will end up doing. The decision around can you even cut space when, let's just say, it is on average 3 days a week that people are coming into the office. Have you seen anyone make those types of decisions of forcing more efficiency by telling people they are coming in certain days of the week? Like if everyone is coming in the same 1 day a week, you still need the exact same amount of space. So I guess a better way to ask the question, how would you say tenants are grappling with that right now?

I think it's early days. I think some may try to seek efficiency out of the hybrid work model. But Jamie, as you're saying, to do that, you want to have to schedule when people out of the office and sequence it. So not everyone is in or out the same day. And then second, you have to go to flexible work plan. In other words, when you come in, you don't have an assigned workstation, you have to move around. Employees don't like that. And if you think about it, the employer doesn't get what they want. What you want is a full firm collaboration. We're actually hearing about models where companies are saying, yes, we're going to be hybrid, but we want everybody to be in the office on this day to make sure that they're all collaborating. Again, it makes it difficult to economize on space if you're managing it that way.

Again, the really interesting phenomenon is that a lot of people have been hired over the last 2 years. And these organizations have not taken incrementally the kind of space they would normally take during the kind of economic recovery that we've seen. And so I think there is pent-up demand. And again, until they understand how they're going to utilize space and how frequently people are going to come in and what the timing is, quite frankly, of when they're going to feel comfortable requiring their teams to be "in person", it's -- this is a to-be written story that we're going to have to watch play out. You are on mute, Jamie.

You guys cover a lot of markets, but we don't have a ton of time. But maybe if you could just rank your markets right now in terms of best to worst and then, of course, people can dig in more on their meetings with you. I'm just curious where things stand today.

Yes. So I guess I don't like to use the word best to worst. I use the words where we're seeing the most activity and where we're doing the most number of transactions because I think level setting sort of what the economic conditions are of a particular market is a very challenging thing when you have the kind of properties that we have because there are certain cases where we're doing really, really well, but the market is very challenging, right? Just use San Francisco as an example. I mean we have 150,000 square feet of leases under negotiation right now at Embarcadero Center. The average rents over $100 a square foot. The concession package is de minimisly different than it was pre-pandemic. But the city of San Francisco has a 28% availability rate. So from an activity perspective today, I would tell you that our Boston area portfolio, largely because of the life science interest that you're seeing here and quite frankly, the displacement of office space, too, which is becoming life science as probably the most active market. Second would be Reston, Virginia. We have a dozen transactions in Reston, Virginia under negotiation right now. Some of them meaningfully large, like multiple floors and knock on wood. If everything goes well, we're going to have very little available space other than the space that's coming to market in our new building in Reston Next, which is going to deliver at the end of 2021 or early 2022. In San Francisco, I'd say that's sort of third. Again, we have a number of transactions going on in Embarcadero Center, the largest being about 1.5 floors, although we have a couple of 2 floor renewals that are starting to percolate. Next would be the Manhattan market. We continue to do lots of smaller leasing at the General Motors Building, at Citigroup Center or 601 Lex, at 599, at 510 Madison Avenue at 250 West 55th,but we don't have big pieces of space other than at Times Square Tower, which is probably the most challenging in our buildings in Manhattan, but we have interest there as well. And then finally would be the CBD of BC, which is -- that continues to be a very slow market where there's not a lot of incremental demand. And I think where the conditions still are pretty challenging relative to where they were pre-pandemic because that's what they were challenging then. So that's sort of -- that would be my ranking. And honestly, in L.A., we have 2 floors of space available. We just knock on wood, did our 2 deals with Santa Monica Business Park and with our largest tenant at the Colorado Center. And so we've got relatively little amounts of space available.

I get a lot of questions around West Coast versus New York City. What are your thoughts on the pace of recovery in those 2 markets, even if you looked at kind of CBD San Francisco versus New York? Think about what you're expecting in the next 18 months or so, how would you compare?

Yes. I think the -- certainly, the Bay Area is behind New York from recovery. I mean on our own building census, New York is pushing 40% and San Francisco is barely in the teens, if at all. And I think the part of the background of this is just that California has been in lockdown for a much more extended period of time than New York City, including today having mask mandates, which we do not have in New York City. So the local authorities kept the city locked down longer, and I think the recovery as a result is well behind New York City. I think there are important business commercial growth drivers in San Francisco that will ultimately prevail and will allow the city to fully recover. But it's on a slower curve at this point.

Okay. That's helpful. And then shifting gears, BXP has been one of the more active in terms of investment activity. So can we talk about just your perspective on where you think the office market stands today in terms of capital, looking at value-add type investments, maybe your perspective on the Columbia deal and what you thought on pricing there? And just generally, kind of where are we in the investment sales cycle for office?

Yes. The office is still a very -- a strong interest asset class to institutional investors. Jamie, as you know, most of the office is owned in the private market, not in the public market. And the transaction volumes have remained high throughout the pandemic, certainly down from pre-pandemic levels, but at a very high percentage of them. I do think the market is bifurcated. Buildings that have limited lease rollover exposure, if anything, I think cap rates have come down because interest rates are lower. And if you don't have any market leasing risk, it looks more like a fixed income instrument. And if cost of capital is lower, the value of those buildings goes up. And we've seen a lot of transaction activity in that sector. That's not something that where we actively participate. We like to use our real estate skills to create value. And as a result, we have been actively in the market for more value-added opportunities. We announced 2 of them in the office sector in the second quarter. One was 360 Park Avenue South here in New York and then Safeco Plaza in Seattle. And both of these deals require real estate work. 360 is a full building renovation and retenanting, and Safeco has some rehabilitation that we can do to the property and also re-leasing. I think the market -- there are definitely -- these processes are still competitive, but I do think there are less investors participating, and I do think pricing has been impacted as a result. We see that as an opportunity, and I say this a lot. We believe and return to the office and the importance of in-person work and we're not just saying it, we're investing in it. And again, we did these 2 important transactions in the second quarter.

So maybe focusing on Safeco, I mean what were the underwriting assumptions to make that deal work?

Well, we adjust to market. We established what we thought market rents were in the market, and we have modest rent growth from this point forward. And given the recovery in the pandemic, we have, I'd say, more modest lease-up assumptions. And then we overlaid all that with our cost of capital. And in the case of Safeco, there's all kinds of assumptions you have to make about the Liberty Mutual tenancy because they're a major tenant in the property. But we thought when we did all that work that the returns that were available to us and our partners were very attractive on a total return basis. And as you know, the per square foot values were very modest with this building. It was about $580 a square foot. Newer buildings that are fully let are trading $950 plus per square foot in Seattle. So we like the value play on the transaction as well.

So investors that are looking at value add, I mean, I agree with you, it's been pretty clear that bond-like assets have been trading well throughout the pandemic. But as we start to see more liquidity come into the value-add type market, what kind of returns do you think competitive buyers might be looking at? And then also, do you think that your JEDI is going to get even more aggressive here or more active here?

Yes. Look, I think it's -- we'd like to look at deals where we think we can get above a 6% cap rate over time. I mean most of these deals, obviously, we're not going to get that day 1. We have to do something. We have to fix the building, we have to retenant, but that's what we look at. In terms of total unlevered returns, I would say 6% to 7% is probably where those numbers are today. Again, that's all -- when we quote those kinds of things, it's always a little bit misleading because, actually, what's more important than the cost of capital are the assumptions that you use. Usually, someone who wins a process, they just have a more optimistic outlook about what's going to transpire or they have some knowledge of a tenant or a situation where they can attract a tenant to a building and therefore, underwrite that. So I think assumptions are more important than cost of capital when driving that. But in terms of our level of aggression, it's going to be constant. I mean, we don't per se get more aggressive. We're in the market, in our 6 cities. We have our joint venture arrangement that we've announced with 2 sophisticated international groups that are looking at deals with us. And as we find transactions in the marketplace, we will pursue them. I think the other thing I would add to this is life science. We also -- in addition to having under control today 5 million square feet of sites and buildings that we can convert to lab, we're also looking for life science value-added opportunities, and we did find 2 of them in the second quarter and acted on them. And we're doing those 100% BXP.

I think it's important to know what we're not doing with our JEDI partners. And by the way, Owen's being a little bit modest. I mean CPP and GIC sort of signed up with us. We just did a deal with GIC and KIC. We have other partners that we're still talking to as well. I mean the amount of capital that we're seeing and is interested in partnering with us, largely because we're prepared to write a reasonable sized is not insignificant. But what we're not doing is we're not looking to do just core assets, right? We're not interested in buying an asset at a 4% going in return that doesn't roll over for 8 years, and we hope that the market is going to improve, and therefore, because it's an under-market rent, it's going to do well during the lease-up in 2030, right? That's not what we're looking at. We're looking at using our real estate skills in the short term to improve the operating characteristics of the building, to improve the cash flows and to create a higher cash-on-cash return at the outset as opposed to simply waiting for the market to change and to hopefully recover.

Okay. That's very helpful. And I know you're new into Seattle. A question coming in from the audience. Do you think you will increase your exposure to Sunbelt states or just any other new market as a result of the pandemic? You kind of shifted what do you think -- where do you think the best place to invest might be going forward?

Yes. Well, we did -- I mean, I've said this on our earnings call, we did 3 new markets last quarter. We did Seattle, but we also don't have any buildings in Midtown South. So that's a new market. New York is -- I mean, Midtown South may be as big as some of the cities that we're in. So that's a new market. And then Montgomery County, Life Science, we weren't in that market either. So we actually did 3. So in terms of perimeter, we're in the cities that we think are the most attractive for our shareholders, and those are the metropolitan areas that we intend to focus on. That being said, within those metropolitan areas, and that's one of the reasons that we're there, there are lots of submarkets and interesting things that we can do. For example, in Seattle, where we started in the traditional downtown, but there's obviously Bellevue and other markets in the Puget Sound area where we could be active. You see that in our Washington business, for example, we're downtown. We're also in Reston. We're now in Montgomery County. So we don't -- we anticipate staying in the 6 metropolitan areas, but I could see us doing new market business within those 6 areas.

Okay. And then along the lines of investments, you guys are prolific developers. What might we see going forward from the development pipeline? And given the new -- the increased focus on amenities and you had mentioned proximity to transit are there new projects that are popping up or new demand that's popping up as companies think about what they want going forward?

Yes. Well, we have, as I mentioned at the outset, we have about 16.5 million square feet of raw material, i.e., land for development, and a lot of that we were going to need pre-leasing to start. But a couple of projects I would mention that are, I think, coming in the shorter term, these are new launches. One is we have a significant residential project and we're at Reston Next. We are developing a new phase of Reston Town Center with Fannie Mae and Volkswagen's U.S. headquarters, and there's a residential project there that will probably launch in the near term. We are -- the office market in Silicon Valley has been very strong, and we are reassessing whether to commence the first phase of Platform 16, which is near the Diridon Station in San Jose. We also have a number of life science projects, 1 of which is a very significant, 1 million square feet in Cambridge that we're clearly going to go for as quickly as possible. And also, there are a number of sites and buildings that we can redevelop in Waltham. We just started on conversion and one new development in Waltham earlier this year, and we're having very strong activity on both of those products. And then likewise, in Life Science and Gateway, which is in South San Francisco. This is our joint venture with Alexandria. We were making good progress leasing up the first phase of that development and we're looking now at a redevelopment of a significant office asset there. So I do think we have an exciting pipeline of near-term starts that we face. Doug or Mike, is there anything else you would like to add to that?

Yes. Look, Jamie, I think that the reality is that the office markets in general are overbuilt right now, right? There is a supply challenge in New York City, in Boston, in San Francisco and Washington, D.C. So for us to simply say, we think it's going to -- we're going to be ready to go starting a speculative office building in those markets, that's unrealistic. However, at the same time, there are tenants looking for space. And the tenants that are looking for space are looking for the best space they can find and they're prepared to pay a premium. And for those that may be looking for a little bit less space, they're prepared to pay more because the space they are going to take, they want to be great. And so we may have opportunities in our portfolio to make proposals and some of them are happening right now to get going on office buildings where you would be surprised that there would be an interest to start a new building. And that's largely due to tenant demand and the expectation that we're going to get significant premium pricing relative to where sublet space, for example, is trading at in a particular marketplace. So don't count that stuff out, but it's certainly not what our focus is. Our focus is where can we deploy capital today where we're comfortable with the demand picture, so that when the buildings are completed, sometimes -- and we're going to be able to achieve a great return.

Okay. You had mentioned sublease space. I mean we've seen some prints lately, especially in San Francisco, for some sublease space that got leased at significantly below market rent. How long do you think that lasts across your markets? And what do you think the lasting impact is going to be on market rent continue to drive net effective rents even lower?

So look, I think that the markets are in stable places right now. So for example, let's just talk about Manhattan because there's probably more office investment in Manhattan than anywhere else, at least in the public REIT sector. I think overall net effective rents are down 10% to 15%. There's no question about that. But there are lots of deals that are getting done, and there's still a lot of sublet space out there. But the tenants that are looking at sublet space are not looking at direct space. It's -- those are 2 different markets. And a majority of the proposals that we are looking at are for 10-plus years. And there are very few long-term sublets of 10-plus years where there's capital available to create the kind of environments that the tenants want in those spaces. So I do think there's a bifurcation of those marketplaces and you're going to see the same thing in San Francisco. The deals that are being done, let's just use our building as an example, that Macys.com is doing at 680 Folsom Street, our deals where, by the way, they're actually getting out hole, okay? So they're going to get -- they're getting what they're paying us, but they would have gotten $20 or $30 more in 2019 had that same space available for sublet. At the same time, in Embarcadero Center, we're achieving, as I said before, rents that are consistent with what we were getting pre-pandemic. So there are sort of 2 markets out there. And the kind of tenants that are looking at 1 kind of space are not necessarily looking at the other. Now is, in general, sublet space going to be sort of a negative tailwind or headwind? Of course, it is. But it's not fundamentally changing the market in a way where we're seeing a "steady eradication of economics." In fact, we think there's a lot of stability right now in terms of where deals are getting done.

And would you say that's the statement across all the markets?

I would. I think it's a consistent process that's sort of showing how it's going to turn out in New York City, in Boston and San Francisco. Washington, D.C. is a little bit different, honestly. In Washington, D.C., sublet space really isn't a factor because, quite frankly, there's so much available space, and there's so much available prebuilt space and tenants are 2 to 3 years out in front of their requirements. So the tenant that's looking for 200,000 square feet of space is going to lease expiration in 2025 right now, but they're going to sign up for a 15- or 20-year deal, and they can get an incredible capital package from an existing direct landlord, so they don't need to go to the sublet market.

Okay. So we're just about out of time here. Anything we didn't cover that you wanted to get across?

Jamie, I would just reiterate the growth message I mentioned at the outset. I mean we touched around it with some of your questions. But again, between the variable revenue, return, the development pipeline that's going to be delivered, that's largely leased, the occupancy improvements, we see a strong growth ramp for our company.

Okay. And would you say occupancy bottomed for the cycle?

In our portfolio, it's bottom.

Okay. All right. Great. So we're wrapping up our meetings here with 3 final questions. And these are multiple choice. So the first one is, which of the following is the greatest challenge facing U.S. public REITs today? A, Fed action and higher rates; B, supply chain issues, which include labor and logistics; or C, flows to nontraded REIT.

I wouldn't be -- I don't think any of those will be my top 3. What was it, flows to non-traded REITs?

The competition of capital from -- the competition from non-REIT capital.

Like the Blackstone?

Yes.

I don't have it. And what was number two?

Number 1 is Fed action and higher rates. Two was supply chain issues, including labor and logistics.

I would say number two.

Just to ask, what would your answer be?

Getting our clients to come back to the office, return to office.

And that sector specific, though, we have to be a little more broad.

I understand. Although it does have ramifications for other sectors.

Second, over the next 5 years, which markets will outperform, urban, coastal, Sunbelt?

What do you think?

I know.

I think you know our answer to that one.

Yes. LA, you could argue is Sunbelt, warm.

That's true. It's also coastal.

Also there's a time aspect to the answer to that question. I mean I recognize going back to my comments earlier about San Francisco versus New York, if you never closed because of COVID, your market is probably doing better right now. So in the very short term, yes, the Sunbelt that probably is going to outperform the coastal gateway markets. But the issue is we're in this business for the long term, and we see the best drivers for growth, the clusters of knowledge workers, barriers to entry in the markets where we are, and we're confident in that in the long term. And 5 years is a long time.

There's a speaker from Allianz, that speaks to 1 of the panels that talked about their 20- to 30-year investment horizon for office. So as we get along. Number three, for your company's office plans post pandemic, will you have no change from pre-pandemic, leave it up to the individual teams, offer hybrid or go full remote?

Well, we did a combination of 2 and 3. We offered hybrid work, but also in our company, we have people that do very different jobs. I mean some people have to be at the office if they're managing a property or doing something like that. So we can't have 1 size fits all. But -- so it's -- so we left it to the business leaders, and we also offered hybrid -- allowed them to offer hybrid. And in certain areas, particularly in the service areas of the company, there is a more hybrid work model, but no reduction in space use.

Okay. All right. Owen, Doug, Mike, thank you guys very much. We appreciate your time, and good luck with your meetings at the conference.

Great. Thanks, Jamie.

Thank you, Jamie. Thanks for having us.

Thank you. See you soon.

Take care. All right.