Boston Properties, Inc. (BXP): PESTLE Analysis [Nov-2025 Updated]

You need to know if Boston Properties, Inc. (BXP) can keep its premium-asset advantage against market gravity, and the answer is complex. While BXP's Class A focus in major US cities gives it a structural edge, the twin pressures of high interest rates and solidifying hybrid work models are putting real stress on the balance sheet; we are seeing projected 2025 Funds From Operations (FFO) per share under pressure from slower leasing velocity, plus new regulatory costs like New York City's Local Law 97 are now a direct capital expenditure risk. The macro picture is clear: flight-to-quality is helping rents, but the cost of doing business-politically, economically, and environmentally-is rising fast. Let's break down the six critical factors shaping BXP's strategy right now.

Boston Properties, Inc. (BXP) - PESTLE Analysis: Political factors

The political landscape for Boston Properties, Inc. (BXP) in 2025 is defined by a dichotomy: escalating local tax pressures in core markets countered by favorable, stabilizing federal tax legislation for Real Estate Investment Trusts (REITs). You're navigating a high-cost, high-friction development environment, so political risk is now a direct line item on your pro forma.

Local government tax policies increase commercial property assessments.

You are seeing a direct, negative impact from local government tax policy in your key markets, particularly Boston and New York City. The core issue is that residential property values are rising while commercial office values are declining due to remote work, but city budgets still need funding. This forces local governments to increase the commercial property tax burden to make up the difference.

In Boston, for Fiscal Year 2025 (FY25), the commercial tax rate increased to $25.96 per $1,000 of value, up 2.7% from $25.27 in FY2024. This happened even though business property valuations actually fell by 1.7% in FY25, the first decline in over a decade. The city's reliance on commercial property taxes is significant; business properties hold only 32.0% of the taxable value but are responsible for paying 55.9% of the total tax levy. That's a huge subsidy to the residential class.

New York City's Fiscal Year 2025/2026 tentative assessment roll also showed an increase for the office sector, with Manhattan office buildings seeing an overall market value increase of 1.21%. The city's use of lagging net operating income data in its valuation process means the full impact of current office market distress is slow to appear in your tax bills, creating a defintely unwelcome lag effect.

Here's a quick comparison of the pressure in a key BXP market:

Zoning and permitting delays slow down new development projects.

While BXP is a seasoned developer, the bureaucratic friction of local zoning and permitting processes in major metropolitan areas still acts as a material headwind, increasing risk and cost. Boston's development review process, historically described as 'complex' and 'opaque,' is undergoing modernization efforts in 2025, but the impact is slow to materialize.

The political environment, coupled with high construction costs, is forcing BXP to shelve major projects, which is the ultimate delay. For example, BXP postponed the construction of its 27-story, 660,000-square-foot office tower at 171 Dartmouth Street in Boston's Back Bay. The decision was made because the prohibitive construction costs, estimated at $1,400 to $1,600 per square foot, could not be justified by current market rents. The project was approved, but the economic reality, exacerbated by regulatory and cost pressures, made it unviable to start in 2025. You can't start a project if the math doesn't work.

The political focus remains on speeding up affordable housing, with Boston claiming a 25% reduction in approval times for those projects since 2022, but commercial development still faces significant regulatory hurdles and unpredictable timelines.

Geopolitical instability affects tenant confidence in global financial centers.

Geopolitical instability, especially concerning trade policy and international conflicts, directly impacts the global financial centers where BXP operates, such as New York and San Francisco. This instability manifests as uncertainty, which restricts capital flows and weakens corporate sentiment.

The primary near-term risk in 2025 is the potential for new US trade policies, including the possibility of a 10% universal tariff and a 60% tariff on Chinese imports. These measures are inflationary and directly translate to higher construction costs for BXP's development and redevelopment pipeline. Higher costs, in turn, make new projects like 171 Dartmouth Street financially unfeasible and pressure BXP's margins on its 10 properties currently under construction or redevelopment.

• Geopolitical risk is expected to restrict capital flows into real estate at least into Q1 2025.
• Increased tariffs on materials like steel and lumber raise construction costs, weakening investor confidence.
• Weaker corporate sentiment from global uncertainty can lead to companies downsizing or delaying leasing decisions in BXP's Class A office towers.

Increased scrutiny on REIT tax structures and corporate tax rates.

The political uncertainty surrounding the expiration of key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) was largely resolved in 2025, providing significant stability and a favorable environment for REITs like BXP.

Instead of increased scrutiny leading to a negative outcome, the political process delivered long-term certainty for BXP's investors and operations:

• Qualified Business Income (QBI) Deduction Permanent: The 20% QBI deduction (Section 199A) for REIT dividends was made permanent in 2025 legislation. This preserves the maximum effective top federal tax rate of 29.6% on ordinary REIT dividends for individual shareholders, providing a clear, long-term tax advantage.
• Taxable REIT Subsidiary (TRS) Limit Increase: The limit on the value of securities a REIT can hold in a TRS was increased from 20% to 25% of the REIT's total assets for 2026 and future tax years. This change gives BXP greater structural flexibility to expand its taxable operations, such as property management or development services.
• Bonus Depreciation Restored: 100% bonus depreciation was made permanent for qualifying property placed in service on or after January 20, 2025, eliminating the scheduled phasedown. This enhances near-term cash flow by allowing BXP to fully expense qualifying assets in the first year.

Boston Properties, Inc. (BXP) - PESTLE Analysis: Economic factors

High interest rates keep the cost of debt financing elevated for new acquisitions.

The prolonged period of elevated interest rates continues to be a significant headwind, particularly for new acquisitions and refinancing activities, which directly impacts the commercial real estate (CRE) sector's capital stack (how a project is financed). For general CRE investment property, loan rates in 2025 are sitting in a range of 6.5% to 8.5%, which is substantially higher than pre-pandemic levels.

While Boston Properties, Inc. (BXP) benefits from its investment-grade balance sheet, the cost of new debt is still materially higher than legacy debt. For example, in September 2025, BXP's operating partnership issued $850 million of exchangeable senior notes at a low coupon of 2.000% due 2030, but a joint venture secured a commercial mortgage-backed securities (CMBS) loan in Q3 2025 at a fixed rate of approximately 5.73% due 2031. This spread shows the difficulty in securing non-convertible, fixed-rate debt at pre-2022 levels, making accretive acquisitions a defintely harder prospect.

Office vacancy rates remain high, especially in San Francisco and New York City.

The shift to hybrid work has kept overall office vacancy rates at historically high levels in BXP's core gateway markets, challenging leasing velocity and rental rate growth across the broader market. In San Francisco, the overall office vacancy rate stood at a staggering 33.6% in Q3 2025, reflecting a deep market imbalance.

New York City's Manhattan market, another BXP stronghold, also faces high availability, with the overall vacancy rate reported at 22.0% in Q3 2025, despite a strong quarter of leasing activity. This contrasts sharply with BXP's own portfolio, which reported a much healthier CBD portfolio occupancy of 89.3% in Q3 2025, demonstrating the defensive nature of their premium assets.

Here's a quick comparison of the overall market vacancy versus BXP's portfolio occupancy:

Flight-to-quality drives higher rents for BXP's Class A properties, but Class B suffers.

The 'flight-to-quality' trend is the single most important driver of BXP's relative outperformance. Tenants are shedding older, less-amenitized space (Class B and C) to consolidate into modern, high-quality Class A properties, often called 'trophy' assets, which BXP specializes in. This is a clear bifurcation of the market.

Across the U.S. office market in Q3 2025, the vacancy rate for prime buildings fell to 14.2%, while the non-prime vacancy rate was significantly higher at 19.1%, and the gap continues to widen. The impact is most visible in BXP's markets:

• San Francisco Class A Tier 1 asking rents are robust at $104.88 per square foot (psf), supported by a low Class A vacancy rate of just 10.2%.
• Leasing activity in San Francisco is heavily concentrated in Class A properties, which accounted for 79.1% of the total volume in Q3 2025.

This dynamic means BXP can command premium rents and maintain high occupancy in its core assets, even as the overall market struggles. Their strategy is validated by the leasing strength in their best buildings.

Inflationary pressure increases operating expenses (utilities, maintenance, insurance).

Despite a cooling trend, inflationary pressure persists in key cost categories, which puts upward pressure on net operating income (NOI) when leases are not structured to pass through all expenses. The U.S. Consumer Price Index (CPI) climbed 3.4% year-over-year in May 2025, indicating that general price increases remain a factor.

For commercial properties, the costs of utilities, maintenance, and insurance remain elevated. While some multifamily operating expenses are easing, they still sit nearly 40% above pre-pandemic levels. BXP mitigates this risk through triple-net (NNN) leases where possible, passing most operating expenses onto the tenant, but costs like property taxes and non-recoverable capital expenditures still impact the bottom line.

Projected 2025 FFO per share is under pressure from slower leasing velocity.

The full-year Funds From Operations (FFO) per share guidance for 2025 reflects the ongoing economic pressure on profitability, despite BXP's strong leasing momentum. FFO is the key metric for real estate investment trusts (REITs) as it adds back non-cash items like depreciation to net income.

Boston Properties' revised full-year 2025 FFO per share guidance is projected to be in the range of $6.89 to $6.92. While this range was slightly raised from an earlier forecast, the Q3 2025 FFO per share of $1.74 still represented a year-over-year decline of 3.9%. This pressure is due to factors like higher interest expense from floating-rate debt and the dilution from asset sales, which are being executed to fund development and reduce debt. The market is rewarding BXP for its strong leasing activity (over 1.5 million square feet leased in Q3 2025) but the economic reality of higher capital costs is still compressing the final FFO number.

Boston Properties, Inc. (BXP) - PESTLE Analysis: Social factors

Hybrid work models solidify, reducing overall space needs for many tenants.

The biggest social factor reshaping the office market is the solidification of hybrid work. This isn't a temporary blip; it's a structural change where companies are reducing their overall square footage but simultaneously demanding higher-quality space to draw employees back. For Boston Properties, Inc. (BXP), this means that while overall market occupancy remains pressured, their focus on premier, Class A properties is a strong hedge.

The market reality is a 'flight to quality' where older, less-amenitized buildings face elevated vacancies, but trophy assets see renewed commitment. BXP's total portfolio occupancy for the third quarter of 2025 was 86.0%, a figure that reflects the broader market's adjustment to fewer required desks per employee. Still, BXP's leasing momentum is defintely strong, with 1.5 million square feet signed in Q3 2025. The long-term weighted-average lease term for Q3 2025 was 7.9 years, which shows tenants are making significant, multi-year commitments to the right kind of space.

Increased tenant demand for amenity-rich, highly-collaborative office environments.

The social contract between employer and employee has changed, making the office a destination, not just a requirement. This shift directly benefits BXP's portfolio, which is heavily concentrated in high-end, amenity-rich workplaces. Clients are making long-term commitments because they value the on-site amenities and collaborative design that support their company culture and employee retention efforts.

The demand for premium space is evident in BXP's leasing activity. Leasing volume through the first three quarters of 2025 totaled approximately 3.8 million square feet. This momentum is driven by tenants who are prioritizing quality and experience over sheer quantity of space. For example, Q3 2025 saw BXP execute over 475,000 square feet of leasing in Midtown Manhattan, largely representing extensions for existing financial services clients who are consolidating into premier locations. This is a clear signal: if the space is great, tenants will sign.

Demographic shifts favor live-work-play urban centers where BXP operates.

BXP's strategy is built around owning premier assets in dynamic gateway markets-Boston, Los Angeles, New York, San Francisco, Seattle, and Washington, DC. These Central Business Districts (CBDs) are the epicenters of the live-work-play lifestyle, which is increasingly favored by the highly-skilled, younger talent pool that companies are competing to hire. The ability to offer an office in a vibrant neighborhood with transit, dining, and residential options is a crucial recruiting tool.

BXP's financial exposure underscores this strategic focus on urban density. Approximately 89.0% of the company's annualized rental obligations are derived from clients located in their CBD portfolio. This concentration of revenue in core urban hubs shows BXP is positioned to capture the economic activity and talent density associated with these demographic preferences.

Corporate focus on employee well-being drives demand for BXP's healthy building certifications.

Employee well-being has become a core corporate social responsibility (CSR) and a key driver of real estate decisions. Tenants are actively seeking spaces with superior air quality, natural light, and wellness amenities. BXP has proactively positioned itself as a leader in this area, which translates directly into a competitive advantage for leasing its properties.

The company has achieved significant milestones in healthy building certifications, which are now a non-negotiable for many premier tenants:

• Total Fitwel certified space is 26.9 million square feet.
• Total LEED-certified space is 34.9 million square feet.
• 91% of BXP's LEED-certified buildings are at the highest Gold and Platinum levels.
• 96% of BXP's actively managed office buildings hold a green building rating system certification.

BXP was also recognized as a 2025 Best in Building Health winner by Fitwel. This focus on health and sustainability is not just good for the environment; it's a tangible asset that attracts and retains the most desirable tenants.

Boston Properties, Inc. (BXP) - PESTLE Analysis: Technological factors

Smart building technology integration optimizes energy use and operational costs.

Boston Properties, Inc. (BXP) views smart building technology not as a luxury, but as a core operational driver that directly impacts the bottom line and is defintely a key differentiator for attracting premier tenants. The company's commitment to achieving carbon-neutral operations by 2025 for its actively managed buildings is fundamentally enabled by this technology. They use sophisticated energy management platforms, like Measurabl Optimize, for real-time data and predictive analytics to fine-tune building performance.

This deep operational engagement yields significant, measurable cost avoidance. Since implementing its optimization programs, BXP has realized a cumulative $2.2 million in avoided energy costs and generated $5.3 million in demand response payments through utility program enrollments. Here's the quick math: BXP's overall 39% energy use intensity reduction since 2008 avoids approximately $49.5 million in annual energy expenses, demonstrating that technology-driven efficiency is a massive financial lever.

The company continues to invest in retrocommissioning (RCx) to correct operational issues in older assets. As of 2025, BXP has commissioned 15 million square feet across 16 buildings, resulting in an estimated $1.6 million in energy cost savings with a simple payback period of under two years. That's a fast return on investment.

PropTech platforms streamline leasing, property management, and tenant experience.

The strategic deployment of property technology (PropTech) platforms is central to BXP's 'flight to quality' strategy, helping to secure its target of approximately 4 million square feet of leasing for the full fiscal year 2025. While internal platforms manage leasing and property operations, the integration of sustainability data management is a clear competitive edge in the premier office market.

PropTech acts as the backbone for BXP's vertically integrated model, ensuring a consistent, high-quality experience across its 53.7 million square foot portfolio as of June 30, 2025. The focus is on providing a seamless, highly efficient workplace that meets the rigorous environmental, social, and governance (ESG) standards of its Fortune 100 and Fortune 500 client base. This is about using data to deliver a superior product, not just a building.

• Integrate real-time energy data with building management systems (BMS).
• Automate alerts for operational inefficiencies and conservation opportunities.
• Benchmark asset performance against portfolio and industry standards.
• Support tenant-specific sustainability reporting for their own corporate goals.

Cybersecurity risk increases due to reliance on integrated building management systems.

The very technology that provides efficiency-integrated building management systems (BMS), smart sensors, and cloud-connected PropTech-also introduces significant cybersecurity risk. A breach in the operational technology (OT) layer could compromise tenant data, disrupt critical building services (like HVAC and access control), and severely damage BXP's reputation for providing a premier workplace.

BXP acknowledges this risk in its February 2025 filings, noting the increasing sophistication of cyber-attacks. The company manages this exposure through a formal cybersecurity program established by reference to the NIST Cybersecurity Framework. This is a necessary defense, but what this estimate hides is the potential for a non-materialized risk to suddenly become a catastrophic event, especially as more systems connect to the network.

The company maintains a data security committee, including IT, legal, and risk management, to oversee the protection of critical financial, sensitive business, and personally identifiable information. While BXP has not reported a material cybersecurity incident, the cost of continuous monitoring, threat intelligence, and system upgrades is a persistent, non-discretionary capital expenditure.

High-speed fiber and 5G connectivity are now non-negotiable tenant requirements.

In 2025, best-in-class connectivity is no longer an amenity; it is a utility, and tenants demand it. High-speed fiber and in-building 5G wireless coverage are essential for the hybrid work model, cloud-based applications, and the massive data consumption of modern businesses. If your property isn't future-ready, you'll lose the 'flight to quality' tenant.

BXP is proactively addressing this, not just in new construction but also in existing assets. For example, at its Hub on Causeway asset, BXP is implementing a small cell system that is easily upgradeable to 5G and is working with anchor tenant Verizon to install an outdoor distributed antenna system (ODAS). This ensures seamless, high-speed connectivity for all users, overcoming the challenge of building materials like low-E glass blocking radio signals.

The market is formalizing this requirement through standards like Wired Certification, which the city of Boston is integrating into its development review process. This institutionalization of connectivity standards means that buildings without robust, redundant fiber and wireless infrastructure will suffer from lower occupancy and reduced asset value. The table below outlines the critical connectivity expectations BXP must meet to maintain its premium market position:

Boston Properties, Inc. (BXP) - PESTLE Analysis: Legal factors

Stricter local building codes require costly upgrades to existing portfolio assets.

You need to be a realist about the regulatory environment in BXP's core markets. Cities like New York and Boston are using local building codes as a legal lever to enforce climate action, and this translates directly into higher capital expenditure (CapEx) for BXP's older, but still premier, assets.

The most immediate financial risk is New York City's Local Law 97 (LL97), which mandates steep carbon emission limits for most buildings over 25,000 square feet. The first compliance reports were due in May 2025, and the penalty for exceeding the assigned emissions limit is a significant $268 per metric ton of CO2 equivalent over the cap. Failure to file the required report carries a fine of $0.50 per square foot for every month it is late. BXP is proactively managing this transition risk, enrolling in demand response aggregation across more than 50 properties in its Boston, New York, and Washington, DC regions to actively reduce energy-related operating expenses and avoid these non-compliance fines. It's a clear trade-off: spend CapEx now on deep retrofits or pay massive annual fines later.

• LL97 fine for exceeding emissions limit: $268 per metric ton CO2e.
• LL97 fine for failure to file report: $0.50 per square foot per month.
• BXP is managing compliance risk across >50 properties in key markets.

Americans with Disabilities Act (ADA) compliance mandates for older buildings increase capital expenditure.

The Americans with Disabilities Act (ADA) remains a perpetual legal risk, especially for a portfolio of 186 properties that includes older, Class A buildings in dense urban centers. While BXP is committed to accessibility, the legal landscape is fraught with litigation risk, and fines are not negligible. Non-compliance can lead to fines reaching tens of thousands of dollars per violation for repeat offenders in 2025. Settlement costs for ADA lawsuits typically range from $5,000 to $20,000 per case, not including legal fees. This is why BXP's maintenance capital expenditures are a critical line item.

Here's the quick math on the operational cost of maintaining compliance: BXP's Share of maintenance capital expenditures alone was $30.211 million in the second quarter of 2025. A significant portion of this budget is dedicated to physical upgrades-like adding ramps, accessible restrooms, and correcting path-of-travel issues-to mitigate the legal exposure from Title III of the ADA. You simply can't afford to let a single physical barrier turn into a $20,000 legal settlement.

Lease agreement complexity rises due to tenant demands for flexible terms and space utilization clauses.

The shift in tenant power is fundamentally changing the legal nature of commercial leases, moving them away from simple long-term contracts to complex service agreements. Tenants, particularly in BXP's premier Central Business District (CBD) portfolio, are demanding greater flexibility (e.g., early termination options, rights to contract or expand space) and sophisticated space utilization clauses that govern how data is collected and how the physical space is managed.

This complexity has a clear cost: tenant improvements (TI) and leasing commissions (LC). BXP's Share of second-generation TI and LC-the cost to refit and re-lease existing space-was a substantial $61.423 million in the second quarter of 2025. To be fair, BXP is still securing long-term commitments, with a weighted-average lease term of 7.9 years for the over 1.5 million square feet leased in Q3 2025. But the legal and financial terms required to secure those long-term leases are more onerous than ever.

Data privacy regulations (e.g., CCPA) impact how tenant usage data is collected and used.

The legal scrutiny over data collection now extends into the physical building, affecting how BXP manages its smart building systems and tenant experience applications. The California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA), is the gold standard for this risk, and BXP's updated Privacy Policy, effective October 1, 2025, reflects this.

The legal burden is on BXP to ensure its collection of tenant usage data (e.g., keycard swipes, HVAC preferences, Wi-Fi usage) complies with the 'Right to Limit the Use and Disclosure of Sensitive Personal Information.' This requires a costly, ongoing legal and IT audit process. The table below outlines the core legal compliance areas that drive this operational cost.

The cost isn't a single CapEx line; it's an ongoing operational expense for legal counsel, cybersecurity audits, and IT infrastructure to segment and protect this sensitive data. You can defintely expect this compliance overhead to grow as more states adopt CCPA-style laws.

Boston Properties, Inc. (BXP) - PESTLE Analysis: Environmental factors

You're looking at Boston Properties (BXP) and trying to map out the real cost of being a premier commercial landlord in coastal gateway cities. The environmental factors-specifically, new municipal regulations-are no longer a soft 'nice-to-have'; they are a hard, near-term capital expenditure and compliance risk. BXP's commitment to carbon neutrality by 2025 is a massive competitive advantage, but it comes with a defintely high price tag for retrofits and risk mitigation.

New York City's Local Law 97 mandates steep carbon emission reductions by 2030.

New York City's Local Law 97 (LL97) is the most aggressive building emissions law in the country, and it directly impacts BXP's significant Manhattan portfolio. The law sets escalating carbon caps for buildings over 25,000 gross square feet, aiming for a 40% reduction by 2030 and 80% by 2050. The first compliance period started in 2024, but the major financial crunch hits now.

By May 1, 2025, BXP must submit a decarbonization plan for non-compliant buildings or a report demonstrating that their 2024 emissions were below the 2030 limits. Failure to meet the caps results in steep annual fines of $268 per metric ton of CO2 equivalent over the assigned limit. Here's the quick math: missing the limit on a large, energy-intensive building could easily translate into millions of dollars in annual penalties. The strategy is clear: invest in deep retrofits now to avoid punitive fines later.

Boston's BERDO 2.0 requires BXP to report and reduce building energy use and emissions.

Boston's Building Emissions Reduction and Disclosure Ordinance (BERDO 2.0) mirrors the regulatory pressure of LL97, applying to BXP's large Boston portfolio. This law mandates that buildings over 35,000 square feet must meet gradually tightening emissions standards, with the first performance standards kicking in during 2025. This is a hard deadline.

BXP has three compliance pathways: direct emissions reduction via efficiency upgrades, using local renewable energy, or paying an Alternative Compliance Payment (ACP). The ACP is currently set at $234 per metric ton of CO2e emitted above the limit. Daily fines for reporting violations for large buildings are $300 per day, so you simply can't ignore the filing deadlines. This regulatory environment forces BXP to accelerate capital planning for energy efficiency across its 53.7 million square feet portfolio.

Increased capital expenditure on LEED certification and deep energy retrofits to meet tenant ESG goals.

The capital expenditure on energy efficiency isn't just about avoiding government fines; it's a tenant retention and leasing strategy. BXP has committed to achieving carbon-neutral operations for its actively managed office portfolio by 2025. This is a huge selling point for Fortune 500 clients who have their own stringent Environmental, Social, and Governance (ESG) targets.

The company has already demonstrated the financial upside of this investment. The 39% energy use intensity reduction achieved since 2008 now avoids approximately $49.5 million in annual energy expenses. In 2023, BXP commissioned 9 million square feet of its portfolio to optimize performance. They have also committed the net proceeds of their fifth green bond offering, totaling $743.5 million, to fund these 'eligible green projects.'

This focus on high-performance buildings is reflected in their certifications:

• Total LEED-certified area is 28.9 million square feet.
• 92% of that certified area is at the highest Gold or Platinum levels.
• 96% of the actively managed office portfolio holds Green Building Certifications.

The investment pays for itself quickly; retrocommissioning 15 million square feet across 16 buildings as of 2025 is estimated to yield $1.6 million in energy cost savings with a simple payback under two years.

Physical climate risk (e.g., sea-level rise) is a long-term liability for coastal properties.

BXP's concentration in coastal gateway markets-Boston, New York, San Francisco, and Los Angeles-exposes the portfolio to chronic physical climate risks like sea-level rise and acute risks from extreme weather events (severe storms, flooding). This is a long-term liability that requires immediate planning.

BXP uses Four Twenty Seven climate risk scoring to evaluate the forward-looking physical climate risk exposure of its entire portfolio, which is the right move for a long-term owner. The biggest financial risk here isn't just the damage, but the transition risk: building adaptation, such as architectural and mechanical improvements for flood protection, will increase capital expenditure requirements. Plus, for properties in the highest-risk areas, the availability and cost of all-risk property insurance could become a serious problem, potentially making it unavailable or prohibitively expensive. This is a material risk that directly affects asset valuation and operating expenses.