The improving economy, favorable business fundamentals, and a focus on life science companies have all led to strong demand for BioMed Realty Trust’s (BMR) properties over the past five years. These factors have also helped the company improve its occupancy level, which was very low compared to most of its peers.
BioMed Realty’s (BMR) average portfolio occupancy rate was at a mere 76.7% in 2010, but this improved gradually since then, reaching 91.6% in 2014. As of September 2015, the average occupancy rate stood at 90.4%. The recent acquisitions and property restructuring could lead to higher demand for BioMed Realty’s life science properties, thus further improving its overall occupancy level.
BioMed Realty’s leasing volumes
In recent years, the demand for company’s well-located properties was healthy and led to strong leasing volumes. The higher occupancy level was also due to lower supply of competitive properties, leading to higher leasing volumes.
In fiscal 2014, for example, the company executed 203 leasing transactions that consisted of 2.8 million square feet, compared to the 120 leasing transactions making up 2.3 million square feet during the prior year.
New York market gaining strength
Meanwhile, BioMed Realty’s Cambridge, UK, the market has witnessed strong demand for its properties with occupancy, reaching to 99.7% as of September 2015, compared to 99.6% during the same period previous fiscal. This was followed by the company’s New York market, with an occupancy level of 98.7%, Maryland at 98.1%, and university-related properties at 94.5%.
BioMed Realty’s occupancy rate and competition
Occupancy rate is the number of units that are rented out to residents by the company in proportion to its total number of units in an apartment or communities. Average occupancy is calculated by dividing the number of units occupied at each property by the total number of units at each property. This means that the higher the occupancy rate, the higher the income for the company.
All the office REITs (real estate investment trusts), including Kilroy Realty Corporation (KRC), SL Green Realty Corporation (SLG), and Boston Properties (BXP), strive to maintain higher occupancy levels in this same way. The SPDR Dow Jones Wilshire REIT ETF (RWR) invests approximately 0.8% of its portfolio in BioMed Realty.
In the part of the series, we’ll analyze factors driving BioMed Realty’s revenue.