Prudential Center

Boston Properties executives are counting on a return to office work rather than a permanent shift to widespread work-from-home policies to stabilize the future of their 51 million square foot commercial real estate portfolio.

The company’s office portfolio remains under 10 percent occupied, as businesses continue to operate with work from home arrangements, but CEO Owen Thomas said businesses are starting to rethink the long-term merits.

“Work from home has been a surprisingly viable way to conduct business during the pandemic, but many of our clients believe it is not a substitute for in-person work,” Thomas said.

Boston Properties collected 98 percent of rents from office tenants but only 50 percent compared with pre-COVID levels from its retail tenants, many of which are starting to emerge from COVID-19 shutdown orders. Reflecting retailers’ financial struggles, Boston Properties is starting to convert leases to a pure percentage rent model, executives said during a conference call Wednesday to discuss second-quarter financials.

Funds from operations, a key indicator of a REIT’s performance, declined to $236.9 million, compared with $276.3 million during the same period in 2019.

The 440-unit Hub50House apartment high-rise which opened this year in West End is currently 48 percent leased, with 81 percent of the units in service as of June 30. Uncertainty about local colleges’ on-campus learning plans has hurt apartment leasing in Boston, President Doug Linde said, and the company’s Cambridge Marriott Hotel is unlikely to open until Marriott International has more clarity about a return to profitable operation models.

Executives said they have been working from the company’s headquarters in Boston’s Prudential Center and at their New York offices for over a month while maintaining six-foot distancing.