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  • Alex Pettee, CFA

Office REITs: No Going Back

  • Vaccines are here, masks are off, and sports stadiums are full. Office desks around the country remain eerily empty, however, as office utilization rates remain a fraction of pre-COVID levels.

  • For many corporations, there's no going back - at least not to pre-COVID norms. Survey data revealed that office workers would accept pay cuts before returning to the 5-day in-person workweek.

  • While the office isn't going away entirely, hybrid work environments - which require less office space - are increasingly standard. Office market rents have plunged 10-20% as occupancy rates soar.

  • The permanence of WFH trends and the ultimate recovery in office demand will be uneven across regions. Commute times and cost-of-living factors are playing a major role in determining which markets recover faster.

  • Earnings reports confirmed that leasing demand remains depressed with no clear inflection yet, particularly in the dense transit-heavy office markets like New York and San Francisco, which are expected to struggle in the "new normal."

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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Hoya Capital Research & Index Innovations is an affiliated index provider and research firm that builds custom indexes tracking U.S. commercial and residential real estate sectors, including indexes tracked by exchange-traded funds (ETFs). 

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