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  • Alex Pettee, CFA

Office REITs: The New Normal

  • Is "Work-From-Home" the new normal? A year into the pandemic, office utilization in major U.S. cities remains a fraction of pre-pandemic levels with coastal cities facing a particularly slow recovery.

  • The "reopening rotation" has boosted many of the urban office REITs to double-digit percentage gains this year even after quarterly results showed punishing declines in FFO/share growth in 2020.

  • Survey data indicates that workplace flexibility is popular among both employees and executives. While the office isn't going away, corporations expect to scale back their real estate footprint.

  • The permanence of WFH trends and the ultimate recovery in office demand will be uneven across regions. Commute times will play a major role in determining how fast - and to what extent - employees return.

  • Dense coastal office markets with brutal transit-heavy commutes will struggle in the new normal. We see value in Sunbelt and suburban-focused office REITs which are poised for a faster and more sustainable recovery.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at 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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