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  • Alex Pettee, CFA

Office REITs: Work-From-Home Reckoning

  • Did coronavirus kill the office? Despite reporting near-perfect rent collection throughout the pandemic, office REITs continue to be under pressure as the “Work From Home” paradigm threatens the long-term outlook.

  • Survey data and commentary from corporations indicate that the WFH paradigm is here to stay long after the pandemic subsides. Technology has accelerated the pre-existing trends of increased workplace efficiency.

  • While many desks still sit empty, tenants continue to pay their rent, for now. As a result, only 5 of the 26 office REITs have reduced their dividend this year.

  • As "WFH" days become the industry standard, the office sector's loss is the housing market's gain. Residential REITs and homebuilders have reported robust demand for extra space to accommodate home offices.

  • Nuance is required, however, as suburban and Sunbelt office assets are likely to see robust demand over the next decade, mimicking similar trends as those seen after the 9/11 terrorist attacks amid a broader "suburban revival."

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