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."