In an article for Benzinga, Piero Cingari discussed the bear market in office REIT stocks as the vast majority are now trading at their all-time lows. It’s not entirely surprising given that workers are not returning to the office, following the pandemic, despite the best efforts of many employers.
As a result, many companies are giving up office space and/or choosing to move to a hybrid model. Of course, this has spillover effects on other areas such as the businesses that sell products and services to these workers.
In the first week of May, office occupancy in the 10 largest US cities was at half the levels that were seen prior to the pandemic. Many analysts had predicted that office occupancy would gradually ‘normalize’ just like so many other parts of the economy have done so. Yet, this isn’t the case and occupancy hasn’t risen over the last 6 months which is an indication that the changes may be permanent.
Adding to the sectors’ woes is higher rates leading to higher borrowing costs, heavy levels of short interest, and rising crime rates in many urban areas.
Finsum: Office REITs have been crushed amid high rates and corporations reducing office space with occupancy at 50% of pre-pandemic levels.