Green Street

Because Working From Home Is Hot, You’ll Need to Do Your Homework on Office REITs

According to Barron's:

If there is one takeaway from the mass work-from-home experiment the American workforce has been conducting in recent months, it’s that office buildings will never be the same. And that has big implications for investments in the real-estate investment trusts that specialize in them.

The owners of office buildings, many of which have seen their use plummet as companies across the country instituted remote-work policies to combat the coronavirus, are finding that employees want to work from home even in a post-Covid world. A recent survey by Morgan Stanley found that among employees who would like to work from home more often in the future, 75% would like to do so at least three days a week.


This work-from-home trend marks another headwind for what “was already an unloved sector,” says Danny Ismail, a senior analyst at Green Street Advisors, a research firm specializing in real estate.

Year to date as of July 29, shares of office REITs, which own and operate various office properties, had returned minus 23%, compared with minus 9% for the FTSE Nareit All Equity REITs Index. In contrast, industrial REITs are up 15% on average; industrial REITs, whose properties include warehouses and distribution centers, have benefited from e-commerce.


“It is important to keep in mind significant issues that will limit WFH growth for many organizations, such as culture, employee morale, and collaboration,” according to a Green Street Advisors note.

Working remotely, which “has been on a slow but steady march since the ‘80s,” involved 3% of workers on a permanent basis in 2018, Green Street observes.

Still, the firm notes that “reduced in-office work means office demand may decline by 10-15%.”

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