VNORP - Office REITs: No Going Back

• Vaccines are here, masks are off, and sports stadiums are full. Office desks around the country remain eerily empty, however, as office utilization rates remain a fraction of pre-COVID levels.
• For many corporations, there's no going back - at least not to pre-COVID norms. Survey data revealed that office workers would accept pay cuts before returning to the 5-day in-person workweek.
• While the office isn't going away entirely, hybrid work environments - which require less office space - are increasingly standard. Office market rents have plunged 10-20% as occupancy rates soar.
• The permanence of WFH trends and the ultimate recovery in office demand will be uneven across regions. Commute times and cost-of-living factors are playing a major role in determining which markets recover faster.
• Earnings reports confirmed that leasing demand remains depressed with no clear inflection yet, particularly in the dense transit-heavy office markets like New York and San Francisco, which are expected to struggle in the "new normal."

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