VNORP - Office REITs: The New Normal

• Is "Work-From-Home" the new normal? A year into the pandemic, office utilization in major U.S. cities remains a fraction of pre-pandemic levels with coastal cities facing a particularly slow recovery.
• The "reopening rotation" has boosted many of the urban office REITs to double-digit percentage gains this year even after quarterly results showed punishing declines in FFO/share growth in 2020.
• Survey data indicates that workplace flexibility is popular among both employees and executives. While the office isn't going away, corporations expect to scale back their real estate footprint.
• The permanence of WFH trends and the ultimate recovery in office demand will be uneven across regions. Commute times will play a major role in determining how fast - and to what extent - employees return.
• Dense coastal office markets with brutal transit-heavy commutes will struggle in the new normal. We see value in Sunbelt and suburban-focused office REITs which are poised for a faster and more sustainable recovery.

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