How Office REITs Could Be Impacted In The Future

Office lease transactions have significantly slowed down this year as more people work from home and could continue to do so permanently.

Analysts believe that real estate investment trusts could be impacted in the short or medium-term, but are still optimistic about the long-term output.

Companies could seek flexible work arrangements moving forward, which raises concerns about a smaller real estate footprint. 

“We expect that the recessionary conditions will soften leasing demand in major central business districts across Asia Pacific,” said Esther Liu, director at S&P Global Ratings. “We also believe the ‘working-from-home’ measures may lead to a shift in longer term demand, as they present companies with the opportunity to cut space requirements.”

Still, this shift will take time and before then, there will be a big drop in occupancy, especially in central locations. In fact, JLL found that office sale transactions across Asia-Pacific fell 36% year-on-year.

Overall, many analysts agree that investors should view office REITs in the long-term as there is more immediate pressure on operations and cost for companies at the moment. Still, the exposure to coworking spaces puts them at a higher risk.

In the past few months, coworking operators have had to close their workspaces, layoff employees and allow others to work from home.