01/04/2023 | by Edward F. Pierzak
Workers in an office environment

Office REITs own and manage office real estate and rent space in those properties to a variety of tenants. Properties can range from skyscrapers to office parks to individual buildings and tend to be located in central business districts or suburban areas.

Offices play key roles in the fabric of our communities. They form the basis of local employment centers and help support small businesses. They also typically provide significant funding for public services and infrastructure through property tax revenues.

The COVID-19 pandemic accelerated the implementation of remote and hybrid work models. The proliferation of these models has raised questions about the future of offices. While people have been working from home, their employers have remained diligent in paying rent.

Data from Nareit’s T-Tracker® shows that the office sector posted an average quarterly funds from operations (FFO) decline of just 1.9% from 2019 to 2020. In the third quarter of 2022, quarterly FFO exceeded its pre-pandemic (2019 average) level by 11.7%.

Despite concerns regarding the impact of work-from-home and uncertainty surrounding near-term office usage, office REIT operational performance has been resilient. The results from this natural workplace experiment will likely unfold over the coming years.

  • 8.8% : Keeping pace with inflation, office REIT net operating income (NOI) grew by 8.8% year-over-year in the third quarter of 2022.
  • 4.4% : Office employment, a key driver of office demand, posted a four-quarter gain of 4.4% in the third quarter of 2022; it averaged 1.3% over the past 20 years.
  • 50% : Highlighting their environmental, social, and governance (ESG) commitments, 50% of office REITs reporting to GRESB, a global ESG benchmark for real assets, have received its highest (5-star) rating.