BlackRock says the office sector still has life in it.
After all, workers have thrived in the work-from-home environment, and many companies are warming to the idea of letting workers stay at home, or perhaps just visit once or twice a week, regardless of the health threat.
BlackRock, however, is reluctant to throw out the baby with the bathwater, or whatever the right office metaphor is. The world’s largest fund manager points to a survey from real estate firm CBRE, which found just 9% of large companies expecting significantly smaller office space over the next three years. That’s because companies also will want lower density, as well as the capacity to absorb peak demand days for their workers.
The pandemic also has put increased interest on sustainability, so “green buildings,” they say, will trade at a premium. “We expect higher-quality office properties – typically large, newly built spaces with greater flexibility and better sustainability credentials – to benefit at the expense of offices that are smaller, less energy-efficient, and outside core locations,” they said.
BlackRock didn’t identify which office properties they viewed as quality. The FTSE Nareit Equity Office Index has bounced back by 19% this year, after an 18% decline in 2020, and according to Nareit the occupancy rate was perhaps a surprisingly strong 93%. Leading office real estate investment trusts include Alexandria Real Estate Equities ARE, +1.32%, Boston Property BXP, +0.18% and Vornado Realty Trust VNO, -1.54%.