Maria Vonotna
Summary
- When the oppression of the pandemic on labor became too much to bear, laborers revolted; remote work’s convenience and flexibility have created an office exodus.
- Berkshire Hathaway Vice Chairman Charlie Munger said, “A lot of real estate isn’t so good anymore…We have a lot of troubled office buildings.”.
- The banking crisis raises concerns about REITs’ ability to meet financial obligations, and Real Estate (XLRE) has been the worst-performing sector over the last year, down more than 13%.
- A tight labor market, massively revised office rental rates, rising interest rates, and painfully slow return to office have led to a major downside for some companies and office REITs. Using Seeking Alpha’s Quant System and Factor Grades, I highlight three sell-rated office REIT stocks suffering from bearish momentum, poor growth, and downward analyst earnings revisions.
The Downfall of Commercial Office Real Estate
The U.S. commercial real estate market is feeling pressure from the pandemic, inflation, rising interest rates, and a banking crisis that could lead to a potential regional banking debacle. For the first time since 2011, U.S. commercial real estate experienced a decline in the first quarter, citing banking industry chaos and the risk of more volatility in the financial sector. Although the decline was less than 1% and led by office buildings and multifamily residences, many companies have been reeling from an exodus from commercial spaces. Long-time investor and Vice Chairman of Berkshire Hathaway Charlie Munger told Financial Times
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