Office REITs, Oh Boy

It’s exceptionally tough out there for office owners, even the largest and hithertofore most successful office real estate investment trusts in New York City. They once boasted a veritably impregnable business model that hybrid work and higher interest rates have now shredded — at least in the near term. Let’s stay with New York City, where industrial leasing has actually returned to pre-pandemic levels.

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— Tom Acitelli, Co-Deputy Editor

New York City's Office REITs Struggle With Steep Stock Declines

For New York City’s premier office real estate investment trusts (or REITs), Armageddon — or at least the ominous dark clouds and thunderclap that are supposed to precede the end of times — appears closer than ever. In fact, it might already be underway. Several of New York’s largest commercial real estate owners have seen stock market declines over the last 12 months that have exceeded 50 percent and wiped out billions of dollars in both shareholder value and desperately needed equity for these office sector titans. The stock price of SL Green Realty Corp., one of New York City’s very largest private holders of office space, has declined 67 percent since April 2022; Boston Properties, which oversees more than 12 million square feet of office space in New York, including majority ownership of the General Motors Building at 767 Fifth Avenue, has watched its stock fall by 56 percent since last April; and American Strategic Investment Corp. (formerly NYC REIT), owner of 1.2 million square feet and eight properties in New York, has experienced an 87 percent stock price decline year to date. But that’s just three examples. Nearly every office REIT has seen their stock prices take a beating since this time last year.

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Industrial Leasing in NYC Slows to Pre-Pandemic Levels: Report

New York City’s red-hot industrial market has started to chill, according to a new report from CBRE. Companies leased 730,000 square feet of industrial space in the first quarter of 2023, a 52 percent drop from the previous quarter’s 1.5 million square feet and 25.6 percent lower than the three-year quarterly average of 1 million square feet, according to the report. “The once voracious demand for space has cooled to pre-pandemic levels and pricing continues to moderate,” the report said. “The New York City industrial market remains healthy although economic pressures are mounting.”

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