Offices Are For Chumps - InvestingChannel

Offices Are For Chumps

Proprietary Data Insights

Financial Pros Top Commercial REIT Searches November

#1CoreSite Realty80
#2Digital Realty Trust19
#3Global Net Lease12
#4Easterly Govt. Properties6
#5SL Green Realty Corp.5

Separating Commercial REITS

In our main story, we explain how commercial real estate investment trusts (REITs) are likely to suffer as working from home becomes permanent.

However, you shouldn’t lump all commercial REITs together.

REITs like Boston Properties (BXP), with properties in major cities like New York, Boston, and L.A., only hit an occupancy rate of 88.4%. 

However, Easterly Government Properties (DEA) focuses on commercial real estate for the government.

If you’re looking at commercial real estate trusts, consider the following:

  • Cities they operate
  • Urban vs suburban sites
  • Typical lease length
  • Customer concentration

Right now, we want to focus on ones with less exposure to higher-priced rents and more on cities with high population growth in general.


Offices Are For Chumps

Key Takeaways

  • 24 U.S. million workers quit between April and September as younger workers cite burnout.
  • Millennials and Gen Z want a better work/life balance and more commitment to their long-term growth from employers.
  • Higher debt and less upward mobility drove a situation where millennials at age 40 are only at 80% of the wealth their parents were at that age.
  • A socioeconomic gap is widening with white-collar workers demanding to work from home while blue-collar workers have no choice but to hit the job site.

It’s been called “The Great Resignation.”

Workers are leaving jobs at unprecedented rates.

Here’s what that means for the economy and your portfolio.

What’s Happening

Around the world, workers are rethinking their relationships with their employers.

Covid put millions of people into lockdown, forcing many to work from home while others were furloughed. During that time, employers put pressure on employees to do more with less citing and an uncertain future.

That led to more than 24 million U.S. people saying peace out to their jobs from April to September of this year.

At the same time, employers can’t find candidates to fill critical positions, leaving many jobs unfilled while the unemployment rate dropped down to 4.2% this month, darn near pre-pandemic levels.

Why It’s Happening

For years, we’ve known that the current generation is likely to be the first not to gain more wealth than their parents. Bloomberg noted that at 40 years old, millennials are only 80% as wealthy as their parents were at that age.

Higher home prices and school debt burdens have outpaced wage gains for decades, limiting wealth creation.

When folks were asked to work in uncertain and even unsafe conditions during the pandemic, they began to question why.

Why work your butt off to barely make rent in high-cost cities for an employer with limited growth opportunities and is more interested in short-term profit goals.

Even Silicon Valley faces problems as high growth names begin to slow, creating less upward mobility.

The burnout is so drastic that:

  • 2/3rds of millennials who left their jobs in 2021 cited mental health reasons
  • That number jumped to 81% for Gen Z
  •  4 out of 10 millennials and Gen Z employees surveyed said they would leave their job if asked to come back to the office full time.

Today’s generation wants a better work/life balance and a commitment to their careers.

That’s creating a significant rift along socioeconomic lines.

White-collar workers can work from home while blue-collar front-line employees have no choice but to work outside the home.

What It Means For Your Portfolio

Employers aren’t taking these changes sitting down.

Wall Street banks planned to downsize their workforce, though it’s unclear whether it’s from a need to cut expenses or the ability to hire folks around the world.

Corporate profits will start to feel the crunch as they’ll be forced to pay more not just for salaries but benefits as well.

Those that are able to scale with remote work won’t struggle with regaining their momentum.

Generally speaking, office REITs and real estate will remain under pressure, especially in big cities like New York City, Chicago, San Francisco, and even Austin.

The Bottom Line: As has been the case for the last year, tech companies with remote operations should come out on top.

In the meantime, work from home stocks that facilitate business operations are now a long-term growth industry, not just a blip.

That includes companies like (CRM), Twilio (TWLO), Microsoft (MSFT), Atlassian (TEAM), and Dropbox (DBX).