Office REIT 2021 earnings season recently wrapped up as CXP, ESRT, HPP, and VNO reported results in a year where office REIT shares are down 35%.
Office utilization in major office markets remains in the mid-teens, but we forecast a meaningful return to office in 3Q2021 based on economists’ view that 50% of the population will be vaccinated by May. A recent JLL report (Better than Normal: Vision 2021) estimated 80% office utilization by yearend 2021. We believe the sector’s earnings, strong office rent collections and leasing spreads point to more durable fundamentals than current valuations reflect.
Moreover, the Goldman Sachs Economics team and others forecast US GDP to grow 7.0% YoY in 2021, a solid backdrop for the office market.