Major Office REIT Stocks Plunge Amid Slow Return-To-Office Rates: 5 Dramatic Charts To Watch

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Zinger Key Points
  • The return-to-office rate has remained at 50% of pre-pandemic levels since November 2022.
  • Office REITs are experiencing a 2008-like sell off, as speculators raise their short bets.

In response to a slow pace of employees returning to offices and an increase in investors predicting further declines, share prices for many major office real estate firms have retreated close to their all-time lows.

In the first week of May, office occupancy in the 10 most populous U.S. cities was only half of the pre-pandemic levels, according to data from Kastle Systems, which monitors key card swipes in 2,800 buildings across the country. Since November 2022, the trend in the office occupancy rate has been essentially unchanged, indicating that we have reached a "new normal" for office occupancy, at least for the time being.

Chart 1: SL Green Realty Corporation Fell Below Its IPO Levels In 1999

Shares of SL Green Realty Corp SLG, the largest office landlord in Manhattan, have lost a third of their value since the start of the year, falling to a level lower than when the company went public in 1997. 
The short interest has increased to 28% of outstanding shares, surpassing the 25.7% short interest recorded in April 2009, according to Koyfin. SL Green Realty is currently the most-shorted office REIT in the market. 

Chart 2: Vornado Realty Trust Is Back At 27-Year Lows

Shares of Vornado Realty Trust VNO have fallen to levels last seen in February 1996, losing 37% of their value year-to-date and recording the worst price performance among office REIT stocks.

Since the outbreak of the pandemic in 2020, the share price of the company with offices in New York, Chicago, and San Francisco has decreased by roughly 80%. 

The short interest in VNO has risen to about 10% of the shares outstanding, near the all-time high of 13% hit in 2009. 

Chart 3: Alexandria Real Estate Equities Now Testing Key Price Support

The share price of Alexandria Real Estate Equities ARE, the largest office REIT by market capitalization, has taken a substantial hit, declining to $115. This represents a significant drop of 50% from its all-time high of $225, recorded at the end of 2021.

ARE is presently testing a key support level that coincided with August 2008 levels, just prior to the Lehman Brothers bankruptcy. Failure to hold above this level could exacerbate negative market reactions. Alexandria Real Estate is trading at over 37 times its projected earnings, one of the most expensive valuations in the industry.

Chart 4: Kilroy Realty Corporation On 2008 Fashion Crash

Shares of Kilroy Realty Corp. KRC have experienced a steep decline for the past year, mirroring the downturn they saw from February 2007 to March 2009, when the company's stock fell by more than 80%.

With offices located in San Diego, Greater Los Angeles, the San Francisco Bay Area, the Pacific Northwest, and Austin, Texas, Kilroy Realy has seen short interest on the stock rising to 5.2% in May 2023, up from a low of 1%  three years ago. 

Chart 5: Douglas Emmett Down 75% From December 2019

Shares of Douglas Emmett, Inc. DEI, have collapsed 75% since their all-time high hit in December 2019, going back to levels last seen in July 2009. 

Douglas Emmett owns high-quality office and multifamily properties located in the premier coastal submarkets of Los Angeles and Honolulu. 

The short interest has now risen to 8.7% of the shares outstanding, the third highest among office REITs. 

Now Read: The Long Decline Of Office REITs: Is There Hope For A Rebound?

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Posted In: Large CapMid CapNewsREITShort SellersShort IdeasTechnicalsSmall CapTrading IdeasReal Estatealexandria real estateDouglas EmmettKilroy RealtyLehmanoffice real estateoffice REITsreitssl green realtyvornado real estate
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