Office Sector Rebound Going Strong…for REITs

Ian Ritter is Online Content Manager at GRS Group

Ian Ritter is Online Content Manager at GRS Group

Obviously, not every owner in the office sector of commercial real estate is a REIT. These entities are often the cream of the crop when it comes to portfolio quality and asset management. But understanding the performance of these firms can give us a relatively good idea how office assets are operating.

According to data from SNL Financial, as reported by GlobeSt.com, office REITs beat their second-quarter FFO estimates, for the most part, signaling a recovery in the sector.

Equity Commonwealth, a Chicago-based owner with single-tenant assets across the country, for one, saw its FFO come in 20 percent higher than previously estimated, according to the report. Though the company posted a net loss of $17.8 million during the second quarter, FFO increased to $84.6 million, up from $81.6 million during the same year-ago period.

Meanwhile, SL Green, a major New York City office owner, reported an FFO jump 13 percent higher than forecast prior. Its second-quarter FFO came in at $160.9 million, compared to $120.5 million during the same period last year. Manhattan office-portofolio occupancy remained flat, coming in at a healthy 94.9 percent.

As these funds from operations are coming in higher than projected, office landlord Paramount Group is going public in an IPO expected to raise more than $2.5 billion. Paramount’s office portfolio is concentrated mainly in New York City and Washington, D.C.

We are also seeing some recent big transactions involving some players, KBS REIT II, in particular. It bought a trophy office in Atlanta for $132.5 million and it sold City Place Tower, in West Palm Beach, Fla., for $150 million.

So at least in the REIT arena, there is a lot of activity in the office sector. We’ll see whether or not it signals a full-fledged national comeback for this commercial real estate sector as a whole.

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