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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