For almost two years now, real estate investors have been losing sleep over the fate of office real estate investment trusts (REITs). With office buildings sitting empty in many major markets, the fear is that their recovery will be stalled for each month they largely remain vacant. And so the news of the omicron variant is an unquestionably harsh blow for an already hard-hit sector.
Though health experts insists that delta is still the dominant COVID-19 variant circulating today, in weeks, omicron could join forces with delta to create an intense wave of infections that could easily overwhelm healthcare systems. Major companies can't afford to lend to that problem and put their staff at risk in light of it. And so many are once again postponing their office reopening plans until things settle down on the COVID-19 front.
Apple is one such company making that call. Despite plans to bring workers back to the office in early February 2022, the tech giant is now saying its office return plans are postponed indefinitely.
Image source: Getty Images.
Not only that, but Apple is also providing employees with a $1,000 stipend to improve their remote work setups. That's an indication that the company doesn't expect an office return anytime soon -- and it's a bad sign for office REIT holders, to say the least.
A major setback
Before the delta variant took the U.S. by storm over the summer, it seemed as though office returns would soar around Labor Day. But that didn't happen. Now, many major employers, including a string of tech giants, are granting workers the option to keep working from home.
Apple's $1,000 remote work stipend, however, is apt to rattle office REIT investors. At this point, we're almost two years into the pandemic, and the fact that the company is willing to make that investment is a sign that things may not get better for a long time.
Of course, it's not just office buildings that have taken a beating over the past two years. Local businesses -- the ones that rely on foot traffic from commuters and office workers -- have also struggled. Some restaurants, for example, see the bulk of their revenue come in during the lunchtime rush. If employees aren't working in offices, they won't be stopping in for a midday sandwich.
Investors shouldn't lose hope
Many office REIT holders were banking on a full-fledged recovery in 2022. That may not happen. But are office buildings about to become obsolete? That's unlikely.
Right now, many companies are erring on the side of caution by allowing workers to do their jobs from home. But they may very well rush workers back into the office once this latest wave of COVID-19 cases subsides. Furthermore, at this stage of the pandemic, many people are just plain tired of working remotely and prefer to report to an office, if given that choice.
And so while Apple's decision may serve as a doom-and-gloom alarm of sorts, the reality is that office REIT investors shouldn't give up on the sector. They may just need to wait another year for a more robust office return and recovery.
