Apple is indefinitely delaying the return of Office: Are Office REITs doomed?

For almost two years, real estate investors have been losing sleep over the plight of office real estate investment companies (REITs). With office buildings empty in many major markets, the fear is that their takeover will be stalled for each month they remain largely vacant. And so, the announcement of the omicron variant is undoubtedly a blow to an already hard-hit industry.

Although health experts insist delta is still the dominant variant of COVID-19 circulating today, in a matter of weeks omicron could team up with delta to create an intense wave of infections that could easily overwhelm health systems. Large companies cannot afford to lend to this problem and put their staff at risk in light of it. And so many people are again postponing plans to reopen their offices until things settle on the COVID-19 front.

Apple is one of those companies that makes that appeal. Despite plans to get workers back to the office in early February 2022, the tech giant now says its plans to return to the office are being postponed indefinitely.

Image source: Getty Images.

Not only that, but Apple is also offering employees a stipend of $ 1,000 to improve their remote work setups. That’s an indication the company isn’t expecting a desktop return anytime soon – and that’s a bad sign for desktop REIT holders, to say the least.

A major setback

Before the Delta variant took the United States by storm over the summer, it looked like office returns would soar around Labor Day. But that did not happen. Now, many large employers, including a series of tech giants, are offering workers the option of continuing to work from home.

Apple’s $ 1,000 remote work allowance, however, is likely to shake office REIT investors. At this point, we’re almost two years after the start of the pandemic, and the company’s willingness to make this investment is a sign that things might not get better for a long time.

Of course, it’s not just office buildings that have taken a hit over the past couple of years. Local businesses – those that rely on foot traffic from commuters and office workers – have also struggled. Some restaurants, for example, see most of their income coming in during the lunchtime rush. If employees aren’t working in offices, they won’t stop for a lunchtime sandwich.

Investors must not give up hope

Many desktop REIT holders were expecting a full recovery in 2022. That might not happen. But are office buildings about to become obsolete? It’s unlikely.

Today, many companies err on the side of caution in allowing workers to do their work from home. But they could very well send the workers back to the office once this latest wave of COVID-19 cases subsides. In addition, at this point in the pandemic, many people are simply tired of working remotely and prefer go to an office, if given the choice.

And so, while Apple’s move may serve as a pessimistic alarm, the reality is that office REIT investors shouldn’t give up on the industry. They may just have to wait another year for a more robust return to the office and recovery.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.