office REITs

Office REITs: Investing Guide and Data

Office REITs own, develop, and manage commercial office real estate, like office parks and high-rise buildings. They rent the properties to tenants and collect rent payments.

This category was attractive in the past because of demand caused by customer growth. However, the COVID-19 pandemic resulted in a structural change as hybrid work became popular. This event lowered demand and client requirements.

Also, the unprecedented rise in interest rates quickly caused interest expenses to surge. Some projects and earlier acquisitions became less profitable. The combination of hybrid work and higher financing costs resulted in cutting or suspending the dividends of some office REITs. For instance, Vornado Realty (VNO) suspended its dividend because of challenging New York City (NYC) market business conditions.

That said, Office REITs may benefit when interest rates trend lower. This article discusses Office REITs and lists important financial data and a dividend calendar.


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What Are Office REITs?

Office REITs are a category within the REIT industry focusing on commercial office buildings.

They own, develop, and manage office properties such as skyscrapers, high-rise buildings, and corporate parks. A few office REITs are specialized, investing in specific classes of properties. An example is Alexandria Real Estate Equities (ARE), which owns medical and life science office buildings. It is considered a healthcare REIT. Others focus on government office buildings.

The REITs lease properties or space to tenants, usually in multi-year leases, often a triple net lease structure, which means the lessee carries most of the risk. Sometimes, a client rents a whole building or office park, and sometimes, they only take part. Typical tenants are banks, law firms, government agencies, non-profits, technology companies, multinational companies, etc.

Most office REITs are publicly traded on stock market exchanges. However, a few are closely held by private equity. The largest office REITs have a market capitalization of hundreds of millions to billions of dollars. Collectively, they own thousands of buildings with hundreds of millions of square feet. 

Our list includes 27 publicly traded office REITs.

Types of Office REITs

Office REITs are often categorized by location. They may own three different types of office buildings: Class A, Class B, and Class C.

Gateway REITs

Gateway REITs are a type of office REIT investing in urban buildings. More specifically, it is referred to as the urban central business district. They hold real estate portfolios concentrated in the six largest metropolitan office markets: NYC, Boston, Chicago, Los Angeles, San Francisco, and Washington, D.C. They may also own buildings in other cities.

Suburban REITs

On the other hand, suburban REITs hold properties in secondary markets, often in sunbelt cities. Suburban office space is often in corporate parks. 

What is a REIT?

A real estate investment trust (REIT) is a corporation that develops, purchases, owns, and operates commercial real estate properties. A REIT is a company that owns, operates, or finances income-generating commercial real estate.

To qualify as a REIT, a corporation must own real estate that generates income distributed to shareholders. Specifically, according to Investopedia, a REIT must

  • Invest at least 75% of total assets in real estate, cash, or U.S. Treasuries
  • Derive at least 75% of gross income from rents, interest on mortgages that finance a real property, or real estate sales
  • Pay a minimum of 90% of taxable income in the form of shareholder dividends each year
  • Be an entity that’s taxable as a corporation
  • Be managed by a board of directors or trustees
  • Have at least 100 shareholders after its first year of existence 
  • Have no more than 50% of its shares held by five or fewer individuals

Some REITs are privately held, and others are publicly traded on a stock exchange. As a result, retail investors can easily invest in the commercial real estate market by buying and selling a REIT’s stock. The advantage is that investors require significantly less capital.

Investors like REITs because they can pay higher dividend yields and diversify portfolios. However, a risk is the dividend may be cut during recessions. For instance, during the Great Recession and the COVID-19 pandemic, black swan event REITs suffered disproportionately, and many cut or suspended dividends. A second negative is REITs do not pay qualified dividends, instead, they pay ordinary or non-qualified dividends.

Pros of Office REITs

Publicly traded office REITs have several advantages for investors.

No Minimum Investment – The minimum is the cost of one share.

Liquidity – Publicly traded REITs can be traded whenever the stock market is open.

Dividends – REITs must pay dividends, permitting investors to generate a passive income stream. Some REITs are dividend growth stocks, too. However, most office REITs do not have long track records because of the Great Recession and the COVID-19 pandemic.

Diversification – Investing in publicly traded REITs provides diversification to a portfolio.

Long-Term Contracts – Contracts in this market usually last five to seven years or even longer. Hence, some stability exists for income and dividend streams.

Final Thoughts

Office REITs are a subset of the REIT industry. Investors are attracted to these companies because of long-term demand and contracts. However, hybrid work and high interest rates have affected results, and thus, the stocks have been under pressure. However, these investments may have a place in some portfolios when undervalued.

List of Office REITs

Stock Rover* and Portfolio Insight* were used to create this table.

TickerCompanyDividend YieldDividend 10-Year Avg (%)Payout RatioPrice / EarningsCap ($M USD)
AATAmerican Assets Trust6.60%4.60%159.80%24.5$1,220
AHHArmada Hoffler Properties7.20%6.90%220.00%31$728
AREAlexandria Real Estate4.70%6.20%355.10%76.1$18,216
BXPBoston Props6.90%4.20%318.70%46.2$8,905
CDPCOPT Defense4.60%0.40%- - $2,770
CIOCity Office REIT8.70%- - - $183
CMCTCreative Media8.40%-26.60%- - $92
CUZCousins Props6.30%5.90%220.70%34.9$3,071
DEAEasterly Government Props9.10%- 321.20%35.4$1,111
DEIDouglas Emmett6.20%0.50%633.30%101.4$2,032
EQCEquity Commonwealth- - 0.00%27.5$2,055
ESBAEmpire State Realty OP1.60%5.80%42.40%26.9$2,407
ESRTEmpire State Realty Trust1.60%5.80%42.40%27$1,447
FSPFranklin Street Props1.80%-25.50%- - $233
HIWHighwoods Props10.40%1.60%155.00%15$2,041
HPPHudson Pacific Properties- - - - $795
JBGSJBG SMITH Props6.40%- - - $1,344
KRCKilroy Realty6.90%4.40%116.80%17.1$3,696
NYCAmerican Strategic- - - - $16
ONLOrion Office REIT7.80%- - - $286
OPIOffice Props IT24.50%-17.50%- - $258
PDMPiedmont Office Realty7.90%-4.60%167.80%14$778
PGREParamount Group4.80%- - - $1,020
PSTLPostal Realty Trust6.70%- 728.90%109.4$308
SLGSL Green Realty9.40%7.50%- - $2,220
VNOVornado Realty- - - - $4,366

Dividend Calendar for Office REITs

Stock Rover* was used for creating this table.

TickerCompanyEx-Dividend DateDiv. Record DateDividend Payment DateDividend FrequencyNext Div. Payment Per ShareDividend Per Share
AATAmerican Assets Trust12/6/2312/7/2312/21/234$0.33 $1.32
AHHArmada Hoffler Properties9/26/239/27/2310/5/234$0.19 $0.78
ALXAlexander's11/3/2311/6/2311/17/234$4.50 $18.00
AREAlexandria Real Estate9/28/239/29/2310/13/234$1.24 $4.96
BXPBoston Props9/28/239/29/2310/31/234$0.98 $3.92
CDPCOPT Defense12/28/2312/29/231/18/244$0.28 $1.14
CIOCity Office REIT10/6/2310/10/2310/24/234$0.10 $0.40
CMCTCreative Media10/5/2310/9/2310/23/234$0.09 $0.34
CUZCousins Props10/3/2310/4/2310/13/234$0.32 $1.28
DEAEasterly Government Props11/8/2311/9/2311/21/234$0.26 $1.06
DEIDouglas Emmett9/28/239/29/2310/17/234$0.19 $0.76
EQCEquity Commonwealth2/22/232/23/233/9/230$4.25 -
ESBAEmpire State Realty OP9/14/239/15/239/29/234$0.04 $0.14
ESRTEmpire State Realty Trust9/14/239/15/239/29/234$0.04 $0.14
FSPFranklin Street Props10/19/2310/20/2311/9/234$0.01 $0.04
HIWHighwoods Props11/17/2311/20/2312/12/234$0.50 $2.00
HPPHudson Pacific Properties6/16/236/20/236/30/234$0.12 -
JBGSJBG SMITH Props11/16/2311/17/2312/1/234$0.22 $0.90
KRCKilroy Realty9/28/239/29/2310/11/234$0.54 $2.16
NYCAmerican Strategic4/8/224/11/224/18/224$0.80 -
ONLOrion Office REIT12/28/2312/29/231/16/244$0.10 $0.40
OPIOffice Props IT10/20/2310/23/2311/16/234$0.25 $1.30
PDMPiedmont Office Realty11/22/2311/24/231/2/244$0.12 $0.50
PGREParamount Group9/28/239/29/2310/13/234$0.04 $0.22
PSTLPostal Realty Trust10/31/2311/1/2311/30/234$0.24 $0.95
SLGSL Green Realty10/30/2310/31/2311/15/2312$0.27 $3.25
VNOVornado Realty1/27/231/30/232/10/234$0.38 -

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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