We have been tracking the “return to the office” trends across filings, transcripts, and macro data since the summer. In July, we were mentioned on CNBC regarding the Wall Street banks and their plans. In September, we wrote about the “return to the office” vs. the data pointing to a “femcession” in Forbes: this trend was later confirmed in early October, when we looked at the latest labor force participation rate for women. The fundamentals have not changed: things will not be back to the “old normal” nor will they be near the “new normal” until schools and after-schools are fully open, regardless of vaccine developments.
With that in mind, we decided to see what the Office REITs are saying about this topic. Another reason why we wanted to look at the Office REITs is that while collections might be going as contracted now, the market is forward-looking and trying to assess lease roll-offs, so bank exposure to the office CRE class will be a bigger topic. We covered the big bank earnings last week.
For this blog post, we will utilize many of Sentieo’s standard AI (NLP and ML) tools that help users save time and gain insights every day:
– Our newly released SEC Filing Section Redlining (see the 4-minute video tutorial here)
– Our Transcript NLP Heatmaps (see us using the heatmaps and spotting the strength in housing early in Q2 2020) and Trending Term identification
– The word clouds in our Transcript NLP Smart SummariesTM (see them applied to Clorox, Six Flags, and UPS as we tried to make sense during the tumultuous Q1 2020)
– Our one-click ML-based filings table identification, chaining, visualization and export tool Table Explorer (one of several tutorials on our YouTube channel)
What we saw across the comments and filings from the Office REITs is:
- Slow pace of return for most markets: sub-25% seems to be the norm
- Only natsec/defence seems to be close to “normal”
- Collections are OK, however plenty of color points to clients reducing or planning to reduce footprint
In this blog post, we are going to cover Corporate Office Properties (NYSE:OFC), Office Properties Income Trust (Nasdaq: OPI), Washington REIT (NYSE: WRE), Boston Properties (NYSE: BXP), SL Green Realty (NYSE: SLG), Vornado (NYSE:VNO), Empire State Realty Trust (NYSE:ESRT), Cousins Properties (NYSE:CUZ), Brandywine Realty Trust (NYSE: BDN), Easterly Government Properties (NYSE:DEA), and Alexander & Baldwin (NYSE: ALEX)
By using our tools, we can spot changes, inflections, and trends in seconds, instead of spending hours reading.
SEC Filings Section Redlining Heatmap
We are looking at the Section Redlining Heatmap for OFC. We can see that there have been increases in the Risk Factors section over the last three quarters: this is true for most filers as we saw a lot of COVID-related language make its way in the documents.
Clicking on the newest Risk Factors section, we bring up the side-by-side view along with the comparison, and we can immediately spot the new language around “more gradual”, “extended easing”, “continue to be hindered”, “reluctance”, and so on.
In OPI’s newest Risk Factors, we see a detailed breakout (footage and rent percentages) on tenants with currently exercisable rights for lease terminations.
Transcript NLP Heatmaps
We saw sentiment improving across categories in the transcript: there is more “green”.
WRE Transcript NLP Heatmap
BXP Transcript NLP Heatmap
BXP Transcript NLP Heatmap detail: we can see comments on store re-openings as well as the current building utilization in Manhattan (15%).
Again with BXP, we picked up “well under 15%” building census in Northern Virginia.
And, predictably, the pace of the recovery and the new highs in COVID cases are picked up as a negative.
In the peer comparison view for BXP (Transcript Peer Comparison: Third Quarter 2020), we can spot sentiment deviations across peers.
We can then explore the “reddest” comments from a peer.
With the “side by side” details, we spot a comment from SLG on employees feeling disconnected and frustrated by the isolation.
Finally, the Empire State Building owner, ESRT, is seeing sub 15% utilization in Manhattan, versus 45-55% in the NYC suburbs (elsewhere, we saw that now is a great time to visit the Empire State Building Observatory: visitors are at 6% of last year’s counts).