Office Market Challenges Remain High Despite Recent Office Stock Rally

News of lower than anticipated inflation data on November 14th by the Bureau of Labor Statistics (BLS) combined with rising expectations that further interest rate increases by the Fed were done, sparked the “biggest one-day rally in 3-years of office real estate investment trust (REIT) shares on average by 11.5%. However, the one-day gains were short lived by most office stocks. Reasons for the rally included the less burdensome appearance of highly leveraged office owners “after bond yields fell alongside the lower inflation numbers;” many office shares had “a lot of room to bounce” since they were “trading around multiyear lows;” and “technical trading issues such as short covering” also played a role. The office market still has a long road to recovery as demand for office space remains well below pandemic levels with companies reducing their space requirements as hybrid and remote work schedules continue.