Office REITs Stabilize Despite Downturn

MILWAUKEE-Occupancy in US office markets appears to have peaked and cutbacks in office jobs pose a problem. But, the office sector has withstood the economic downturn relatively well and its REITs are holding their own.

Analysts at Milwaukee-based Robert W. Baird & Co., in a study that examines all categories of REITs, say they continue to like “out-of-favor suburban office names” that nonetheless hold the potential for significant earnings improvements once the capital markets stabilize.

One reason for the Baird analysts’ preference for suburban markets is their view of suburban versus CBD markets. “Contrary to popular opinion concerning the supply-constrained nature of CBD office markets, it appears these markets may in fact have more supply as a percentage of inventory than suburban markets,” according to their report.