Office Return-to-Work: As can be seen in the Chart of the Day below, Last week Kastle Systems' 10-city Back to Work Barometer rose +0.6% to 35% "occupancy," which really represents "utilization" i.e. the number of bodies coming through turnstiles versus tenant occupied and paying space. Every city showed a sequential improvement with the exception of Houston (-0.1%), led by New York (+1.3%) and San Francisco (+1.3%) which were unequivocally the most negatively impacted office markets in the pandemic. Both cities remain at or near the bottom of the list, but New York had been slowly catching up before significantly narrowing the gap to the pack two weeks ago. We are Long AVB, EQR, SLG and VNO and adding ESS to the Long Bench for Quad 2 and an actual reopening in Q4.
Other Position Monitor Changes: Adding DRE, FR, STAG & PLYM to the Short Bench list. We spoke about this on The Call on Monday, 10/4, but Industrials/Warehouses are not going to be great picks in Quad 2, so we are not going to fight and are fading the sector here. We are staying Long IRM given its idiosyncratic opportunities and the probability of "melting ice cubes," cyclical recovery, higher beta and higher leverage names working well in Quad 2.
Chart of the Day: NYC & SF Lead Return-to-Work Last Week
Source: Kastle Systems
Figure 1: REITs Position Monitor
Figure 2: REITs Sentiment Monitor
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
