One of the concerns with New York City REIT is its small size. Its 1.2 million square foot portfolio is tiny compared to its publicly traded peers. For example, fellow New York City-focused REITs Empire State Realty Trust (NYSE: ESRT) and Vornado Realty Trust (NYSE: VNO) own 10.2 million and 32.7 million square feet of leasable space, respectively. That greater scale provides them with lots of advantages, such as better property diversification, more exposure to potential tenants, and the ability to spread costs over a larger portfolio.
Another issue facing New York City REIT is the headwinds in the New York City market, which was hit hard by COVID-19. The pandemic forced many office tenants to shift their employees to work from home. That's giving them the freedom to move to cheaper areas outside the city. While this exodus might be temporary, there's growing concern that a long-term work-from-home trend could impact demand for office space in the city. Similarly, retailers in New York are under pressure because of the impact of COVID-19 on leisure and business travel to the region. While these issues will affect all New York City-focused REITs, it could have a greater effect on NYC REIT's smaller portfolio.
Finally, while New York City REIT has been operating for years as a private company, it's new to the public markets. On the one hand, that opens it up to new investors. However, it also makes it easier for existing investors to unload their shares, which seems to be the case as the stock has tumbled 25% since its initial listing earlier this month. One thing worth noting is that the REIT only listed 25% of its available shares so far and plans to list the remaining amount in 25% blocks over the next year. As more shares trade freely, it could cause additional selling pressure as existing investors monetize their holdings.