At this point, many companies have had their employees working remotely for almost a year and a half, and that's been downright terrible for office REITs (real estate investment trusts). Many of those REITs have seen their value decline as office buildings in major markets have sat virtually empty since the winter of 2020.
Earlier this summer, things were starting to look up in that regard. Many major companies started announcing plans to call workers back to the office in the fall, and some even began opening their offices in limited capacity.
But the delta variant is changing that. Now, a lot of companies are starting to rethink their reopening plans. And those that already welcomed some workers back are changing course due to safety concerns.
One such company is Twitter (NYSE: TWTR). This week, the tech giant announced that it will close its New York and San Francisco offices immediately as the COVID-19 outbreak continues to worsen on a national level.
Office REITs can't catch a break
Now that more companies are used to remote work, the fear among real estate investors with office REITs in their portfolios is that a large chunk of employers will seek to uphold that arrangement due to the cost savings involved. In fact, leasing activity for office buildings has been sluggish over the past 17 months as companies reassess their plans and reevaluate their office space needs.
Still, the one bright spot for office REITs was that many major companies were announcing plans to have workers return to the office in the fall or open back up slowly but surely over the summer. But now, the delta variant is throwing a major wrench into the works.
On top of Twitter's announcement, Google announced this week that it will delay its office reopening to October. Apple recently made a similar announcement. If people can't get back to in-person work due to health concerns, it will take even longer for office REITs to recover from the blow of the pandemic.
Complicating matters is the fact that the CDC just shifted its guidelines after announcing in May that vaccinated individuals could ditch their masks for good. It's now saying that due to the highly transmissible nature of the delta variant, even fully vaccinated people should mask up in indoor environments. And that's something that may cause even more employers to rethink their reopening plans.
After all, it's one thing to bring workers back to an office environment where they can do their jobs comfortably. Forcing them to come in and wear a mask every day for eight hours or more is a very different story.
Of course, from a public health perspective, it's clear that Twitter made a smart call. The last thing any major company wants is an outbreak on its hands. But the fact that Twitter had to take that step is discouraging for office REITs. And if the coronavirus outbreak continues to surge, office REIT investors may be in for another rocky quarter to say the least.