The Impact of Remote Work Spurs W.P. Carey’s Decision to Exit Office Market
In response to the significant decline in demand for commercial office space caused by the growing trend of remote work during the pandemic, real estate investor W.P. Carey (WPC) has made the decision to completely withdraw from the office real estate market. The company recently announced that its board has unanimously agreed to either spin off or sell all of the office assets within its portfolio.
W.P. Carey’s plan involves placing 59 of its office properties into a separate publicly-traded real estate investment trust (REIT) called Net Lease Office Properties (NLOP), while the remaining 87 properties will be put up for sale. As of June 30, the company had a total of 1,475 net lease properties and 85 self-storage facilities.
The spinoff of the office properties into NLOP is scheduled to take place on or around November 1, 2023, with the sale of the remaining properties set for January 2024.
CEO Jason Fox stated that this strategic move by W.P. Carey aims to improve the overall quality and stability of their portfolio, enhance earnings, and strengthen their credit profile. By exiting the office real estate market, the company anticipates achieving a lower cost of capital, ultimately positioning itself to create long-term value for its investors.
Following the announcement, W.P. Carey’s shares experienced a significant drop of nearly 8% on Thursday. This decline in share price brought them to their lowest level in over three years, reflecting investor concerns and the potential challenges ahead for the company.
W.P. Carey’s decision to exit the office real estate market comes as a direct response to the sharp decline in demand caused by the widespread adoption of remote work. By strategically spinning off and selling its office assets, the company aims to optimize its portfolio, improve its earnings stability, and ultimately create long-term value for its shareholders. However, the market’s reaction highlights the challenges the company may face in the current real estate landscape.