At least one real estate industry watcher is concerned a recent slowdown in tech hiring could affect the office sector. BMO Capital Markets analyst John Kim recently said he’s downgraded 3 office REITs with high exposure to the tech industry, saying a hiring slowdown could weigh heavily on the REITs’ revenue and earnings.
Several big tech companies recently announced hiring slowdowns, including Microsoft, which says it’ll decrease hiring for its Windows, Office, and Teams software groups. Meta plans to pause hiring and, in late May, Redfin said it made a “difficult decision to freeze hiring and rescind a small number of job offers” because the housing market is cooling down. Other tech firms aren’t just slowing down but also shedding jobs, such as social audio app Clubhouse and tech giants Netflix and PayPal.
Throughout the pandemic, the tech sector has been one of the few bright spots for office real estate, so the hiring slowdowns aren’t welcome news for office REITs or landlords and investors. Technology tenants were responsible for 22 percent of all office leasing volume nationally in the fourth quarter of 2021, according to JLL. Kim, the industry analyst, said the decrease in tech demand “really takes the leg out of the stool for growth” for some office REITs. It’s too early to tell what the ultimate impact will be, but something for office landlords and investors to certainly watch.