Downtown Office Space Could Make a Pivot to the Suburbs

A lot of companies looking to attract millennial talent were betting on the bright lights and big-city allure of downtown office space. However, with the pandemic forcing a lot of businesses to rethink their real estate strategy, many moving their operations to the suburbs.

Companies like McDonald’s, Kraft Heinz, and Walgreens, for example, were hoping that opening downtown offices in their respective territories would provide a steady stream of 20-somethings looking for work. Fast forward to today and remote work office locations are changing that tune.

“And with each of these moves, there were perks: Millennial talent was more plentiful in these bustling districts such as the Loop in Chicago, where the nightlife and bar scene were also strong,” a CNBC report noted. “Some companies, including GE, found tax breaks from municipalities when they positioned their offices downtown. And reliable public transit systems could seamlessly transport workers back and forth each week.”

The movie is eerily similar to the way brick-and-mortar retail sites are going the way of the dinosaur with the rise in online shopping.

“Is office space going the way of retail in five years? That’s what investors are really trying to understand,” said James Farrar, CEO of real estate investment trust City Office REIT.

“I think you will see more and more tenants leave the city,” he said. “There will probably be more satellite offices, where people don’t have to be downtown. There will be more part-time working from home.”

Investors who want broad exposure to the real estate market via ETFs can start with the Vanguard Real Estate ETF (NYSEArca: VNQ). VNQ seeks to provide a high level of income and moderate long-term capital appreciation by tracking the performance of the MSCI US Investable Market Real Estate 25/50 Index that measures the performance of publicly traded equity REITs and other real estate-related investments. VNQ is up 7.26 percent year-to-date, according to Yahoo Finance Performance numbers.

Traders will want to keep on an eye on when playing leveraged real estate ETFs like the Direxion Daily MSCI Real Est Bull 3X ETF (NYSEArca: DRN) and Direxion Daily MSCI Real Est Bear 3X ETF (NYSEArca: DRV).

Overall, Direxion ETFs will help traders:

  • Magnify your short-term perspective with daily 3X leverage
  • Go where there’s an opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile – with liquidity to trade through rapidly changing markets

The MSCI US IMI Real Estate 25/50 Index (M2CXVGD) is designed to measure the performance of the large-, mid- and small-capitalization segments of the U.S. equity universe that are classified in the real estate sector as per the Global Industry Classification Standard (GICS).

For more market trends, visit the ETF Trends.