Paul McDowell, president and CEO of Orion Office REIT Inc. (NYSE: ONL), participated in a video interview at Nareit’s REITweek: 2023 Investor Conference, held in New York June 6-8.
McDowell said that work from home and space utilization are the biggest factors impacting the office sector today.
“A lot of our tenants, for example, are Fortune 500 companies,” McDowell said. “They’re trying to slowly figure out how much do they require their employees to be back at work [and] how many days per week. That will then indicate their space needs.”
McDowell said there’s “quite a large shift” between urban and suburban markets today, adding that high housing costs in the gateway markets began pushing millennials to the suburbs even before the pandemic.
“The companies that are in our portfolio follow their employees,” he noted. “They want to be in the same place where their employees are, and very often that is not in these large gateway cities.”
Turning to the 2021 merger between Realty Income and VEREIT, McDowell said that Orion has made “huge amounts of progress” on portfolio repositioning over the past 18 months. Since McDowell formerly served as the COO at VEREIT and the Orion team mostly came from VEREIT, they know the portfolio very well.
“We’ve had a lot of heavy lifting to do at Orion to sort of right-size our portfolio, manage it, and then start to try to pull out our weighted average lease term by renewing tenants in place, and then filling up vacancy,” he noted.