A slowdown in the hiring of technicians could hurt the office market

At least one real estate industry watcher is worried that a recent slowdown in tech hiring could hurt the office sector. BMO Capital Markets Analyst John Kim recently said he downgraded 3 office REITs with strong exposure to the tech sector, saying a slowdown in hiring could weigh heavily on REIT revenues and earnings.

Several big tech companies recently announced hiring slowdowns, including Microsoft, which says it will cut hiring for its Windows, Office and Teams software groups. Meta plans to suspend hiring, and in late May Redfin said it had made a “difficult decision to freeze hiring and cancel a small number of vacancies” as the housing market cools. Other tech companies are not just slowing down, but also cutting jobs, like social audio app Clubhouse and tech giants Netflix and PayPal.

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Throughout the pandemic, the tech sector has been one of the few bright spots for office real estate, so slowdowns in hiring are not good news for office REITs or owners and investors. Tech tenants were responsible for 22% of all office leasing volume nationwide in the fourth quarter of 2021, according to JLL. Kim, the industry analyst, said the drop in technology demand is “really taking the leg off the stool for growth” for some office REITs. It’s too early to tell what the final impact will be, but something office owners and investors should definitely watch out for.

Jose C. Birney