Positive Globe article! Starts off about Slate saying it might not be a going concern and looks overvalued...then...
Other office REITs, though, may be worth a closer look.
A good place to start: Allied Properties REIT.
Yes, it has its challenges as well. Though the occupancy rate is better than most, at 85.9 per cent, it has declined by 3.7 percentage points since the end of 2022.
The decline contributed to a credit rating downgrade from Moody’s on June 11. Allied Properties’ unit price has fallen 7.5 per cent since then, driving the dividend yield toward a troubling 12 per cent.
But there’s a case to be made that investors are being too pessimistic.
The Bank of Canada recently cut its key interest rate after inflation subsided. Additional rate cuts should bolster the appeal of dividend-paying REITs, ease pressure on borrowing costs and support economic activity that will generate jobs and demand for office space.
Stephen Brown, deputy chief North America economist at Capital Economics, estimates that lower rates should drive Canadian economic growth to 2.2 per cent in 2025 and 2.8 per cent in 2026, up from just 1 per cent this year.
Hybrid work is a threat, but the trend may be levelling off as fully remote work loses its appeal and more companies demand workers return to the office.
Allied Properties’ occupancy rates reflect some moderation. The rate declined 0.5 percentage points in the first quarter of this year, compared with a more severe 1.4-percentage-point decline in the first quarter of 2023 and a 1.6-percentage-point decline in the same period in 2022.
Down is down. But the end of this difficult period could be in sight.