Q1 Office Wrap Up: U-Turn Completed - What's Next?

Research evidence excerpt

Q1 Office Wrap Up: U-Turn Completed - What's Next?

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magnitude next year and this more conservative assumption offsets most of the expected ramp in SS NOI.

From a stock market perspective, office REITs have experienced a volatile U-turn since the start of the year. The

group sold off sharply during the first two months of the year amid concerns around AI-driven disruption, potential

white-collar employment displacement and higher interest rates. While rates remained stubbornly elevated into the

second quarter, investor concerns around office employment have begun to moderate as the labor market has

remained generally intact. Against this backdrop, investors have started to revisit the group, taking advantage of lower

valuations, which supported a recovery in office stocks into the end of the first quarter.

Looking at YTD performance, CDP remains the best-performing stock in the group, and we generally support the

steady upward move. The company remains largely insulated from the core threats facing more traditional office

owners, and we remain constructive on the stock. DEI moved from the bottom of the performance list to near the top

within a matter of weeks, returning close to 6% YTD. This move was driven by a surprisingly strong leasing volume in

1Q against low expectations, which helped the stock recover a lot of its lost ground. VNO and SLG also rebounded

as sentiment improved around the strength of New York City office demand, supported by robust first-quarter

fundamentals.

ESRT has not benefited to the same extent, largely due to weakness in the observatory business, which remains a

drag on the overall story. CUZ remains a favored stock amongst investors, supported by strong fundamentals and

continued evidence that the company can play offense in 2026.