Do half-empty office buildings offer opportunities for investors?

investmentnews.com:

Legendary investing guru Peter Lynch popularized the idea of investing in what you know and what you see with your own two eyes. So when financial advisors view the half-empty office buildings right in front of them, should they also be seeing an investment opportunity for their clients?

The commercial real estate market continues to evolve in the post-pandemic world. The increase in remote work is keeping office buildings in many cities well below full occupancy. But offices are only part of the total commercial real estate space, creating a wide and diverse path to profits, says Chris Acito, CEO of Gapstow Capital Partners.

“Multifamily warehousing, industrial health care, hotels. It’s a pretty broad definition for commercial real estate, casting a wide net,” Acito said. “That’s not to circumvent the challenges that office is facing right now, but within the universe, certainly as represented by the rates in the index, office is about 20%.” 

Acito adds that not all office property is created equal, at least geographically speaking. Acito’s company is behind the Gapstow Real Estate Income Index, which underlies the recently launched AXS Real Estate Income ETF (RINC), a portfolio of stocks of U.S. publicly traded real estate investment trusts that own commercial and residential mortgages and mortgage-backed securities.

“We see the issues being concentrated in a couple of cities where, in fact, the real exposure is a national one,” Acito said. “We know that for as many cities that are facing the challenges, some are booming in terms of real estate as well, even among the work-from-home phenomenon that we’re seeing.” 

Morris Chen, portfolio manager for the DoubleLine Commercial Real Estate ETF (DCMB), invests in commercial