The persistent popularity of work-from-home well after the height of the COVID pandemic has complicated the outlook for office buildings. While most office-using employees go into offices at least a few times a week, the days of companies having the majority of employees in offices five days a week seem at an end. There has been some notable pushback and outliers to this, but hybrid work seems here to stay.

That has created a muddy outlook for the office sector. This piece explores responses to WMRE’s latest exclusive research on the state of office fundamentals. A previous story examined investor sentiment.

Related: What Investors in Office Real Estate Expect for 2023

For the first time in the eight years the survey has been conducted, a plurality of respondents (48.6 percent) said they expected occupancy rates for office buildings to drop in the next 12 months. While sentiment was far from bullish in 2020 and 2021, a majority of respondents in those years still thought occupancies would rise (56 percent and 64 percent, respectively). This year the figure dropped to 46.7 percent.

Rising sublease inventory is complicating matters for owners. Overall, about two-thirds of respondents said the amount of sublease space is increasing somewhat (49.1 percent) or dramatically (17.0 percent). Another 23.6 percent said the level of sublease inventory is unchanged, while 8.5 percent said it is decreasing somewhat.

Related: Tech Layoffs Mean Even More Empty Offices to Rent for NYC, San Francisco

Just less than one third of respondents (29.3 percent) also believe there is too much development of office properties in their regions. About half of respondents (46.2 percent) think the right amount of development is occurring. The figures are roughly in line with previous years, although the number of respondents concerned about overdevelopment is at the highest level in the eight years the survey has been conducted. Reinforcing that sentiment, nearly 40 percent of respondents (37.5 percent) said their markets could absorb less than 5 percent of additional supply based on current market inventory.

In addition, just more than half of respondents (52.4 percent) believe office rents will rise in the next year. That’s down from 53.4 percent in 2021 and 67 percent in 2020. In all surveys prior to the pandemic, typically more than 70 percent of respondents thought office rents would rise.

Another sign of the sector’s challenges is the lack of demand from industries that had been big occupiers of office space in past years. When asked to rate companies were the most active tenants on a scale of one to five, respondents gave no option more than a score of three. In past years, tech firms were ranked as the most active tenants. But this year’s survey reflects what’s been occurring in the broader market the past year with many tech firms conducting mass layoffs and reducing office footprints.

The survey has also attempted to gauge how the emergence of co-working spaces and the increase in telecommuting is affecting the sector.

A plurality of respondents (35.2 percent) said co-working has been a mild net negative, while 11.4 percent said it has been a significant net negative. An additional 25.7 percent said co-working has not been a factor and 21.0 percent said co-working has been a mild net positive. All of those results are in line with responses to that question in the prior three surveys it was asked.

The sentiment on telecommuting, however, has shifted dramatically. In the 2019 and 2020 surveys, fewer than 10 percent of respondents said telecommuting was leading to a significant decrease in the amount of space their tenants needed. But in 2021 that number jumped to 28.7 percent and hit 34.3 percent in the most exact survey.

When asked specifically about tenants in their buildings, 60.4 percent said employers are using a hybrid model, with only 22.8 percent bringing their staffs back five days a week. (Notably, that figure is up from 12.4 percent a year ago.) Overall, a plurality of respondents (37.8 percent) said their buildings are between 51 percent and 75 percent capacity on a daily basis.

In terms of office layouts, there’s also been a marked swing in sentiment. Prior to COVID, open-office plans predominated. In the 2019 and 2020 surveys, about half of respondents said they were seeing more open-office plans and fewer than 10 percent said they were seeing traditional layouts. About 30 percent said the split was even. During the pandemic there was some speculation that tenants might move to different types of layouts. In fact, in the 2021 survey, more than one-fifth of respondents said tenants were opting for traditional plans and those saying they were seeing more open offices dropped to 34 percent. But in the most exact survey, there’s been a hard swing back. Now, 56.2 percent say they are seeing more open-office plans and only 7.6 percent say they are seeing more traditional office layouts.

The uncertainty in the sector is translating to lease lengths. More than half of respondents in this year’s survey (50.5 percent) said average office leases are becoming shorter. That’s up from 42 percent in 2021.

Office tenants are also downsizing. More than 70 percent of respondents said office tenants in general are asking for less space—a jump from 57.5 percent who said that in 2021 and 52 percent in 2020. Just 5.6 percent of respondents said tenants are asking for more space. In addition, when asked about existing tenants, 39.2 percent of respondents said their tenants are decreasing the amount of space they are leasing.

On balance, 78.6 percent of respondents said more than half of their tenants with expiring leases are renewing. In fact, 12.2 percent of respondents said all of their tenants are renewing. Both of those figures are up from 65.5 percent and 6.1 percent, respectively, in the 2021 survey.

Among non-renewing tenants, most respondents believe tenants are relocating either to smaller spaces (57.4 percent) or newer buildings (22.3 percent). Others are relocating from CBD to suburban offices (11.7 percent). Only 16.0 percent of respondents said non-renewing tenants are closing their offices entirely. Other responses included moving to larger spaces (8.5 percent), moving to a new office market entirely (6.4 percent) or moving from a suburban office to one in a CBD (4.3 percent).

During the pandemic, there was some thought that tenants might de-densify offices. But that has not come to fruition. In 2021, there was a roughly even split when among respondents saying tenants were increasing space per employee (32.1 percent) vs. decreasing space (24.4 percent). (An additional one third said there was no change.) In 2022, only 17.5 percent of respondents said tenants were increasing square footage per employee vs. 37.9 percent who said tenants were decreasing space (37.9 percent). An additional 35 percent said there has been no change in density.

One positive for landlords is that fewer tenants are asking for rent relief. This year, 39.6 percent of respondents said no tenants asked for relief—that’s double the figure from 2021’s survey. Another 42.5 percent said fewer than 25 percent of their tenants had requested relief. Further, owners say they have largely not been granting those relief requests. Just less than one-third of respondents (31.7 percent) said they have not granted any relief, while another 39.7 percent said they have granted fewer than 25 percent of the relief requests.

Survey methodology: The WMRE research report on the office real estate sector was completed via online surveys distributed in October and November of 2022. The survey yielded 107 responses. Half of respondents (50 percent) hold the titles of owner, partner, president, chairman, CEO or CFO. The results from the current research were compared against prior studies completed between 2015 and 2021.

With Microsoft's (NASDAQ:MSFT) fiscal Q3 '23 financial results scheduled to be released on Tuesday, January 24th, 2023, after the market close, investors will get their first look at the SP 500 mega-cap's earnings results for the December '22 quarter.

Microsoft still comprises 5.4% of the SP 500's market cap as of Friday, January 20, 2023 and is the 2nd largest stock in the SP 500 by market cap in the SP 500, behind only Apple.

Sell-side consensus expectations for the fiscal Q2 '23 quarter for the enterprise-software giant are for $2.30 in EPS on $52.9 billion in revenue for expected year-over-year (y.y) growth of -7% and 2% respectively.

That represents a significant slowing from the fiscal 2021 and 2022 pace, all of which could already be discounted in the stock price.

Full-year fiscal '23 estimates today expect Microsoft to earn $9.55 in EPS on $212.2 billion in revenue for expected growth in the next 6 months of 4% in EPS and 7% in revenue.

Satya Nadella, Microsoft's CEO said two weeks ago that the slowdown would likely last another 2 years, however the interesting aspect to that is that sell-side estimates expect a return to double digit, mid-teens EPS and revenue growth by fiscal 2024 (starts July 1 '23.)

One metric I've watched over the year for Microsoft is the comparison between revenue growth and operating income growth. This provides an interesting take on pre-Covid growth, what happened during the pandemic and then the return to more normal growth rates since the pandemic:

Peak revenue in late '21 was 21% revenue growth vs 31% operating growth. Obviously, this is now in the process of returning to a more-normal growth rate.

Microsoft by segment

The importance of this table shows the growth in Intelligent Cloud (IC), the primary product of which is Azure.

If this spreadsheet were expanded to reach back to the start of the last decade or 2010 to 2104, readers would see that the Intelligent Cloud was just 20% or less of total revenue and operating income when the last decade started.

Obviously, readers can see the growth in the IC since.

When the September '22 quarter was reported in early November '22, MSFT reported +42% growth in Azure and then guided to +36% - +37% for the December '22 quarter for the key cloud product.

In addition, bookings in the Sept '22 quarter fell to +16%, versus the +35% in the June quarter of '22.

MSFT valuation

Part of the longer-term problem is that the stock never looks cheap. Trading around $240 per share coming into earnings, MSFT sports a 25x multiple for expected 4% EPS growth in fiscal '23.

The "average" PE looking 3 years out from '23 is around 18x, so the stock is trading closer to 1x PEG looking at '24 - '27 EPS estimates, with mid-teens revenue growth, but that's assuming the Intelligent Cloud segment and Azure can sustain the present growth rates.

MSFT does have a 4% free-cash-flow yield and the ability to repurchase an enormous amount of stock, with the stock trading down $100 per share since its peak in 2021 at $345. But management likely won't do that and the dividend will continue to grow nicely at its 10% annual clip, although with a yield of just over 1% the dividend yield isn't meaningful.

However, the dividend as a % of FCF dollars is now below 30% - MSFT could hike the dividend to a greater degree, or like they did in 2002, pay-out a special dividend, but that is unlikely. Before Ballmer left, he said the special dividend payout was - in Microsoft's terms - a poor use of capital.

Summary/conclusion

Expectations are very subdued coming into MSFT's fiscal Q2 '23 earnings release on Tuesday night, January 24, 2023. That's always a plus, but personally, I expect an inline quarter and rather subdued guidance since that has been the posture of Satya Nadella the last few months.

It seems unusual that Satya Nadella would say two weeks ago that the growth slowdown would last 2 years, and then be optimistic on the call Tuesday night.

However, the fall in the dollar in the 4th quarter of '22 should help MSFT at the margin, as well as the rest of large-cap tech. This blog post from December 26th '22 showed how large-cap tech companies were impacted by the unusually strong dollar in calendar '22 and Microsoft was no exception.

Microsoft saw a 500-bp headwind from the strong buck in the Sept '22 quarter.

The other positive for MSFT is that for calendar '23 financial results face easier compares from the strong demand driven spike in fiscal '21 and then early fiscal '22. The December '21 compare is actually not that difficult, while it is a tough compare for larger mega-cap tech companies.

In the September '22 quarter MSFT caught some grief from analysts after lowering depreciation expense by extending the useful life of some servers, which is a quality of earnings issue, but given MSFT's cash and free-cash-flow generation, it's worth noting but not a serious issue.

MSFT is still a large holding for clients, but I'm not expecting much in the quarter or from guidance. The fact is expectations have come down so much for the software giant, I think the stock could outperform after getting shellacked in 2022: MSFT fell 28% in 2022 versus the SP 500's 18% decline, however, I do not believe that this market environment is a replay of 2000 to 2002, when the Nasdaq fell 80%.

Morningstar still sports a $320 fair value on the stock. Leaving MSFT at a bigger discount to intrinsic value than it's probably traded at in the last few years.

Watch Azure guidance by the Microsoft management team. It will likely be subdued, but it's not expected to be dire, and it's MSFT's most important metric looking forward.

Over the next few weeks post earnings, I'll be watching to see if the 2024 - 2027 EPS and revenue growth rates change negatively.

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

ABOUT 10 years ago, I helped a young woman from the barrio relocate from a tech job in the US Midwest to a tech job at Silicon Valley, one of the technology giants with campuses in that sprawl of Northern California. She knew I hated traveling and leaving my farm work to others, but her lure was hard to ignore. "Old man, here is your chance to witness the post-First World employment order first-hand. You can't eternally write about post-First World jobs from a vacuum."

That was 10 years or so ago, before the self-immolation of Elon Musk, the jobs bloodbath at the Valley, the drop in the market caps of the tech giants and ChatGPT.

Indeed, with her "blue pass," everything from food to laundry to bus rides was free 24/7. In the open space where she worked, the pantry had coffee blends from Sumatra to Peru. The freezer was fully stocked with Haagen Dazs,

Ben and Jerry and a dozen other ice cream brands. A huge pile of food containers was in a corner as take-outs were encouraged. During the relocation period, she and her French American husband stayed at a hotel-like building where newly hired workers can stay for a full month (rent-free) while scouting for permanent housing. Immigrants like her who came on H1-B visas were even encouraged to bring their visiting next of kin into the campus for tours — and partake of the freebies.

Still, some things I witnessed in the general environment of Silicon Valley did not sit well with my deeply ingrained sense of country. First and foremost, the bumper stickers of the pricey European cars (the dominance of Teslas was to come later in these campuses ) that tooled in and out of the Valley The bumper stickers carried the names of famous engineering and tech schools in the US and... IIT. IIT Madras, IIT Bangalore, IIT Delhi, IIT Bombay, IIT ad infinitum.

No bumper stickers saying " UP" or "Ateneo" or "De La Salle" or "UST." Not a single one. During the few days that I was there, the foreign universities represented in the bumper stickers were the many campuses of the Indian Institute of Technology spread across the vastness of India. The creation of an excellent technology and engineering-oriented school for young Indians meant to supply India and the rest of the world with tech and engineering talent was the idea of an unapologetic socialist, Jawaharlal Nehru, and that led to the creation of IIT.

The immense pool of Indian tech talents turned out by an excellent university system is the main driving force behind these:

– At least 15 corporations in the S&P 500 are led by Indian-born CEOs. India-born CFOs, CTOs and CIOs in the same corporate giants are dime a dozen.

– The pool of talents is partly the reason why India toppled Britain from being the 5th largest economy in the world this year.

The former colony bumping off the colonizer, and more, the current prime minister is the son of Indian immigrants.

– In the reconfiguration of the global supply chain that involves companies moving their assembly/manufacturing sites out of China into other locales because of Covid concerns and geopolitical reasons, one of the top five countries of choice for those relocating is India. The movement out of China into India would mean lots and lots of fresh investments via new factory/assembly sites and the complementary job creation. This is on top of India's sustained run as the destination of substantial foreign direct investments.

– Cornering a substantial chunk of FDI year after year.

Which has been the elusive dream of a succession of Philippine governments, that reached fever peak during the Duterte administration. Which is also the highest dream of the administration of President Marcos Jr.

The lesson from India's limitless pool of highly-educated, highly skilled nomads is this. We are taking the wrong approaches on investment attraction and generation, the Philippines' policy priority.

Our core strategies center on the following. First, we announce to all and sundry that we are open for business. We do plenty of shout-outs to the world at large centered on the thesis that this is a country that warmly welcomes investments.

Second, we do it via legislation and executive fiats. During the Duterte administration, the House of Representatives even passed a draft law that voids all the equity provisions in the Constitution to guarantee 100 percent foreign ownership even in patrimonial economic sectors, clearly an illegal and irresponsible move. Some of the core institutions of the polity even assault the Constitution just to proclaim the openness of the country to foreign investments. There is an ongoing Cha-cha hearing by a Congress that has never learned.

We also passed a law on sweeping corporate tax cuts amid diminishing revenue just to attract fresh investments.

In a few years, the corporate tax rate will hit a bottom 20 percent.

The problem is all these legislative and executive efforts never work. Investors will always ask this question: Where are your fundamentals?

The fundamentals that investors require before putting in their investment money have been spelled out clearly by Treasury Secretary Janet Yellen in talks before finance ministers of the G7 and OECD economies. Legislating investment attraction was not one of them. In fact, Secretary Yellen has railed against the use of massive corporate tax cuts as part of a country's investment attraction strategies. She calls corporate tax cuts via legislation as a "race to the bottom."

According to Yellen, these are the fundamentals sought by investors:

First, good governance; second, a skilled workforce; and third, a culture of innovation.

By fulfilling the second and third requirements through a massive pool of skilled workers trained at the IIT and elsewhere, India has shown the way in these two critical areas. Exporting tech talents that have scaled CEO, CFO, CIO and CTO level. Alphabet and Microsoft are led by Indian-born talent, so was Twitter before Elon Musk's acquisition. Then building cutting-edge tech centers within India itself that has been attracting foreign investments. All the fruits of a good educational system and training world-class tech and engineering talen.

The dear lesson here is this. We can't generate FDI on a massive scale by legislation that says we are open for business.

Or legislation that offers corporate tax cuts. Or, saying over and over again that the Philippines is an investment-friendly country and there is an entire body of laws and rules that say so.

The first step, if we are really serious about attracting investors is this: Excellerate the educational system dramatically.

This will yield a substantial pool of skilled and tech/ engineering-savvy workers. This will eventually lead to a deeply ingrained culture of innovation.

Fulfill these and we won't even need a show horse called Maharlika Investment Fund. We won't even need to network at Davos.

I will paraphrase something from the movie " Field of Dreams." Build an impressive educational system and develop a culture of innovation and the investors will come.

Bhavesh Verma, Author: Fundamentals of Digital Marketing

From understanding the basics of digital marketing to exploring the opportunities it provides, this book discusses the potential of digital marketing.

INDIA, February 1, 2023 /EINPresswire.com/ -- A new book has been launched that provides a comprehensive overview of the 'Fundamentals of Digital Marketing'. ‘Fundamentals of Digital Marketing’ is a comprehensive guide for business owners, marketing professionals, and students who want to learn the basics of digital marketing and learn how to apply them in real-life situations.

The book is written by Bhavesh Verma, an experienced Digital Marketing Expert and a Market Research Consultant (also founded Brahmaastrasoft, a Marketing Company), who has helped numerous businesses Excellerate their online presence and reach their target audiences. ‘Fundamentals of Digital Marketing’ covers all the essential elements of digital marketing, including search engine optimization (SEO), pay-per-click advertising (PPC), social media marketing, email marketing, and more.

The book also features real-life case studies that illustrate how companies have used digital marketing to achieve their goals. These case studies provide valuable insights and inspiration for readers who are looking to implement digital marketing strategies in their own businesses & explore new scalable opportunities to beat the peer competition in the market.

Bhavesh Verma said: "Digital marketing is constantly evolving, and it can be difficult to keep up with the latest trends and best practices. This book provides a comprehensive overview of the fundamentals of digital marketing, making it an essential resource for anyone looking to build a successful online presence & leverage the power of Social Media to build Brands."

'Fundamentals of Digital Marketing' is now available for purchase in digital formats, print format will be available soon enough. Both the formats will be exclusively available on amazon. For more information, visit Bhavesh Verma.

Bhavesh Verma
Brahmaastrasoft
[email protected]
Visit us on social media:
Instagram
Twitter
LinkedIn
Other

Private foundations offer a robust philanthropic toolkit and are the gold standard for helping families build lasting legacies – but they can be tricky for donors to administer on their own without clear guidance. Join this session with Foundation Source’s Chief Legal Officer Jeffrey Haskell for important insights on the substantive rules that govern private foundations. Learn what activities are permissible, which require advance IRS approval and the most common trouble spots to help your clients steer clear of compliance issues and penalties.

Some of the Topics covered will include: 

• Employing a family member
• Making scholarship and hardship or disaster relief grants
• Transactions between a foundation and its insiders
• Guidelines for avoiding jeopardizing investments

CFP, CIMA®, CPWA®, CIMC®, RMA®, and AEP® CE Credits have been applied for and are pending approval.

Sponsored by

Jeffrey D. Haskell, J.D., L.L.M.
Chief Legal Officer
Foundation Source

Susan Lipp - Moderator
Editor in Chief
Trusts & Estates

New York, New York--(Newsfile Corp. - February 13, 2023) - Dr. Kimberly Olson, a seasoned psychologist and family therapist, has announced the release of her comprehensive guide to the therapeutic relationship, The Least You Should Know about Therapy. With simple language that's accessible even to newcomers in the field, Dr. Olson chronicles how a lack of empathy has led to a steady decline in quality of care.

Book cover of The Least You Should Know about Therapy

The Least You Should Know about Therapy highlights an alarming trend in how therapists are trained in many modern programs. Dr. Olson's observations are based on an extensive review of relevant literature and client stories that show how the credibility of psychotherapy is coming into question as more and more people lose trust. The Least You Should Know about Therapy is a roadmap that leads psychologists, social workers, and counselors back to what truly matters-the therapeutic relationship and genuine understanding.

Mental health professionals at any stage of their careers can benefit from the lessons in The Least You Should Know about Therapy. Instead of using scripted responses that can cause clients to feel invalidated and unheard, Dr. Olson demonstrates how lasting long-term change is driven by interpersonal connection, communication, and genuine insights based on a client's unique situation.

Furthermore, this book includes exercises and worksheets to help readers internalize key learnings. For instance, the Relational Chart® breaks down complex Topics into a digestible format and shows how different variables intersect.

In a time of social upset when many people are turning to therapy for the first time, Dr. Olson's work is a potent reminder that evidence-based practices or what insurance companies believe is right isn't always what's best for the client. When clients feel valued, therapy can be a life-saving intervention, and The Least You Should Know about Therapy sets out to prove it.

Story continues

The Least You Should Know about Therapy is available for purchase on Amazon.com or wherever books are sold.

Dr. Kimberly Olson is a marriage and family therapist with over 20 years of experience, and recently became a licensed psychologist. Her wealth of experience includes teaching at prestigious institutions such as California State University and Chapman University, as well as being a clinical and administrative supervisor for over 12 years for the Department of Behavioral Health. Dr. Olson believes that optimal care starts with quality training. From this book to her TedTalk, she has been a powerful voice for change. She would also like to thank all therapists for their tireless commitment to healing. To get in touch with Dr. Olson, kindly email her at OlsonKimberlyL@aol.com.

Source:

Lisa Quinn
eBook or Print
lisa.quinn[at]ebookorprint[.]com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/154603

By Stephen Nakrosis

Corteva Inc. said it sees the outlook for ag fundamentals as "robust."

Check Magro, the agriculture company's chief executive, said "Farm income levels remain strong as tight supply keeps crop prices over historical averages, leading farmers to continue to invest in technologies that increase productivity and yield."