Morgan Stanley has named three stocks to buy and three to short as it revealed a cautious stance on the global office space sector. The Wall Street bank forecasts an oversupply of office space that could last more than a decade amid headwinds from the rise in working from home, increasing capitalization rates, and expensive refinancing challenges.
Reflecting that view, Morgan Stanley said shares of Office Properties Income Trust and Vornado Realty Trust face significant downside to the current share price. The Wall Street bank expects both stocks to decline by more than 35% over the next 12 months. "Fundamentals this cycle are worse than the [global financial crisis] in terms of occupancy, subleasing activity, and secular challenges from office utilization stalling at 20-55%," the analysts warned.