Is It Time to Return to the Office with Allied Properties?

JPMorgan CEO Jamie Dimon recently criticized remote work, using colourful language to make his point (as played on our webcast). Now Canada’s biggest banks (RBC, BMO, and Scotia) are doing the same, telling employees it’s time to show up in the office four days a week starting this fall. Mentorship and collaboration are two good reasons for working together in person.

Will other companies follow the banks’ lead? If so, that would signal the early innings of a recovery for office real estate.

We recently reviewed Allied Properties REIT (real estate investment trust), known for its brick-and-beam, high-ceilinged office buildings in Toronto, Montreal, and Vancouver. These spaces attract knowledge workers and creative industries. Before the pandemic, Allied boasted over 94% occupancy; today, that’s dropped to 87%. 

Trading roughly 60% below its pre-pandemic valuation, Allied is an intriguing contrarian candidate that was worth a closer look.

Our firm tapped several trusted contacts in commercial real estate. One from a Canadian bank noted that Canada usually mirrors U.S. trends. Currently, 39% of U.S. firms mandate full-time (five days a week) office returns, yet office vacancies remain near 20-year highs at 20.7% south of the border. While vacancy rates have stabilized, they haven’t shown meaningful improvement.

Data from Fortune 500 companies (which is slimmer than the total U.S. firm count cited in the paragraph above) shows full-time return-to-office mandates nearly doubled—from 13% to 24% since late 2024—but actual office attendance increased less than 2%, highlighting a significant compliance gap. Many employees quietly resist rigid policies, and managers often turn a blind eye.

A second contact that interacts directly with Allied advised simply: “I would wait.”

Environics Analytics reports that foot traffic in Canadian cities has recovered slowly post-pandemic and remains down over 40% compared to 2019. Although there was a gradual uptick after restrictions eased in 2022, momentum stalled last year. Notably, Canadians work from home 1.9 days per week—the highest rate among developed nations.

We have concerns Allied may cut its distributions to shareholders. (Distributions are similar to dividends.) The REIT is selling non-core assets to reduce debt and hopes to preserve its payout. However, last year they paid out 99% of free cash flow, and this figure is projected to exceed 100% in 2025 and 2026 unless occupancy improves significantly.

Despite these efforts, investors remain cautious. Double-digit yields often signal risk of a cut, and Allied’s 9.9% yield suggests this is no exception.

CEO Cecilia Williams has pledged to maintain the monthly $0.15 distribution per unit through 2025. But her comments on 2026 have been vague. In a May interview, she said, “I don’t see us increasing it. It’s a conversation we have with our board every quarter. We will certainly maintain it for 2025. And we’ll reassess whether to increase or maintain it in December.” Given there’s no plan to raise the payout, the real question in December will likely be whether a cut is necessary.

Overall, we don’t expect many companies to follow the banks’ push for a more aggressive office return. While we’ve chosen not to invest in Allied Properties, Schneider & Pollock holds two other real estate positions for clients. If you own Allied—or are considering it—reach out to see whether our alternatives might better suit your portfolio.

-written by Jeff Pollock

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