Company: CIO
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000950170-25-023714
Chunk: 54

Company: City Office REIT, Inc.
Filing Date: 2025-02-20
Form: 10-K
Item: Item 6
Chunk 54
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 2020 without increasing their available space. We expect these factors will help offset, at least partially, the headwinds to office space demand.Work-From-Home TrendsOur business has been impacted by tenant uncertainty regarding office space needs given the evolving remote and hybrid working trends. Usage of our assets in the near future depends on corporate and individual decisions regarding return to usage of office space, which is impossible to estimate. As of December 31, 2024, 12.4% of net rentable area under our portfolio was vacant, when excluding committed leases, as compared to 13.5% as of December 31, 2023.Leasing activity has been impacted by work-from-home trends. We have experienced uncertainty over existing tenants’ long-term space requirements. Overall, this could reduce our anticipated rental revenues. In addition, certain tenants in our markets have and may explore opportunities to sublease all or a portion of their leased square footage to other tenants or third parties. While subleasing generally does not impact the ability to collect payment from the original lessee and will not result in any decrease in the rental revenues expected to be received from the primary tenant, this trend could reduce our ability to lease incremental square footage to new tenants, could increase the square footage of our properties that “goes dark,” could reduce anticipated rental revenue should tenants determine their long-term needs for square footage are lower than originally anticipated and could impact the pricing and competitiveness for leasing office space in our markets. We will continue to actively evaluate business operations and strategies to optimally position ourselves given current economic and industry conditions.Business and Strategy We focus on owning office properties in our footprint of growth markets predominantly in the Sun Belt. Our markets generally possess growing populations with above-average employment growth forecasts, a large number of government offices, large international, national and regional employers across diversified industries, generally lower-cost centers for business operations and a high quality of life. We believe these characteristics have made our markets desirable, as evidenced by domestic net migration generally towards our geographic footprint. A majority of our properties are well located, have good access and functionality to our markets, are new or in new condition, attract high-quality tenants and are professionally managed. We utilize our management’s market-specific knowledge and relationships as well as the expertise of local real estate property and leasing managers to identify acquisition opportunities that we believe will offer cash flow stability and long-term value appreciation. Rental Revenue and Tenant Recoveries The amount of net rental revenue generated by our properties will depend principally on our ability to maintain the occupancy rates of