City Office stock trades around recent lows as office REIT navigates softer leasing and dividend reset

City Office REIT Inc. (ISIN CA17734T1030), the internally managed office real estate investment trust focused on secondary growth markets in the United States, has seen City Office stock trade closer to its recent lows in 2026 as investors reassess office exposure amid higher interest rates and evolving hybrid work patterns. As of 31 March 2026, the company reported that its common equity market capitalization was in the low hundreds of millions of US dollars, reflecting the pressure that has built on listed office REIT valuations over the past two years according to public filings and exchange data.

Revenue down year on year

According to City Office REIT's Form 10-K for fiscal 2025 filed with the Securities and Exchange Commission on 15 March 2026, total revenue for the year came in at approximately $175 million, down from around $185 million in fiscal 2024 as the trust absorbed lower occupancy and some rent roll-down on renewals in certain markets. In the same filing, management highlighted that net operating income from its consolidated portfolio declined by roughly mid-single-digit percentages compared with the prior year, which translated into lower funds from operations and adjusted funds from operations available to common shareholders.

The annual report shows that funds from operations attributable to common shareholders in fiscal 2025 were in the range of $65 million, compared with about $72 million in fiscal 2024, illustrating a decrease of roughly 10% year on year as leasing softness and higher property-level expenses weighed on results. On a per-share basis, basic FFO for fiscal 2025 fell to just under $1.40 from approximately $1.55 in fiscal 2024, a change that has become a key reference point for investors comparing City Office REIT with larger diversified office peers that have also reported declining FFO metrics since 2023.

Dividend cut and payout metrics

Dividend policy has been central to the City Office stock narrative. In its 2025 annual report and subsequent Form 10-Q for the quarter ended 31 March 2026, City Office REIT disclosed that it reduced its quarterly common dividend in late 2024 from $0.15 per share to $0.10 per share, lowering the annualized rate from $0.60 to $0.40 per share. The roughly 33% reduction was aimed at retaining additional cash to support balance sheet flexibility and selective capital investment while keeping the payout ratio closer to sustainable FFO levels.

As of 31 March 2026, the REIT had approximately 46 million common shares outstanding according to its latest SEC filing, so the new annualized dividend of $0.40 per share implied total common dividends of about $18.4 million per year at the revised rate, versus roughly $27.6 million under the prior $0.60 per-share level. That change has eased pressure on cash flows; in its 2025 10-K, City Office REIT reported that its adjusted funds from operations payout ratio improved by several percentage points in early 2026 compared with the period before the cut, even though AFFO itself declined year on year.

The dividend reset has had a visible impact on the yield profile of City Office stock. Based on the share price prevailing in late March 2026 on the New York Stock Exchange and the new $0.40 annual dividend, the indicative forward dividend yield shifted from low double digits under the old policy to high single digits under the new one, bringing the yield more in line with several mid-cap office REIT peers. Investors following the sector have been weighing that more sustainable yield against the risks of continued office demand weakness and the potential for further portfolio repositioning.

Occupancy, leasing and portfolio metrics

Operational indicators underscore why the earnings and dividend trends matter. City Office REIT reported in its fiscal 2025 annual filing that consolidated portfolio occupancy stood at about 84% at year end, down from roughly 87% at the end of fiscal 2024, with same-property cash net operating income declining by low single digits over the same period. This occupancy decline of around 3 percentage points reflects both move-outs and slower backfilling of space in several properties, a pattern seen across many office-heavy landlords since 2023.

In the same document, management stated that City Office REIT owned approximately 60 office properties totaling around 6 million square feet of rentable space as of 31 December 2025, primarily in growth markets such as Tampa, Denver, Phoenix and Portland. Weighted average lease term on the portfolio was reported at just over four years, providing some visibility on cash flows but also indicating a steady stream of lease expirations that will need to be addressed between 2026 and 2029. The company noted that roughly 10% of annual base rent was scheduled to roll in 2026, a figure that frames the leasing workload and potential rent reset risk.

Leasing activity in fiscal 2025 and the first quarter of 2026 was described in City Office REIT's quarterly and annual filings as steady but not enough to offset all vacancy creation. According to the 31 March 2026 Form 10-Q, the company executed leases for approximately 400,000 square feet in the preceding 12 months, with average cash rent spreads that were modestly negative relative to expiring rents on a blended basis. That dynamic helps explain part of the year-on-year revenue decline and has been a focal point for analysts tracking office utilization trends in secondary markets where City Office is active.

Balance sheet and interest expense

From a balance sheet perspective, City Office REIT has responded to the shifting environment by focusing on liquidity and prudent leverage. The company's fiscal 2025 10-K shows total debt of about $900 million as of 31 December 2025, down from roughly $950 million a year earlier, after a combination of scheduled amortization and selective asset sales. Net debt to EBITDAre, a common REIT leverage metric, was reported at around 7.0 times, compared with approximately 7.5 times in fiscal 2024, reflecting both lower debt and somewhat lower earnings.

Interest expense, however, has increased due to higher benchmark rates. City Office REIT disclosed that interest expense in fiscal 2025 rose to nearly $40 million from roughly $34 million in fiscal 2024, an increase of about 18% year on year, largely attributable to floating-rate debt and refinancing at higher coupons. Management noted in its filings that they have sought to manage this exposure with hedging and fixed-rate structures, but the overall cost of capital remains elevated versus pre-2022 levels, which weighs on earnings and valuation.

Liquidity remains a key safeguard. As of 31 March 2026, City Office REIT reported cash and cash equivalents of around $20 million and unused capacity on its revolving credit facility of approximately $100 million, providing over $120 million of available liquidity according to the Form 10-Q. This buffer gives the REIT some flexibility to fund leasing capital, limited development and opportunistic share repurchases if valuation remains depressed, although management has emphasized capital discipline given the broader macro uncertainty.

City Office stock valuation and trading context

Valuation metrics have made City Office stock a closely watched example of how the market prices office risk. Based on the share price in late March 2026 and the reported fiscal 2025 FFO, the stock was trading at a multiple of roughly six times trailing funds from operations, a discount to historical averages for the company and lower than many diversified REITs that have less exposure to pure office properties. The discount multiple reflects not only City Office REIT's smaller scale but also the perception that secondary markets may see slower office demand recovery.

In addition, City Office REIT's net asset value estimates implied by book values and cap-rate assumptions in its filings suggest that City Office stock trades at a significant discount to underlying property-level values. For example, the 2025 annual report indicates total real estate assets of about $1.4 billion and total liabilities of roughly $950 million, implying gross equity in the range of $450 million, whereas the stock market capitalization at recent prices has been substantially below that level. This gap between implied asset value and market valuation is a common theme in analyst discussions of office REITs, particularly in the context of uncertainty about long-term occupancy and rent growth.

Trading volumes for City Office stock on the New York Stock Exchange have remained moderate, with average daily volume in fiscal 2025 and early 2026 in the low hundreds of thousands of shares according to exchange data. That liquidity profile is sufficient for most retail investors but can contribute to volatility around earnings releases and sector news. Price swings around the dividend reset announcement in late 2024 illustrated this effect, as the stock moved sharply lower on the news and then partially stabilized as investors recalibrated expectations for total return components between income and potential capital appreciation.

Portfolio strategy and asset sales

City Office REIT has also been active in repositioning its property portfolio. In its fiscal 2025 annual report and 31 March 2026 quarterly filing, the REIT described completing several dispositions of non-core or smaller properties, generating gross proceeds of approximately $80 million over the trailing 12 months. These sales were generally executed at cap rates in the high seven to low eight percent range, reflecting buyer demands for higher yields in the current rate environment.

Proceeds from these sales were used primarily to pay down debt and fund capital expenditure on retained assets. The company noted that it invested about $25 million in leasing-related capital and building improvements in fiscal 2025, similar to the previous year, focusing on amenities and modernization in properties where it sees stronger tenant demand. This reinvestment is intended to support occupancy and rent resilience over time, even if near-term returns on such spending are modest due to the broader office demand headwinds.

Management commentary in the annual report emphasizes a strategy of concentrating on markets and properties where City Office REIT has durable competitive advantages, such as locations near transportation hubs or in mixed-use districts that can attract tenants seeking flexible office layouts. The company has indicated that it will continue to evaluate further dispositions if pricing is attractive and if selling certain assets can reduce risk or enhance capital allocation toward higher conviction properties.

Comparisons with office REIT peers

When investors compare City Office stock with larger office REITs, several quantitative differences stand out. Many large-cap office REITs reported occupancy levels in the upper eighties to low nineties percent range for fiscal 2025, compared with City Office REIT's roughly 84% occupancy. Similarly, some competitors in coastal gateway markets have maintained positive cash same-property net operating income growth, whereas City Office has reported modest declines.

On leverage, City Office REIT's net debt to EBITDAre of around 7.0 times sits higher than the 5.0 to 6.0 times range typical for investment-grade office REITs, though it is not out of line with other smaller, non-rated peers. This leverage position can amplify both upside and downside moves in City Office stock as changes in occupancy, rents and property values feed through more directly into equity outcomes.

On valuation, the roughly six-times trailing FFO multiple and high single-digit dividend yield for City Office stock contrast with mid-teens FFO multiples and lower yields for some diversified REITs that include industrial or residential assets. This divergence underscores investor preference for sectors perceived as structurally stronger, yet it also highlights how much office risk is already priced into City Office REIT at current levels.

Key risks and investor considerations

Several risks remain central for investors analyzing City Office stock. Demand uncertainty in office markets is the most obvious. If hybrid work adoption leads tenants to reduce space or delays expansion plans further, occupancy could remain under pressure and rent growth could lag inflation, challenging City Office REIT's ability to grow funds from operations and dividends.

Interest rate risk also remains material. Although City Office REIT has reduced total debt from about $950 million to roughly $900 million over the past year and has pursued more fixed-rate financing, a significant portion of its borrowings still reset with market rates. Should benchmark rates stay higher for longer than currently expected or widen sharply again, interest expense could rise further from the nearly $40 million reported in fiscal 2025, compressing coverage ratios and equity valuations.

Property valuation risk is another factor. Cap rates used to value office properties have moved higher since 2022 in most markets. If appraisal values decline further, City Office REIT could face non-cash impairment charges and, more importantly, lower proceeds from potential property sales, affecting its ability to deleverage or recycle capital. The $80 million of dispositions completed over the last 12 months show that market liquidity exists, but pricing has clearly shifted versus the low cap rate environment seen earlier in the decade.

Representative property and tenant mix

One example of City Office REIT's approach to property management is its presence in the Tampa market, where the company owns multi-tenant office buildings leased to a mix of professional services, technology and government tenants. In its filings, City Office REIT has highlighted properties where occupancy remains in the upper eighties percent range and where lease spreads are closer to flat or modestly positive, helping offset weaker performance in other assets.

Across the portfolio, no single tenant accounts for more than a low double-digit percentage of annual base rent, according to the 2025 annual report. This diversification reduces concentration risk, though sector clusters such as financial services or technology can still be exposed to cyclical hiring and space decisions. The company has indicated that it continues to target tenants with stable business models and credit profiles to support rent collections and reduce volatility in cash flows.

City Office REIT operations and product focus

City Office REIT's core product is professionally managed office space aimed at small to mid-sized tenants in U.S. secondary growth markets. The REIT typically offers traditional multi-tenant office buildings rather than flexible co-working arrangements, though it has adapted some spaces to more open and collaborative layouts in response to tenant preferences. Revenue from its office leasing activities, which totaled about $175 million in fiscal 2025, remains the dominant contributor to overall performance.

The company has not pursued large-scale development projects in recent years, preferring to focus on leasing and capital improvements to existing properties. Capital expenditure of approximately $25 million in fiscal 2025 on tenant improvements, leasing commissions and building upgrades underscores this priority. By concentrating resources on enhancing current assets, City Office REIT aims to improve competitiveness in its markets without taking on the higher risk profile of speculative new construction in an uncertain demand environment.

City Office stock price and recent trading

As of 31 March 2026, City Office stock closed around the mid-single-digit dollar level on the New York Stock Exchange, according to exchange quote data, placing the shares closer to their 52-week low than to their 52-week high. Over the preceding 12 months, the stock's trading range spanned roughly from the low single digits at the bottom to near $10 at the top, illustrating significant volatility as macro conditions, REIT sector sentiment and company-specific news such as the dividend reduction influenced market perception.

At that late March 2026 closing price, City Office REIT's common equity market capitalization was in the low hundreds of millions of dollars, a fraction of its approximately $1.4 billion in reported real estate assets. For investors, this price-to-asset relationship, combined with metrics such as the six-times trailing FFO multiple and high single-digit dividend yield derived from the revised $0.40 annual dividend, frames the risk-reward profile currently embedded in City Office stock.