Paramount's Return-to-Office Mandate: A Catalyst for Commercial Real Estate Rebound and REIT Opportunities

The return-to-office (RTO) movement, once a relic of pre-pandemic norms, is making a comeback—and Paramount Global's recent mandate could signal a pivotal moment for commercial real estate demand. As the entertainment giant under David Ellison's leadership enforces a full-time in-office policy for its Los Angeles and New York employees starting January 2026, the implications extend far beyond corporate culture. This shift aligns with a broader trend of companies rethinking hybrid work models, potentially reigniting demand for prime office space in key urban markets. For REIT investors, the stakes are high: the interplay between corporate behavior and real estate fundamentals could reshape the sector's trajectory in 2026 and beyond.

The Paramount Playbook: RTO as a Strategic Lever

Paramount's RTO mandate is not merely a cultural reset but a calculated move to streamline operations and reduce costs. By requiring employees to work five days a week in offices, the company aims to foster collaboration and innovation—critical for its creative industries. This mirrors strategies adopted by tech giants like Amazon and underscores a growing skepticism toward hybrid work's efficacy for knowledge-based sectors. The severance opt-in program for non-compliant employees and planned layoffs further highlight the company's commitment to aligning its workforce with its new operational model.

The timing is telling. Paramount's decision coincides with its relocation of corporate headquarters to the Melrose lot in Los Angeles and a broader restructuring post-merger with Skydance. These moves signal a return to centralized, in-person workflows—a stark contrast to the decentralized models that dominated the pandemic era. For commercial real estate, this means renewed demand for office space in urban cores, particularly in Los Angeles and New York, where Paramount's operations are concentrated.

Office Real Estate: A Tale of Two Markets

The U.S. office market in 2025 remains deeply bifurcated, with prime assets outperforming non-prime ones. In New York, prime vacancy rates have dropped to 6.8%, driven by financial and tech firms expanding their footprints. The city's “flight to quality” is supported by limited new construction (projected 13 million sq ft of 2025 deliveries) and a tenant preference for amenitized Class A spaces. In contrast, Los Angeles faces headwinds: rising vacancies, asset devaluation, and quality-of-life concerns (crime, homelessness) have dampened demand. Yet, the region's role as a media and tech hub—bolstered by AI-driven industries—suggests long-term resilience.

Paramount's RTO mandate could tip the scales in Los Angeles. By anchoring a significant portion of its workforce to physical offices, the company may catalyze a ripple effect, encouraging other tenants to follow suit. This aligns with the Nareit REITWeek Conference's observation that New York's return-to-office momentum is outpacing Los Angeles, but the latter's recovery could accelerate if major employers like Paramount normalize in-office work.

REITs in the Crosshairs: Opportunities and Risks

For REIT investors, the key lies in identifying assets poised to benefit from this shift. Office REITs with exposure to prime urban markets—particularly New York and Los Angeles—are prime candidates. Here's a breakdown of the most compelling opportunities:

1. Kilroy Realty Corp. (KRC)
2. Exposure: 17M sq ft of office space in Los Angeles, San Francisco, and Seattle.
3. 2025 Outlook: Despite West Coast office challenges, Kilroy's focus on life sciences and ESG-compliant properties positions it to capitalize on long-term demand. Its stock trades at a 24% discount to Morningstar's $55 fair value estimate.

4. Rationale: As AI and biotech firms expand in Los Angeles, Kilroy's high-quality assets could see renewed leasing activity.

5. Equity Residential (EQR)

6. Exposure: Multifamily REIT with a coastal focus, including New York.
7. 2025 Outlook: While down 15% YTD, EQR benefits from strong rent growth and high occupancy in urban markets. Morningstar assigns a $80 fair value estimate.

8. Rationale: Urban apartment demand remains robust as remote work blurs the line between home and office, driving demand for proximity to workplaces.

9. Kimco Realty Corp. (KIM)

10. Exposure: Retail and mixed-use centers in New York and Los Angeles.
11. 2025 Outlook: Kimco's $21.29 stock price trades below Morningstar's $26.50 fair value. Its grocery-anchored centers are insulated from e-commerce.
12. Rationale: As office workers return to urban cores, mixed-use developments with retail and residential components could see increased foot traffic and occupancy.

The Bigger Picture: Structural Tailwinds for REITs

Beyond Paramount's mandate, structural factors favor REITs with urban exposure. High borrowing costs have stifled new development, creating a supply-demand imbalance in prime markets. This “flight to quality” dynamic—where tenants prioritize premium assets—supports rent growth and occupancy stability. Additionally, REITs' cost-of-capital advantage over private owners (due to access to public markets) enables them to acquire undervalued assets or recapitalize portfolios, further enhancing returns.

However, risks persist. Los Angeles's recovery hinges on resolving quality-of-life issues and stabilizing the entertainment industry. Similarly, New York's office rebound could stall if remote work norms resurface. Investors must balance optimism with caution, favoring REITs with strong asset management and diversified tenant bases.

Conclusion: Positioning for the RTO Renaissance

Paramount's return-to-office mandate is more than a corporate policy—it's a bellwether for a broader shift in post-pandemic work culture. As companies like Amazon and Paramount normalize in-person collaboration, the demand for prime office space in urban cores is set to rise. For REIT investors, this presents a window of opportunity to capitalize on constrained supply and resilient demand, particularly in New York and Los Angeles. While challenges remain, the structural tailwinds—limited new construction, ESG-driven tenant preferences, and a flight to quality—suggest that REITs with strategic urban exposure are well-positioned for long-term gains.

The key takeaway? Watch for REITs that align with the RTO narrative, prioritize prime assets, and demonstrate agility in navigating regional market dynamics. In a world where physical proximity is once again valued, the office is not dead—it's evolving, and so must your portfolio.