Vornado Realty Trust (VNO Quick QuoteVNO - Free Report) is well-poised to benefit from an improving office leasing market on the back of high-quality assets in key locations. However, intense competition from developers, owners and operators of office properties poses a challenge to its office assets.

Office-space demand will likely be driven by higher square foot per office worker and the need for better-amenitized office properties to focus on health & wellness amid social-distancing requirements. Considering significant government stimulus and improved conditions in the office leasing market, Vornado is likely to benefit from the emerging trend, given its ability to offer top-quality office spaces.

The focus on having assets in a few, select high-rent, high barrier-to-entry geographic markets and a diversified tenant base that includes several industry bellwethers is expected to drive steady cash flows and fuel Vornado’s growth over the long term.

Additionally, Vornado enjoys a strong balance-sheet position and has ample liquidity. As of Sep 30, 2021, VNO had $4.5 billion of liquidity, consisting of $2.3 billion cash and cash equivalents. Such a flexible financial position will enable it to take advantage of investment opportunities and fund its development projects.

However, Vornado faces stiff competition from developers, owners and operators of office properties and other commercial real estates. This affects VNO’s ability to attract and retain tenants at relatively higher rents than its competitors.

Moreover, Vornado’s retail portfolio is suffering from the rapid shift in customers’ shopping preferences and patterns, with online purchases growing by leaps and bounds. These made retailers reconsider their footprint and eventually opt for store closures. Additionally, retailers unable to cope with the competition are filing for bankruptcies. Such a situation emerged as a pressing concern for VNO as the trend is curtailing leasing velocity for the retail real-estate space, and lowering absorption and rents.

Shares of the currently Zacks Rank #3 (Hold) Vornado have appreciated 10.6% in the past three months, underperforming the industry’s growth of 26.8%. However, the trend in estimate revisions for 2021 funds from operations (FFO) per share indicates a favorable outlook for VNO as the same has moved 1.4% north in the past month.

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Stocks to Consider

Some better-ranked stocks from the REIT sector are OUTFRONT Media (OUT Quick QuoteOUT - Free Report) , Cedar Realty Trust and Condor Hospitality Trust .

The Zacks Consensus Estimate for OUTFRONT Media’s 2021 FFO per share has been raised 13.8% over the past two months. OUT’s 2021 FFO per share is expected to increase 45.71% from the year-ago’s reported figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

OUTFRONT Media flaunts a Zacks Rank #1 (Strong Buy) at present. Shares of OUT have gained 9.6% in the past six months.

The Zacks Consensus Estimate for Cedar Realty’s current-year FFO per share has been raised 2.6% to $2.36 in the past two months. Over the last four quarters, CDR’s FFO per share surpassed the consensus mark twice and missed the same on the other two occasions, the average surprise being 6.4%.

Currently, CDR sports a Zacks Rank of 1. Shares of Cedar Realty have appreciated 41.5% in the past six months.

The Zacks Consensus Estimate for Condor Hospitality Trust’s 2021 FFO per share has been raised 25.8% over the past two months. CDOR’s 2021 FFO per share is expected to increase significantly from the year-ago’s reported figure.

Condor Hospitality sports a Zacks Rank of 1 at present. Shares of CDOR have soared 26.4% in the past six months.

Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.