As an increasing number of office workers trickle back into Toronto’s downtown core, an analyst at CIBC Capital Markets said this trend will bode well for Dream Office Real Estate Investment Trust.

“The REIT is seeing a return-to-office resumption through increasing tenant activity and parking volumes. The pick-up in touring activity reflects downtown re-migration and should translate into higher leasing volumes and rental rates,” wrote Scott Fromson in a note to clients dated March 11.

He raised his 12-month price target to $31.50 per share, from $27.25, and maintained his outperformer rating (the equivalent to a buy) on the stock.

As Canada emerges from the COVID-19 pandemic, announcements from major employers about bringing their workers back to the office, at least on a part-time basis, have become more frequent.

Bank of Nova Scotia and Manulife Financial Corp. allowed workers to return to some offices on a voluntary basis Monday, while Canadian Imperial Bank of Commerce will begin to bring workers back starting March 21.

Bank of Montreal already allowed some bankers to return to the office in early February, with a broader return planned for early April.

“Dream Office is well positioned to convert increased [rental] activity into improved operating performance,” Fromson wrote.

He said Dream Office is seeing stability in its traditional office tower segment, and stands to benefit from pandemic-era renovations in its smaller boutique buildings, in terms of attracting tenants and charging higher rental prices.

Dream Office has 29 office buildings, located primarily in downtown Toronto.

There are a number of risks to this outlook, according to Fromson, including the company’s concentration in the Toronto market and the possibility Dream Office won’t be able to demand economically-viable rental prices. He also noted investors might have a preference for commercial or warehouse REITs rather than office REITs in the current environment.

While a full return to the office is still up for debate, a recent survey indicated many workers don’t want to commute into the office five days a week post-pandemic.

An Amazon Business report, released on March 10, found 57 per cent of Canadian office workers said they prefer a hybrid work model, and 43 per cent of respondents said they would likely look for a different job if their employer mandated that they be in the office full-time.

However, Fromson said he believes the recovery in the Canadian office space is still in its “early stages” and that the main opportunity for Dream Office lies in its boutique building segment, where there is more room to grow its occupancy rate.