W. P. Carey, a 50-year-old commercial property investor that has seen its share of changes in global real estate, is reacting to the latest demand shift by getting out of the office market quickly with the sell-off of its portfolio of 87 office properties.

The real estate investment trust approved a plan to exit its office assets by the end of this year through the spin-off of 59 of the properties into a new REIT formed to sell those holdings as it parts with the other workspace real estate.

The REIT, with its own offices in New York, London and Amsterdam, serves as something of a bellwether for international workspace demand, investing in office buildings mainly in the United States and across the United Kingdom, Netherlands, Spain, Croatia and Poland.

The unusually fast sell-off comes at a time of historically low demand for office properties, as companies adjust to worker schedules that combine remote and in-office work in the wake of the pandemic as well as economic uncertainty with higher interest rates. It signals a bet by W.P. Carey that a clear picture of future office demand may not emerge anytime soon.

"While we've meaningfully reduced our office exposure in recent years, the plan we've announced this morning vastly accelerates our exit from office," Jason Fox, W. P. Carey's CEO, said Thursday in a statement. "Ultimately, with a clear path to monetizing our legacy office assets, we believe we will achieve a lower cost of capital and be better positioned for long-term value creation."

The sell-off is aimed at "enhancing the overall quality of our portfolio, improving the quality and stability of our earnings, and incrementally benefiting our credit profile," Fox added.

W.P. Carey has not bought any office properties over the past five years, Fox noted in his second-quarter earnings conference call in July. The REIT's office exposure has come down significantly from over 30% of its portfolio five years ago to its current level of about 16%.

“We have over that period, kind of sold more office as a percentage of our total sales,” Fox said. “We've been overallocating new capital into industrial warehouse and maybe retail to a lesser extent.”

While Fox said that investment strategy was aimed at reducing office holdings to zero percent, there was no time frame in place as recently as July for that to happen. The latest announcement clarifies the timing of the plan.

The new publicly traded REIT, Net Lease Office Properties, will implement the asset sale program to dispose of all 87 properties. It hopes to complete those sales by the end of 2023, according to W.P. Carey. The company said many of the properties are in the advanced stages of negotiations.

The speed at which W.P. Carey is abandoning its office strategy is striking. Other investors around the world have whittled down their office portfolios, but there are few examples of it happening all at once.

In the United States, New Jersey REIT Veris Residential, formerly Mack-Cali Realty, decided to get out of office properties and become a pure-play residential rental firm. That transition has taken more than a decade.

REITs traditionally have been net buyers of office properties in all but 2020, the year the pandemic hit, according to CoStar data. This year, however, they have been net sellers. Their net selling activity this year totals $2.9 billion. That compares to their net buying over the past two years combined of $1.3 billion.

About 330,000 square feet of W.P. Carey’s office portfolio has become vacant over the past 12 months, according to CoStar data. The vacancy rate now stands at about 12.3%.

The assets being contributed to the new REIT represent about 10% of W. P. Carey's annualized based rent as of June 30.

Net Lease Office Properties is expected to comprise a portfolio of 59 office properties totaling about 9.2 million leasable square feet primarily leased to corporate tenants on a single-tenant, net-lease basis. Under a single-tenant net lease, the tenant is responsible for many of the expenses of building operations.

The new REIT’s portfolio will consist of 62 corporate tenants operating in a variety of industries, generating annual base rent of more than $141 million as of June 30, the firm said.

In addition to $169 million of existing mortgage debt outstanding to be assumed by Net Lease Office Properties, the REIT has also entered into a new $455 million debt facility with JPMorgan Chase.

The spin-off, which does not require shareholder approval, is expected to close on or around Nov. 1.