TORONTO, Feb 1 (Reuters) - Shares of Canadian office space operator Allied Properties REIT slumped nearly 10% on Thursday after it disclosed a C$499 million ($372.83 million) writedown as offices remained sparsely staffed in big Canadian cities including Toronto and Montreal.

The REIT, or real estate investment trust, which issues shares to investors against a portfolio of office real estate holdings, said the about C$70 million losses came from development property valuations in Toronto and Montréal and about C$425 million came from rental-property valuations in Toronto, Montréal, Calgary and Vancouver.

Allied Properties said occupancy at its properties fell to 86.4% from nearly 90% a year ago.

The Toronto-based firm's shares were on track for their worst day in nearly four years and dragged down peer Dream Office Real Estate Investment Trust.

The results come just a day after New York Community Bancorp renewed fears about the industry's health after it reported pain in its commercial real estate portfolio and slashed divided.

Canada's big banks, which are preparing to report first-quarter earnings, have warned about weakness in office real estate space, especially in the U.S.

Last month, the head of the banking regulator Peter Routledge warned that global banks were poised to take a hit as the risk of commercial real estate grows.

Office spaces, once seen as lucrative investments, are under stress. Property valuations declined and revenue opportunities slimmed as companies shifted to hybrid work arrangements after the pandemic, leaving many office spaces in downtown core areas empty.

Canada's No.5 bank CIBC in August said it would reduce focus on U.S. commercial real estate to grapple high bad loan provisions, marking a shift in its portfolio composition.

Allied Properties said it now expects financial metrics that measure the cash generated by the REIT to contract up to 5% in the first half of the year.

"Management does expect economic occupancy gains in the second half of the year, but cannot be certain as to the magnitude of those gains, given the current macroeconomic environment," it said in a statement.

Raymond James analyst Brad Sturges noted that he was moving the stock to the "sidelines until office fundamentals stabilized" and downgraded the stock citing the near-term challenges for Canadian office assets. ($1 = 1.3384 Canadian dollars) (Reporting by Nivedita Balu in Toronto; Editing by David Gregorio)