Hybrid work arrangements will continue – but a doomsday scenario for the office space is unlikely, says analyst
The way Canadians work has transformed profoundly over the past three and a half years – but it may be premature to sound the death knell now for the office space.
The onset of public health measures after the arrival of COVID-19 in March 2020 heralded a work-from-home revolution that saw millions of Canadians transition to remote-working arrangements as downtown cores emptied and offices shuttered.
As it stands, few companies have since mandated employees to return to attending the office five days a week, with continuing hybrid and remote schedules causing a ripple of unease across the commercial real estate sector about the future of the office space.
That said, a shift had already been underway even prior to the pandemic – and emerging trends suggest there’s reason for optimism where the office market is concerned, according to Marie-France Benoit (pictured top), principal, director market intelligence, Canada, at commercial real estate advisory firm Avison Young.
She told Canadian Mortgage Professional that technological advances had begun to transform Canada’s workplace culture well before the arrival of COVID-19.
“The number one thing that we’re looking at is employment, not economic growth, and that’s where the difference comes in," says Earl Davis of BMO Global Asset Management.
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Workplace changes were underway even before the pandemic
“Everyone is comfortable now doing videoconferencing, working from anywhere. And that started with Wi-Fi – it wasn’t COVID,” Benoit said. “Having Wi-Fi everywhere made it possible to work everywhere. So that started before COVID, and we’re not going back to not being mobile workers.
“This is another long-term trend to look at. I must say that I know it sounds weird, but right now I’m more optimistic about the office market than I have been since Q2 2020.”
That’s because while many companies are mandating that their employees work from the office for at least part of the working week, Canadians are also showing a growing appetite to blend remote work with some in-person collaboration, Benoit said.
“Companies are asking people to come back and we talk about those who don’t want to come back – but there’s a lot of people who do want to come back. We don’t talk about them,” she explained.
Rather than dying out, the office space is seeing its purpose shift, according to Benoit. Instead of being a place where managers can keep track of their employees and maximize efficiency, the office is increasingly viewed as an environment for collaboration and teamwork – even if attendance five days a week isn’t required for that.
“I see the streets busier than last year and the year before,” Benoit said. “It’s starting to feel like normal. Hybrid is here to stay – it’s going to have an impact on office space.
“A lot of large tenants are reducing their footprints and using the technology for having less square footage per employee – but you still need the mothership. [Companies] still need a place to convene, and a lot of companies use office premises as an incarnation of the culture, a physical expression of the company culture of how they treat the employees.”
Top banks leading the charge in return-to-office efforts
Recent months have seen some major companies in Canada, including leading banks, adopt a stricter approach office-working requirements.
Royal Bank of Canada (RBC), the country’s largest lender, reportedly mandated either three or four days in the office each week per employee starting at the beginning of May, while National Bank indicated its employees should spend at least 40% of their time working from the office.
Throughout the year to date, the nation’s largest financial institutions have steadily ramped up provisions for loan losses, mainly on their commercial portfolios with uncertainty about the future of the office space seen as a key reason for those moves.
Part of the challenge for companies across the country, according to Benoit, is the task of cultivating vibrant and attractive office space to increase the appeal for employees who have grown accustomed to work-from-home arrangements.
“Even if it’s in smaller space, it’s not really rent that’s an issue anymore,” she said. “It’s more like the cost of making that space beautiful and compelling, and make people want to go back.”
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