Levels have already surged since the onset of the COVID-19 pandemic
Office vacancy rates are expected to increase by as much as 15% by the end of 2024, according to a new report.
Research from investment management company Colliers Canada noted office vacancy across Canada has risen from approximately 8% to 14% since 2020, and could hit another peak in 2024 as companies lean toward using hybrid work models as a method to reduce costs in office space.
However, the report also found the rate could fall by early 2025 if the economy continues to grow over the next 18 months as new businesses come into play and others work on expansion.
As of the last quarter the average number of days an employee works at the office increased to three from two and a half in 2022. Fifty-five (55) companies have started to balance in-office and remote work, up from 49% in 2022.
“Hybrid is still having an impact on the market and it’s taking a lot longer for people to figure out what is the right solution,” John Duda, president of real estate management services at Colliers Canada, told the Toronto Star.
“With the imbalance in the employment market where the employees still have a lot of power… they’re making decisions to work from home longer, so that is impacting people’s desire to keep office. So what we’re seeing on a regular basis is they may keep their space, but they’re reducing it by 10% or 20%.”
About 86% of tenants have expressed satisfaction with their hybrid work models, and 10% are likely to renew a lease for each additional day their employees work at the office. That is, if staff would work four days a week, companies would likely keep their current office space.
Duda notes there could be a disconnect in terms of work arrangements between senior management and employees as research revealed staff would feel encouraged to work at the office if they are able to have some level of privacy as they have when working at home.
“I don’t think it’s going to get back to five days per week, but when we’ve been talking to tenants, talking to industry, everybody seems to think that it could settle at four days per week over the next year or so.
“Generally, senior management want people back in more and employees want to be home more,” he added. “There were clear numbers that whoever had private space, you were in the office significantly more than if you were in an open office.”
Colliers Canada surveyed 289 tenants of its properties across Canada.
