How has the emergence of hybrid work affected the state of commercial office real estate?
I believe we are at the beginning of that journey. Pre-Covid, there were several large global firms such as IBM and Yahoo Finance that had massive work-from-home programmes. Over time, as productivity began to decline, they brought everyone back into the office. It’s an issue that hasn’t been resolved, and as more businesses experience it during the pandemic, discussions about productivity and culture are taking place. so we did our research new era of hybrid work Because it affects the office and determines how we improve things like productivity and company culture.
As office property managers, our role is to maintain and operate these offices and provide all the services required to meet the needs of both our tenants and our investors. Amidst the emergence of hybrid work, it is important for us to understand their behavior to better serve both our tenants and our investors. This way, we can be sure to provide the right services that create a desirable and functional place to work.
Have you noticed an increasing demand for flexible office space?
absolutely and it was an important topic in our The new era of hybrid work Survey. Interestingly, pre-Covid the supply of flexible office space accounted for about 1% of office space, whereas today the demand for it is proposed to be 8% of office space used in this way. Creating these spaces requires a lot of capital, so what we anticipate are a lot of options in the market over the next few years. Owners and tenants are going to get more creative with how they address their lease space in order to create a variety of uses for the office.
What role does commercial real estate play in the long-term success of businesses adopting hybrid work?
Office spaces can and should accommodate the evolving needs of tenants. We’re focused on reducing the friction and barriers that sometimes make returning to the office difficult. Parking, food and daycare are examples of important factors many employees face upon returning to the office. Generally speaking, commercial real estate can best support the success of a business by adhering to the variety of amenities the businesses need. There are even tenant apps that we’ve started using to communicate updates directly with our tenants on security, security protocols, new features, and other matters.
The concept of wellness at work has also taken off since the pandemic. This requires a high level of collaboration between us and the tenants to better understand their interests and how to design a better office culture. At the Colliers-managed 95 St.Clair West, we replaced the concrete in front of the office tower with an urban farm. Most of the vegetables harvested are provided to a homeless shelter in the neighborhood, but some are available to tenants as well. This is a small example of how creating a space with meaning and purpose builds community and leads to more desire to live in that space.
How does hybrid working affect small to medium sized businesses compared to larger ones?
In our research, we looked at small, medium and large businesses. To our surprise, small businesses are back in offices more than anyone else. We found that medium-sized businesses have made the move a little less and it appears that larger companies are working more from home or in sustainable hybrid models. I think one of the most important ways hybrid work will affect small versus large businesses is in its ability to provide the convenience of returning to the office.
Within small businesses, people often wear many different hats. While larger businesses may have entire floors of employees dedicated to specific, individual tasks. When processes tend to work less productively at home, a return to the office may be easier for some businesses than others. It all comes down to structure and how easy it is to move your workforce, who is being affected and what the day-to-day will look like.
How can business executives and their investors stay on the pulse of Canadian real estate trends?
Colliers generates all kinds of reports which come quarterly. These reports address things like vacancy rates, financial trends, market forecasts and more. Therefore, executives and investors can take advantage of these reports to determine their investment plans for the future based on where we think the markets are headed. It’s about using the resources available to you.
What are some of the most prevalent findings in Colliers’ new era of hybrid work report?
Another key finding from this report is the vacancy position in commercial office real estate in Canada. We are going to see an increase in the average rate from 13% to about 15% over the course of the next year. It is not the same in all markets and it is not the same in all asset classes, but we are already seeing this increase, although it is estimated that by 2025 it will start to decline and return to the market.
How can businesses prepare for the shift to hybrid work today?
You must be certain about what your business needs to do in order to remain relevant and competitive. Once you have a list of determinants, if you choose to address your workforce and begin the shift toward hybrid work, I would recommend that this be done as intentionally as possible. Reveal why you are making the proposed changes you are making. It is important to create a culture of purpose rather than just expecting from employees. Having discussions with employees about what is working and what is not is also a very important part of resilience.