“Public transit and commuting have a huge impact on core cities like Toronto and Vancouver,” said John Duda of Colliers Canada. (Photo: Arash Chopra/NurPhoto via Getty Images) (NurPhoto via Getty Images)
A new report suggests that Canada’s office vacancy rate is expected to peak in the second quarter of 2025, but the impact of the hybrid work era on the office industry remains a key factor.
A Colliers Canada report that surveyed office tenants across the country highlighted the importance of easy commutes and thoughtful office design for workers accustomed to working from home at least some of the time. The national office vacancy rate is expected to be 14.4% in the first quarter of 2024 and peak at about 15% by the second quarter of 2025, according to the report.
“Vacancy rates will continue to rise slightly through 2025, then fall overall as conditions improve, the economy grows and new types of work environments take hold,” John Duda, president of property management services at Colliers Canada, told Yahoo Finance Canada in an interview. “More people will be coming into the office, but hybrid will be here to stay.”
Duda predicts that hybrid work arrangements will eventually result in people spending four days in the office per week, up from about three days a week today, on average, and there’s research to back that up: While still in its early stages, a longitudinal study by researchers at the University of Waterloo found that 37% of Canadians aged 15 to 19 want to work exclusively in the office, the highest of any age group.
As the commercial office sector continues to struggle with vacancy rates well above pre-pandemic levels, the Colliers report said that to lure employees back to the office with the convenience of working from home at least part of the time, companies are prioritizing locations with easy public transport links, ample parking, or ideally both.
“In core cities like Toronto and Vancouver, transportation and commuting are having a big impact,” Duda said, “so a lot of people are choosing to stay home because it’s too expensive or difficult to get to the office.”
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The report makes clear that commute accessibility is a big factor in the bottom line for office landlords. Colliers found that public transport accessibility and parking availability were closely related to tenants’ intentions to renew their office leases. Tenants who said they were likely to renew rated public transport accessibility an average of nine out of 10, while those who said they were unlikely to renew rated it an average of seven, Colliers said.
Not well suited to open-plan layouts
The research also suggests that companies need to pivot away from completely open workspaces to environments with more privacy options: “If you have a high degree of openness, people don’t want to come in,” Duda said.
While roughly half of the employers surveyed said they were fine with their current office facilities, Duda said, “50 percent said, ‘Our office space no longer suits the way we work and we need to renovate.'”
Open-plan offices can be “too disruptive”, says Duda: “At home you can put your head down and concentrate, but if you have the privacy to work in the office you might be more likely to show up than your employer requires.”
Thirty-five percent of occupants surveyed want “more space for quiet and independent work,” including more private offices, better soundproofing and more dedicated spaces where employees can concentrate without interruptions.
Colliers’ survey surveyed 427 businesses of various sizes located in Class A, B and C office space across a range of markets across the country, and the firm says it has a 95 percent confidence level in its findings.
John MacFarlane is a senior reporter for Yahoo Finance Canada. Follow him on Twitter. FollowDownload the Yahoo Finance app, available for Apple and Android.