Despite the upward surge in office vacancy rates, brought on by the pandemic and the resulting employee preference to continue to work from home, the mid-sized 150 Bloor St. W. is 100-per-cent occupied.Supplied
What do workers want? Not to come back to the office – at least not this year.
New data from Colliers Canada suggests that office-building owners and white-collar employers should not count on workers rushing back to their cubicles in 2024. The report by Colliers Real Estate Management Services on Canada’s office market shows that vacancies are expected to rise by 1 percentage point this year, peaking at about 15 per cent nationally by mid-2025.
Vacancies may come down a bit next year, as people finally trickle back to their workplaces, says John Duda, president of real estate management services at Colliers Canada, but this is by no means certain.
“The upward curve in vacancies hasn’t stopped, either here or in the United States,” Mr. Duda says. Colliers’s report notes that the impact of hybrid work “is still placing upward pressure on vacancy in Toronto and the GTA [Greater Toronto Area], along with Vancouver and the [Greater Vancouver Area].”
He agrees with the findings of the report, called Nearing the Path to Recovery, that the office vacancy rate is likely to settle in the middle of next year, but says some sort of hybrid work week will “probably be here to stay.”
Our tenants have told us that if Toronto were able to reduce travel time by 10 per cent, we’d see a 2-per-cent reduction in vacancies.
— John Duda, president of real estate management services, Colliers Canada
There are a few exceptions – office buildings filled with tenants. “Royal Bank Plaza in Toronto [200 Bay St.] is doing well, and the mid-sized 150 Bloor St. W. is 100-per-cent occupied,” Mr. Duda says, adding a likely reason is that unlike many offices, both buildings are well served by public transit.
Transportation is now a big issue for workers, he adds. “Toronto has become one of the top 10 worst cities in the world for commuting. It’s not just the lack of transit, it’s also the condition of the roads, the construction.”
The City of Toronto has numerous transit expansion plans under way, but these are “at varying phases of planning, design and construction,” the city’s website says. These include the 15.5-kilometre Ontario Line, which will connect rapid transit from the current site of the Ontario Science Centre to Exhibition Place and the 19.9-kilometre Eglinton Crosstown Light Rail Transit line.
“Our tenants have told us that if Toronto were able to reduce travel time by 10 per cent, we’d see a 2-per-cent reduction in vacancies,” Mr. Duda says.
It’s not just frustration with transportation and a need for closer child care that’s keeping workers from being lured back to the office, says Chris Bell, professor of organization studies at the Schulich School of Business at Toronto’s York University.
“A big thing people have liked about working at home is the autonomy and control over their work,” says Prof. Bell. “Employers may want to consider how they might be able to accommodate that kind of personal discretion and control.”
Workers may encounter pushback from employers, who are contending with too much empty leased space and a perception that people are more productive when they are working at the office, Mr. Duda says.
Office workers want to work in buildings that are well served by public transit, like Royal Bank Plaza in downtown Toronto.Supplied
There is some evidence that shows people’s work patterns change between the office and working from home, he explains. A new study in the University of Chicago’s Journal of Political Economy Microeconomics found that workers increased their hours when working from home, starting earlier and finishing later.
But “at the same time, there was a slight decline in output as measured by an employer’s primary performance measure. We estimate that average employee output per hour of work declined by 8 to 19 per cent,” the study shows.
Some employers and building owners are likely to seize on this data as evidence that it’s time to crack down and show up at the office, says Mr. Duda, adding that they should be cautious.
“It’s a comprehensive study, but it just looked at one workplace. It’s hard to tell if the results apply across the board,” he says.
The outcome of the trend toward vacant offices and more people working from home is hard to predict, Mr. Duda says, but it’s likely to reach a more consistent pattern over the next few years.
“It’s still anecdotal, but I believe a lot of people will go back to the office for four days a week and work outside for one.”
Building owners can help these work patterns reach equilibrium – and fill their offices – by making sure the workplaces they offer are attractive. “There’s a flight to quality,” Mr. Duda says. “The basics are important – a good lobby, clean washrooms, up-to-date building security. Make sure everything is in good shape and smells nice.”
“What workers want more than anything is better work-life balance that helps them juggle their job and family responsibilities. That means greater flexibility around remote work,” says Chris Aylward, national president of the Public Service Alliance of Canada (PSAC).
Mr. Aylward says the PSAC, which represents nearly 230,000 workers in the federal public sector, made major gains in its most recent collective agreement, reached in May, 2023.
The agreement, which is in effect until June, 2025, fell short of the union’s demands for the right to work from home, but it now requires federal bosses to look at remote and hybrid work options on a case-by-case basis.
That requirement has “set the bar for workers across Canada,” Mr. Aylward says. Employees will continue to want to work remotely, resisting coming to the office until there is better child care near their workplaces “with enough child care spaces for all families who need them. And they want better, more efficient transportation options,” he says.