Hybrid work era amplifying need for easy commutes, office privacy: Report
'Where there's a high degree of open office, people don't want to come in'
Canada’s office vacancy level should peak in the second quarter of 2025, a new report says, with the hybrid work era’s impact on the sector still a key factor.
Colliers Canada’s report, which surveyed office tenants across the country, highlights the importance of commuting convenience and thoughtful office design for a workforce largely familiar with working at least occasionally from home. It says actual nationwide office vacancy in the first quarter of 2024 was 14.4 per cent, with a peak expected at around 15 per cent by the second quarter of 2025.
“The vacancy rate will continue to climb marginally until 2025 and then we will see a broad decline — as things improve, as the economy grows, and as there is a settling into a new kind of workspace,” said John Duda, the president of real estate management services at Colliers Canada, in an interview with Yahoo Finance Canada. “We will see more attendance in the office, but hybrid will be there to stay.”
Duda says he expects hybrid work arrangements to eventually settle at an average of four days per week in the office, up from a current average of around three days. Some research supports that forecast. Though still in its early stages, a longitudinal study by researchers at the University of Waterloo found that 37 per cent of Canadians between 15 and 19 years old would prefer to work only in the office, the highest percentage of any age group.
The commercial office sector has been dealing with vacancy rates still well above their pre-pandemic levels. Colliers’ report suggests that the convenience of working at least occasionally from home means a premium is being put on office locations with good public transit access or good parking — or, ideally, both — to draw workers back to the office.
“The effect that transit and the commute are having on core cities like Toronto and Vancouver is huge,” Duda said. “So a lot of people make that choice to stay home because it's too expensive and it's too hard to get into the office."
The importance of an easy commute to office landlords’ bottom lines is clear in the report: Colliers found that the quality of public transit accessibility and the availability of parking were tied closely to tenants’ intention to renew office leases. Tenants who said they were likely to renew rated their public transit accessibility at nine out of 10 on average, Colliers says, while those unlikely to renew gave an average score of seven.
Not so open to open-plan layout
The survey also shows that businesses may need to pivot away from purely open-plan workspaces to settings with more privacy options. “Where there's a high degree of open office, people don't want to come in,” Duda said.
Around half the employers surveyed say their offices fit-outs were fine as they are, but Duda says “50 per cent of people are saying ‘Look, our space needs to be revised because it doesn’t suit how we work anymore.’”
Open-plan offices can be “too disruptive,” Duda says. “If I'm at home, I can put my head down and focus and do my work. But when that ability to work with the appropriate amount of privacy is available” in an office, workers will come in more than their companies require, he says.
Thirty-five per cent of tenants in the survey would like “increased capacity for quiet independent work,” including changes such as more private offices, more sound-proofing and more dedicated spaces for workers to concentrate without interruption.
Colliers' survey canvassed 427 companies of various sizes across Class A, B and C office spaces in a wide range of markets nationwide. The company says the results have a 95 per cent confidence level.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android.