How has the traditional office space occupancy and leasing fared during Covid-19? Terribly! But we all know that already. Where is the traditional office space heading in terms of employee occupancy? Towards a flexible work-from-home option. But we already know that now also. But will this flexible hybrid model be temporary or permanent?
As vaccination rates increase and many Canadians start contemplating the future of their work environments, many employers and employees are looking back at the past 20 months or so to see what impact, if any, the period of work-from-home has had on employee and business performance. And the results have been mixed.
Some industry sectors have observed greater employee performance, and overall business performance with either part-time or full-time remote work and have moved to adopt these arrangements as permanent for new and existing employees.
For instance, the tech industry sector has seen the biggest shift to a hybrid work arrangement where employees have the option of working remotely part of the time. Thirty of some of the leading tech companies in the world including Amazon, Apple, Facebook, and Microsoft have adopted different models and variations of a flexible hybrid system for many of their employees.
But what about other industry sectors?
Typically, industries and businesses which employ white-collar workers may be more suited to adopt a flexible hybrid model for many of their employees but other industries which are heavily reliant on blue-collar workers such as manufacturing, production, and onsite construction would be less suited of course.
So where does this leave the demand for office spaces?
There are indications that smaller office spaces and co-working environments (where businesses and employees from different companies share workspaces including equipment’s, utilities, administrative services, etc.) will lead the way, at least for the foreseeable future.
The demand for smaller offices and coworking spaces will be satisfied by the significant office vacancy rate nation-wide in Canada created by Covid-19 compared to pre-pandemic times. A recent BMO survey indicated that commercial vacancy rates in the country reached almost 15% in the first quarter of 2021, the highest it’s been in a quarter of a century nation-wide. Some cities have surprisingly fared quite better than others, however. For instance, Vancouver and Ottawa are dealing with lower commercial vacancy rates at 6.3 and 9.3 respectively compared to the national average, but still higher that pre-pandemic times.
So, is the traditional office space gone for good?
Many business owners and corporate executives believe the traditional office space is still necessary to foster employee engagement, collaboration, and team building, especially for onboarding and training of new and inexperienced employees as a business grows, which is why they may never move to full-time or even permanent remote work for many of their employees. For instance, financial institutions in the US such as Bank of America, Goldman Sachs, JP Morgan Chase, and Morgan Stanley require anywhere from half to all employees to return to full-time work. Here in Canada, most public and many private sector institutions have adopted and welcomed a hybrid model of remote and office working and all indications are that this model is here to stay.