I know the title of this post must not have made sense to you. I found this news report while I was browsing yahoo finance. Yes, I still use yahoo finance and I like them for their finance news.
Anyway, the article was about the new report that came out today on vacancy rates in office buildings in Canada. The CBRE group is a real estate services company that manages most of the buildings in Toronto. They came up with a report and a headline tag that "Canada's national office vacancy rate is at highest percentage" in the first quarter of 2023.
This piece of report got me thinking about the impact of the pandemic on work structure and the leading impact on office buildings. At one point in time, analysts were predicting the end of in-person work arrangements. That has not happened yet. There were many in my work circle who predicted that the government would force workers to come to office to reinvigorate the downtown core economy. That has happened in a different form and shape but not at the pace many predicted.
The report noted that Canada's overall vacancy rate is at 17.7%. which is higher that Toronto's vacancy rate at 15.3% and Vancouver at 10.4%. This is the highest level of vacancy rate in Toronto since 1995 and in Vancouver since 2010.
We all knew that the occupancy will be low given not all office workers are back to their office since the pandemic. Many companies have restructured their organogram to promote remote work. Having said that, the government agencies and large banks have not yet decided to promote 100% remote work.
I was reading a news report that suggests Royal Bank of Canada with almost 100K employees will ask staff to work in person for 3 days a week minimum starting May 2023. It shows the large organizations are pushing their employees to come back and use the office space.
The office vacancy rate in the Washington DC reached up to 25% in December 2022. It shows the vacancy rates are higher than ever in other places as well.
We have been predicting this tussle between employees and employers over work structure. It is happening now as the pandemic woes has subsided a bit and organizations are ready to bring people in. Whereas employees know the benefit of working from home and enjoy the perks (flexibility) that come with being at home. The argument is valid as workers manage to deliver all targets working from home in the last three years and there cannot be any counter argument to that other than promoting collaboration in the office.
** The report cited one reason behind these numbers. The technology companies rightsizing their businesses and rethinking their spaces led to the highest ever vacancy rates. **
That could be one of the reasons but not the only one to push the vacancy rates higher. There are many small businesses that are not booking spaces in the downtown core citing small footfall to boost their business. Even bigger organizations like banks could have lowered their footprint to accommodate smaller number of employees coming to office. There are news reports on how government agencies are changing the way they utilize office spaces to promote flexibility (such as hoteling options).
There are multiple manifestations but the real reason behind this issue is the way employees prefer to stay home than to commute to a central location for collaboration.
I predict that hybrid structure will be the name of the game for quite some time moving forward. I cannot envision employees working in office 5 days a week like pre-pandemic times. That is not happening at all.
What do you think?