The proliferation of remote work has become a defining phenomenon of the 21st century. With the advent of high-speed internet, collaborative tools, and shifting employee expectations, remote work had already been on the rise. However, the COVID-19 pandemic acted as a catalyst, accelerating this trend at an unprecedented rate. Canada, like the rest of the world, has not been immune to these changes. The impact on Canadian commercial real estate is immense, as organizations reassess their space requirements and employees adapt to flexible working conditions.
Shifting Dynamics in the Office Market
One of the first places where the impact of remote work has been felt is in the office market. A survey conducted by PwC Canada in 2021 showed that only 20% of Canadian CEOs expected to increase their office space in the coming years, compared to 30% globally. Furthermore, 38% of Canadian CEOs stated that they were planning to reduce their office footprint (source). This signifies a major shift in thinking, as companies are reassessing the need for large physical spaces for their workforce.
Demand for Flexibility and Hybrid Models
The same PwC survey revealed that 78% of Canadian CEOs believe that remote work is here to stay, and organizations are increasingly looking to adopt hybrid models of work. With hybrid models, employees can divide their time between working from home and the office. This has led to a reimagining of office spaces, as companies are investing in redesigning offices to make them more conducive for collaboration and innovation rather than for day-to-day tasks.
The Rise in Vacancy Rates
The decrease in demand for traditional office spaces has led to an increase in vacancy rates. According to a report by CBRE, Canada’s national office vacancy rate reached an all-time high of 15.7% in the first quarter of 2023 (source). The rise in vacancy rates is creating challenges for commercial real estate owners, who are having to come up with innovative solutions to attract tenants or repurpose spaces.
The Revitalization of Suburban Markets
As more employees work remotely, the demand for office spaces is also seeing a geographical shift. According to Statistics Canada, there was an increase in population in suburban areas during the pandemic as people were looking for more space and a better quality of life (source). This, coupled with the hybrid working model, is leading to a rise in demand for smaller, more flexible office spaces in suburban areas as opposed to traditional central business districts.
Bringing It Home
The rise of remote work is undoubtedly reshaping Canadian commercial real estate. The decline in demand for traditional office spaces, the increased vacancy rates, and the shift in geographical preferences are some of the most significant trends. Commercial real estate stakeholders need to adapt to these changes by embracing flexibility, reimagining spaces, and recognizing the potential in emerging markets. This will not only help them to stay relevant but also contribute positively to the evolving world of work.
