Office tower leasing could tremble due to increasing work from home
Work-from-homers could shake office tower leasing
Frank O?Brien
Western Investor
A recent U.S. study showed a 47 percent productivity increase in 2020, despite the coronavirus lockdown and the ensuing increase in working from home.
There is a potential earthquake building that will shake downtown office towers across Canada – and office landlords could feel it as early as September.
The current bullish sentiment in the office real estate sector is that things will quickly return to normal when COVID-19 restrictions are eased this fall and people return to work.
“Predictions that the impacts from a global pandemic would fundamentally alter the dynamics of Metro Vancouver’s office market failed to materialize at mid-year 2020 as vacancy in the suburbs reached record lows and downtown Vancouver continued to post one of the tightest office vacancy rates in North America despite an initial wave of sublease vacancy,” Avison Young stated in its mid-year office market report, released August 5.
The report also noted, however, that take up of office space in downtown Vancouver went negative in the first half of 2020 for the first time since 2014, as more than 500,000 square feet of leased space was shoved back onto the market.
Evidence is mounting that, after six months of working from home, many workers will never come back to the office full time.
A July Gallup poll found that nearly 60 per cent of U.S. workers who have been working from home during the pandemic would prefer to continue to work remotely as long as possible.
A new study from RW3 CultureWizard that surveyed 2,700 professionals in 106 countries found that most wanted to continue to work remotely, even when given an option to return to the workplace.
The tech industry, which has been the major driver of new office leasing over the past two years, could see an exodus of office workers.
Both Facebook and Google have told employees they can work remotely until the end of 2020, but some tech firms expect half their office staff will be working from home over the next decade.
Amazon, which holds more than 600,000 square feet of office space in downtown Vancouver and has pre-leased 1.07 million square feet of space being built at the Post project on West Georgia Street – the largest office leasing deal in Vancouver’s history – will allow its employees to work remotely until January of next year.
Twitter has told its office workers they can work from home “forever.”
As well, provincial and federal governments – major office tenants in cities across Canada – appear in no hurry to get people back into the office, where strict COVID-19 measures remain in effect.
In some office towers, the pandemic protocols may be simply unworkable. An example is restricting elevators to one or two persons.
“Imagine you’re in a tower with 20 floors, for example, and you’re waiting on the 15th floor to get on the elevator,” said Debi Daviau, president of the Professional Institute of the Public Service of Canada. “It really doesn’t matter which direction it comes from you’re never going to get on that elevator.”
Social-distancing and other measures could convince some returning workers to hurry back to their kitchen table. Employee interaction, the lunch room, and packed and lively conference rooms where projects are debated and discussed – the main reasons people want back in the office – could all be lost under mandated measures to contain COVID-19.
The bottom line, however, is that office productivity has not suffered over the past six months.
A recent U.S. study by Prodoscope, which tracks employee digital traffic, showed a 47 per cent productivity increase in 2020, despite the coronavirus lockdown and the ensuing increase in working from home.
The full effect of this unprecedented social experiment is not yet fully known, but it will change the office space industry as we know it. In the longer term, the potential reduction in space requirements could be offset by less density per workstation, but it is not yet clear whether the balance will be positive or negative, or in what proportions.
We are about to find out.
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