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What you need to know about COVID-19: September 18, 2020
The current era of remote work has compelled a significant number of companies to reevaluate their need for office space, but the projected decline in overall office space needs across Canada is only expected to be 8.5 per cent, with most of the changes happening over the next four years, according to a new report from real estate company Colliers International.
The company surveyed 445 of its own tenants between May 26 and June 2 — more than two months after remote working began for many white-collar workers — and found that 47 per cent of respondents said their office space needs had decreased.
But of the 47 per cent, only 11 per cent said they would reduce their office space by 80-100 per cent, the survey said.
“Assuming the economy recovers to pre-COVID-19 levels, our analysis indicates that the factor of an ongoing work from home approach could result in a potential reduction of tenant office space needs by an average of 8.5 per cent.”
A third of respondents said their office space needs would not change in the future, and a further 20 per cent said they were uncertain of what their needs would be over the next few years.
“There’s been a lot of talk of the death of the office. I would say the survey proves that it will not happen,” said John Duda, president of real estate management services at Colliers. “Nobody is really saying that we are not going to have office space. There will probably be more flexibility, but there’s no point trying to predict the long-term right now.”
The Colliers’ survey also showed that four per cent of its office tenants will likely shutter their businesses entirely because of the pandemic. “If all these tenants followed through with these closures, it would lead to a three per cent decrease in rent collections, and a two per cent decrease in the vacancy rate,” the report said.
Part of the reason why some businesses have indicated they would move towards a reduction in office space is because of the decline in the overall number of employees — in fact, 56 per cent of Colliers’ tenants fit this criteria. Just 44 per cent of those surveyed have maintained the same number of employees since mid-March.
But as life in some major cities begins to return to some normalcy, Brookfield Asset Management Inc., one of the largest owners of office real estate in North America, said Wednesday that it’s seeing higher demand for office space as 30 per cent of its own New York employees and 70 per cent of its London employees return to work this week.
“Today we’re leasing greater amounts of space to people than they had before. They want to accommodate their people and get them back quickly,” the company’s CEO Bruce Flatt told an audience at the Bloomberg Invest Global virtual conference.
Remote working had a substantial impact on productivity according to Colliers’ tenants — they estimated employee productivity to have declined by 22 per cent throughout the course of the pandemic.
“You can’t create a productive work culture when everyone is sitting at home,” said Duda, adding that companies such as Shopify Inc. for example, that have allowed employees to work from home indefinitely will eventually have a “rude awakening” when productivity levels diminish.
Polling on this subject, however, is divided. A two-year long Stanford University study conducted back in 2018, for example, showed that work-from-home employees worked a true full-shift or more, compared to when they were present in the office simply because of fewer distractions in their midst.
An ongoing research project on remote working by University of Montreal’s School of Industrial Relations showed that while workloads have increased because of telework, staff productivity has risen in tandem.
Michael Cooper, CEO of Dream Office Real Estate Investment Trust, believes that remote working could push certain office buildings that are older and in less central locations to remain vacant in the long run, although he disagrees with the notion that most offices will eventually become obsolete.
“It’s just too early to tell. But I can tell you that our tenants are doing okay, and in fact over the last few years we have diversified and sold 140 buildings, keeping just 32 that we think we won’t have problems going forward,” told the Financial Post in an interview.
Copyright Postmedia Network Inc., 2020