As people return to the office, the hybrid workplace trend remains strong

In-house collaboration and networking important to younger employees

The COVID-19 pandemic has disrupted the workplace and office life so irrevocably, some commercial real estate insiders are calling it “the great re-evaluation.”

“The pandemic was a worldwide work-from-home pilot project,” says Samantha Sannella, managing director of strategic consulting, Canada, at Cushman & Wakefield. “This enabled us to understand how untethering employees from the office affects both the organization and the individual.

“It was kind of a perfect storm, which made many people realize that life can change on a dime,” she says. “They changed jobs, downsized, moved out of cities or took early retirements. They spent more time with their families rather than commuting into downtown. They reprioritized.”

The changes triggered by the worldwide shutdown began with a steep drop in people going to their offices. According to “Flexible Office in the Changing Workplace,” a Cushman & Wakefield report released in January, attendance decreased from nearly 100 per cent to 15 per cent in the U.S. from late March to late April 2020, but has been gradually climbing since then.

Canada’s return to the workplace has differed across the country, due to various provincial restrictions; however, workplace attendance has generally been rising since January, with the West Coast leading the way.

Most complete office closures have subsided, with offices open to varying degrees. Other trends such as accommodating hybrid work within flexible office space – which are offices that can be modified quickly to accommodate different sizes of workforces and teams – have escalated.

Canada entered the pandemic with some of the lowest office vacancy rates in North America. While vacancy rose through the pandemic, overall market conditions remain fundamentally sound – with Vancouver and Toronto performing well at 8.7 per cent and 10.2 per cent, respectively, as of the first quarter of 2022, with the technology sector fueling office leasing demand.

“At this time, we are seeing strong leasing activity from emerging and established technology companies while startups are keen to gobble up sublet space,” says Chuck Scott, chief executive officer, Canada, at Cushman & Wakefield.

While the return to the office is still uneven, Scott says, in some markets, the demand has accelerated.

Worldwide office-based employment reached prepandemic levels in the first quarter of this year, the report shows. In Toronto, office-based employment was up by 6 per cent from the beginning of the pandemic to the third quarter of 2021 – a gain of some 12 per cent from when the lockdowns began.

“Organizations had to figure out how everyone could adapt,” Scott explains. “Now that people are emerging from the pandemic, there’s acceleration. The pandemic was fuel for many trends that were already evolving.”

One such trend is the “flight to quality,” says Sannella, in which investors consider “B” and “C” class office buildings – many located in Canadian suburbs – as less desirable. “We are seeing a strong uptick in leasing of Class A office space, 10 per cent more than usual, proving that quality matters,” Sannella says.

“With the potential for suburban office growth in our future, due to rising housing prices, we need reinvestment in these assets.”

Another notable preference that may shift real estate investment in suburban office buildings is employee reluctance to commute, cited as the number one reason employees want to continue to work from home. This preference has driven suburban growth in the U.S., where cities sprawl and public transportation is limited. Coupled with steep gas prices, this may be a trend that is here to stay.

Younger employees are keener to go back to the office than older ones, Sannella says.

“Young people depend more on the office for their social networks,” she explains. “Also, they tend to live in smaller spaces or with roommates, and many don’t have the space for a home office. The office is a desirable space for them to work and be productive.”

Scott and Sannella agree that most employees want a hybrid work situation, where they’re in the office two or three days a week – nearly eight out of 10 (78 per cent) would prefer this kind of setup, according to the report.

“This desire is consistent across the board, internationally and in every part of Canada,” says Sannella. “How we solve this has to be a bespoke solution – varying across industries, regions and job requirements.”

The re-evaluation doesn’t mean people are abandoning the office, Scott says, but, rather, looking more closely at the benefits an office brings. Companies are responding by offering unique amenities and services, such as concierges, advanced video production studios and tech-enabled conference centres – in addition to gyms and daycares, redesigned outdoor space like rooftop patios, upgraded eating areas and afterwork social events.

“It’s not a question of whether to have an office; it’s looking at what having an office means to the work that people do,” Scott says.

Going to the office is a plus if people can share ideas with co-workers, for example, but it’s a hassle if they’re just coming in to use the phone or an office desktop, he adds.

According to the report, “learning and collaboration” decreased 30 per cent from September to January of 2022. This decline has led to organizations wanting employees to return to the office, Sannella says.

“The nuances of personal interaction have not been replaced by digital collaboration just yet,” she says. “And as organizations change over time, the social capital that existed pre-pandemic dissipates without the bonds built during face-to-face collaboration.”

“The purpose of the office is being rethought,” says Scott. “It’s still a central piece of a workplace ecosystem – it’s a reflection of company culture and where talent collaborates face to face.”

Young people depend more on the office for their social networks. Also, they tend to live in smaller spaces or with roommates, and many don’t have the space for a home office. The office is a desirable space for them to work and be productive

Samantha Sannella, Managing director of strategic consulting in Canada at Cushman & Wakefield