Companies Reimagining Workspaces for Hybrid Work Model

The great experiment of balancing working from home and returning to the office is still on the drawing board, according to new research about commercial property in Canada.

After nearly three years since the first lockdown, more offices are turning to a hybrid work model, with employees dividing their workweek between home and the office, according to a new report from Colliers Canada called The New Age of Hybrid Work.

But the research shows that building owners and operators, employers and office workers alike are still struggling with this idea, says the report, released in late January.

“It is clear we are in the age of hybrid work, yet companies continue to experiment, and their space needs continue to evolve,” it says.

“There’s no question that there are structural changes going on in the relationship between the amount of time people work at home compared with the office,” says John Duda, president of Canadian real estate management services at Colliers.

“There are basic issues that have still not been addressed. They come down to two things – productivity and culture,” he says.

“More than half of the companies we surveyed said, ‘I don’t know what to do’ about whether we can let our people keep working at home. If a company is finding it difficult to compete, they’re going to look at pulling their workers back into the office,” he says.

Mr. Duda says there is conflicting research on whether workers are more productive at the office or their dining rooms.

For example, IBM sold off office property in 2009 because so many of its employees in 173 countries were working remotely. Then in 2017, it called back thousands into offices, only to send them back home during the COVID-19 pandemic.

By 2021, IBM chief executive officer Arvind Krishna told Yahoo Finance that he expected up to 80 per cent of the company’s employees to choose a hybrid schedule of two or three office days a week, with up to 20 per cent working from outside the building full time.

“Every business is different; there are metrics you can use as a discussion point, but they don’t tell the whole story,” Mr. Duda says.

Statistics Canada’s Labour Force Survey reported in April, 2021, that 90 per cent of workers said they get as much done working from home as they do in an office. Nearly one in 10 workers had a hybrid work arrangement, the agency said in its December, 2022, report, up six percentage points compared with the previous January.

In October, a survey by Montreal-based financial tech company Hardbacon found that 80 per cent of people who shifted to remote work during the past few years would rather quit than come to an office full time.

To entice people back to offices, many companies are offering gourmet food and coffee and games such as air hockey on site. But it usually takes more, says Ted Mildon, senior director of office leasing for Oxford Properties Group in Vancouver.

“One way to encourage people to come in is to improve the amenities for the entire building, not just one company,” Mr. Mildon says. For example, in January, Oxford’s 35-storey MNP Tower in Vancouver held an evening exhibition called 100 Amigos with works by local artists.

It drew a packed crowd, Mr. Mildon says. Another of Oxford’s buildings in Vancouver is opening a 5,000-square-foot gym to cater to about 3,000 office workers.

“People who have been working out on machines in their basements for three years will like coming to a state-of-the-art facility,” he says.

Despite such enticements, the new Colliers survey says national office vacancies will continue to rise from the current rate of about 14 per cent until the end of 2024, when they will reach 15 per cent before starting to level off.

The rise is not all because of hybrid work – changes in the economy and new buildings opening that were planned years ago have an effect too. But “if we isolate hybrid work to determine its impact on vacancy, we estimate that [vacancies] will increase a further 4.5 per cent by 2025,” the report states.

Many workers who do go back to offices, whether full time or a few days a week, will find that their space has shrunk.

“The average square feet of space per employee has declined 10 per cent since the onset of the pandemic,” from 280 square feet to 250, the Colliers survey shows. Nearly half (44 per cent) of companies will not be providing a dedicated workspace to all employees.

Flexible office space, which can be adjusted quickly for size and use, will make up 8 per cent of Canada’s total office market, Colliers reports.

This affects not only the way offices are configured but how companies acquire and maintain office space, says Wayne Berger, CEO, the Americas, at IWG, a global leader in flexible office real estate that offers a sustainable turnkey model to enable investors, landlords, entrepreneurs and brokers to capitalize on the continuing workplace transformation.

The uncertainty about how much hybrid work will dominate the white-collar future is leading many companies to unload their office portfolios and move to managed partnership agreements for as-needed flexible workspace with companies like IWG (which operates under brand names such as Regus in Canada), Mr. Berger says.

“Companies are rationalizing their corporate real estate portfolios, finding that the capital they have tied up owning buildings and leasing can be put to use in other areas, such as improving technology,” Mr. Berger says.

Another offshoot of the tentative move away from central offices is a rise in demand for flexible workspace in secondary and tertiary markets, he adds.

IWG is seeing greater demand for space on Vancouver Island, the Okanagan Valley, southwestern Ontario and the East Coast, he says.

While many workers say they prefer working at home, Mr. Duda says he expects many companies will insist on some office time. But it won’t happen by turning it into party time or by simply ordering people to show up, he says.

“The pitch to come to the office has to be evidence-based, not: ‘I just want you in here,’” he says. “You have to explain the effect on the company if people don’t come in, and let workers make a choice.”

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