Future of Canadian Offices: Why the Vacancy Rate May Peak in 2024

A new report by Colliers Canada suggests that the office vacancy rate in Canada could reach its peak of approximately 15 per cent by the end of 2024 due to the increasing popularity of hybrid work arrangements.

In recent years, the concept of remote work has gained significant traction, altering the traditional office landscape. With the onset of the COVID-19 pandemic, remote work became a necessity rather than a luxury. However, as we move towards a post-pandemic era, companies are reevaluating their office space requirements, giving rise to the hybrid work model. A new report by Colliers Canada suggests that the office vacancy rate in Canada could reach its peak of approximately 15 per cent by the end of 2024 due to the increasing popularity of hybrid work arrangements.

According to the report, the office vacancy in Canada has already risen from around eight per cent to 14 per cent since 2020. However, Colliers Canada predicts that this trend will reverse in early 2025, unless a significant economic downturn occurs within the next 18 months. Despite the growing adoption of hybrid work, the report highlights that economic strength has played a role in tempering vacancy growth. The expansion of businesses and the entry of new companies into the market have contributed to this phenomenon.

Colliers Canada conducted a survey of 289 tenants across its properties in Canada to gather insights into their approach towards balancing in-office and remote work. The survey reveals that 55 per cent of respondents have finalized their strategies for hybrid work, an increase from 49 per cent in the previous quarter. Impressively, 86 per cent of these tenants indicated satisfaction with their current hybrid work arrangements.

The report also uncovers that companies now mandate employees to work in the office for an average of three days per week, an increase from 2.5 days in late 2022. Commercial tenants are more likely to renew their leases for each additional day their employees spend in the office. Interestingly, companies are most inclined to retain their current square footage of office space if staff work in-office for at least four days per week.

While some may view the rise of hybrid work as a recent development, a separate report by Robert Half International Inc. suggests that hiring managers and professionals are progressively aligning their preferences on this matter. Data from the company indicates that 54 per cent of hiring managers favor hybrid working arrangements, compared to 49 per cent of professionals surveyed. This marks a significant shift from the fourth quarter of 2022, when only 35 per cent of hiring managers preferred a hybrid setup, and 60 per cent preferred in-office work for all team members.

As the workplace adapts to these changes, it becomes crucial for companies to stay ahead of the curve. Embracing hybrid work models can yield numerous benefits, such as increased employee satisfaction, improved work-life balance, and enhanced productivity. By offering a flexible work environment, businesses can attract top talent, foster innovation, and reduce operational costs associated with maintaining extensive office spaces.

Canada's office vacancy rate is expected to reach its peak in 2024, driven by the growing popularity of hybrid work models. Despite the rise in remote work, the Canadian market remains resilient due to continued economic strength and market expansion. By staying attuned to the evolving needs of employees and embracing hybrid work arrangements, businesses can position themselves for success in a dynamic work landscape.