Office vacancies could peak next year as companies solidify hybrid plans: report

Canada’s national office vacancy rate could hit 15% next year as employers solidify hybrid work policies and reduce their office space, a commercial real estate report says.

Colliers Canada said national office vacancy rates have risen to 14% from 8% in 2020 as employers adopted remote and hybrid work to navigate the Covid-19 pandemic.

With hybrid work remaining even after pandemic restrictions ended, Colliers said vacancies are expected to peak next year at 15%.

A report this week from recruiting firm Robert Half showed managers and employees are aligning on the issue of hybrid work.

Colliers’ survey found that more than half of companies (55%) have finalized their approach to hybrid work, with three days per week as the national average.

Nearly as many (51%) said they plan to maintain their current office space, while roughly one-quarter (26%) said they need less space. Others weren’t sure (15%) or said they needed more space (8%).

Companies were most likely to maintain their current square footage if employees work at the office four days per week, the report said. And every additional day that a majority of employees work from the office makes companies 10 percentage points more likely to renew their lease.

The report also found that private workspaces drove attendance: employees with a private office spent four additional hours per week at the office on average.

Economic growth is so far tempering the rise in vacancies, Colliers said. “Barring a major economic downturn over the next 18 months, we expect to see signs of recovery in early 2025,” it said.

A report last month from consulting firm McKinsey said a permanent shift to hybrid work could knock US$800 billion from office building values in a group of major global cities by 2030.

Mark Burgess

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Mark was the managing editor of Advisor.ca from 2017 to 2024.