A huge rise in available downtown office space has been a leading trend in the commercial real estate market of recent years
Return-to-office (RTO) mandates, particularly among large financial institutions, are creating friction in the labour market – but they may also be setting the stage for a tightening of office vacancies, especially in older, well-located buildings.
Some of Canada’s largest banks, including BMO, RBC, and Scotiabank, have announced plans to require four in-office days per week starting this fall. While these changes are prompting pushback from some employees, commercial real estate professionals say they’re already seeing signs of increased space utilization.
“Our data is telling us – and we know it through our clients – that the average occupancy of space throughout the week has been increasing steadily,” Mark Fieder, president of commercial real estate firm Avison Young, said in a May interview with Canadian Mortgage Professional. “The return to office is strong and continues to get momentum.”
Fieder believes office vacancies in Canada’s six major markets have likely peaked, with further tightening expected.
“The construction cycle is coming to an end. There are no big projects coming in the next few years,” he said. “With that, there’s going to be a tightening of vacancy but it’s not going to be a tightening at the top end of the market. It’s going to be that A-minus, older building that’ll get a lot more attention going forward because of the lack of choice in the marketplace.”
Read more: Is the Canadian office market nightmare nearing an end?
Labour market power shift
The shift in office demand comes amid a broader power shift in the labour market, where employers are feeling emboldened to enforce stricter attendance policies. During the pandemic, remote and hybrid work were widely adopted.
Public health restrictions led to work-from-home mandates beginning in March 2020, ushering one of the most seismic changes in the Canadian workplace ever seen as workers adapted to the home-office era. But with economic uncertainty and a cooling job market, companies now have more leverage to set terms.
“Now, it seems with economic uncertainty, employers have bigger leverage to basically impose unilaterally that kind of stuff and tell people, ‘If you don’t like it, you might as well go,’” Philippe de Villers, chair of Chartered Professionals in Human Resources Canada, told Global News.
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