DECEMBER 2021
Issue #01 | Article 03 / 03
What does the future hold for the office?
Psychology behind workplaces – what is driving companies’ decisions as they plan for future?
Have you ever wanted to see the future – to know how the real estate decisions you make today will unfold in five, 10 or even 50 years?
With so much uncertainty these days, the answer may likely be “yes.” Unfortunately, crystal balls are hard to find.
Today, owners and occupiers are consumed with planning for the future of the workplace. What is at the root of these plans – what is driving companies’ decisions? The new workplace is expansive, varied and fluid. While research reveals that remote work does in fact work, we also know from a recent study of Avison Young clients that there are certain activities workers would prefer to do in person. These include team building, corporate social events, training and development, as well as formal departmental/team meetings. The Vitality Index by Avison Young further underscores that workers are gradually returning to the downtown cores of major cities across North America. Using anonymized cell phone location data, the Index offers a real-time window into daily foot traffic by city and by industry. For example, although overall foot traffic remains below pre-pandemic levels, we saw promising and encouraging surges in downtown foot traffic between Q2 and Q3 in cities across Canada.
of employers say the shift to remote work has been successful
of executives surveyed feel that employee productivity has improved
The X Factor
Businesses are re-evaluating how they use space, as more flexibility is key. In the years leading up to the pandemic, occupiers were already shifting toward flexible workplaces and schedules with modest adoption. With the arrival of the pandemic, these trends were accelerated as cracks turned into craters, amplifying and evolving the specific needs of employee groups and the overall employee experience.
“Data suggests that the worker - and not the employer - is currently driving workplace trends,” says Sheila Botting, Principal and President, Americas, Professional Services, Avison Young Canada.
“X Factor is Avison Young’s response to the fact that the definition of the workplace has changed. It takes into account a unique combination of options and opportunities that will maximize employee experience, productivity, and attraction and retention, all while future-proofing employers’ strategies.”
“The X Factor value proposition considers both the virtual and physical work environment to empower employees to work efficiently and organizations to enhance overall productivity,” adds Botting.
Bringing the human experience to the office environment
Today, buildings are not just bricks and mortar. They are a conduit to a human experience, where people can safely gather, share and learn. In the war for talent, this is becoming increasingly evident, as more employees seek to work for companies that offer workplaces of choice and flexibility, and spaces that offer experiences beyond strictly a spot to sit and perform a job.
While companies are still performing cost analyses and aligning their leases with their space requirements, their considerations go beyond footprints. “Tenants are recognizing that it’s about much more than simply physical space when it comes to business operations,” says Mark Fieder, Principal and President, Avison Young Canada. “It’s about human connection. For that, access to work environments is fundamental to bring together people, ideas and innovation.”
For these reasons, the sublease market is shrinking, with less inventory available – signalling that companies are reversing course on shedding their space. “Companies are pulling back on their plans to let go of all their space because their employees want to return to a hybrid work schedule, where their time is divided between working from home and working from an office,” says Fieder. “For example, in Toronto, businesses are shifting their mindset from ‘will we return to office’ to ‘when and how will we return.’ So, the office is not gone – it is still very much alive.”
In cities like Toronto, Montreal and Vancouver, it is expected downtown sublease space will continue to decline as return to office strategies unfold.
"Businesses are shifting their mindset from ‘will we return to office’ to ‘when and how will we return.’ So, the office is not gone – it is still very much alive."
Businesses are evaluating the importance of health and sustainability
Healthy, sustainable buildings are no longer ‘nice to haves’ but are firmly ensconced in the ‘must have’ column – and they play a critical role in overall wellness, says Amy Erixon, Principal and President, Global Investment Management, Avison Young. “Wellness features into both the ‘E’ and ‘S’ parts of the environment and social components of ESG. When it comes to wellness in the workplace, you have to ensure absence of toxic materials, access to natural light, safe ventilation levels, and inclusive spaces for people to work independently and in groups – as some examples. It’s important to have an overall supportive, safe and healthy work environment because these things contribute to mental health and physical wellness, and employee retention.”
One misconception is that sustainable design is expensive. “As a matter of fact, sustainability can drive down operating costs,” says Erixon.
“It’s especially important to look at lifecycle costs when making these investments. The payback for upgrading to LED light fixtures, for example, is often a few months, and the bulbs last four to 10 times as long.”
Erixon points to Ontario and Quebec as examples of jurisdictions mostly using natural gas for heating office buildings – and points to other countries exploring alternate sources. “Natural gas in Ontario and Quebec is so much less expensive than oil or electricity, although Quebec has cheap and abundant hydroelectricity. In Denmark, they’re using high-efficiency furnaces that burn garbage to make steam – creating a circularity, so that nothing is wasted. While we have a long way to go to get to net zero, it is getting more expensive to not be environmentally sustainable.”
Technology and tomorrow’s workplace
In addition to ESG, technology is a critical factor in the workplace of the future.
“Technology strongly contributes to operational efficiencies,” says Neil Lacheur, Principal and Executive Vice President, Canadian Real Estate Management Services, Avison Young Canada. “Indoor air quality sensors, HVAC systems for filtration – these are all tied into technology, which is increasingly modernized and sophisticated.”
On the occupant side, technology is playing a leading role in digital applications for online booking tools. For example, to manage employee volumes and foot traffic, it is now commonplace for employees to advise in advance that they’re coming into the office, and for them to sign in electronically upon arrival. “Building owners are moving toward that higher level of communication and putting real-time, current information into the hands of building occupants,” says Lacheur.
Technology improvements may impact operating costs, although this is largely product driven and marketplace (or location) driven. “Some enhancements can be quite expensive and may be deemed by landlords as unnecessary in order for a property to remain competitive and relevant within their competitive set,” says Lacheur. “Tenants in AAA downtown offices are more demanding of the latest and greatest, regardless of cost. As you move away from the core, some enhancements will become less and less critical.”
Bottom lines drive decisions. The costs for occupying offices of the future can become increasingly more expensive when outfitted with all the latest technologies and digital accoutrements, and not all tenants will demand this level of sophistication. Owners will need to have a clear understanding of their tenant profiles when assessing whether, how and when to upgrade their offerings.
Need help finding that crystal ball?
While we don’t have a crystal ball, we have the technology and expertise to provide data backed counsel to clients so they can make informed, strategic decisions. Cutting-edge technology from AVANT by Avison Young uniquely positions the firm to pull from real-time, expanding and evolving data-based analytics. AVANT makes markets more accessible, cities more transparent and decision-making more efficient. This technology, coupled with a world-wide network of experts to tap into, enables Avison Young to offer holistic services throughout the lifecycle of a project and deliver the right mix of solutions tailored to each client.
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Our experts who contributed to this article
Neil Lacheur
Principal, Executive Vice President, Real Estate Management Services, Canada
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