Many businesses revisited their post-pandemic workplace strategies, electing to shrink their footprints in response to the worldwide remote work model. Although this carried into post-pandemic times, some office tenants have bucked the trend by seeking out ways to expand their spaces – in some cases, doubling and tripling their footprints. Hear from two of Avison Young’s leading experts on office leasing in Vancouver and Toronto – Glenn Gardner and Garrett Noiles. What they’re seeing might surprise you.
The view from Vancouver
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Glenn Gardner
Principal
Vancouver
Consulting & Advisory, Office Leasing, Sales & Leasing
+1 604 687 7331
Why are some of your clients bucking the trend and expanding their footprints?
During the pandemic, I can appreciate why businesses explored the opportunity to down-size or retain the same amount of space they did pre-pandemic. Interestingly, what is playing out now is a very clear situation where many companies are requiring their employees to come into the office a minimum of 3 days a week – and most people tend to come in on the same days to collaborate and have face-time – so where do they all gather if they choose to down-size? Additionally, organizations are growing due to economic drivers so the space that worked in 2019 no longer fits a larger company in 2024 or looking ahead to 2030 and beyond. Organizations are starting to take up more space to future proof their business and not simply think of the business of today.
Does the way that people use space play into why they’re looking for larger office spaces?
Absolutely. The pendulum has swung from the direction of everyone being in an open area or wanting a private office to now creating spaces where people can work in a variety of ways, including collaboration spaces, private spaces, open areas and amenities. Companies are going through the redesign process, which often requires providing employees with a variety of work environments! Options typically require additional space.
What types of buildings are clients looking to expand into?
Everybody wants to stay in the same class of building or get better. It could be a lateral move to the same class of building but with better amenities – for example, a gym, rooftop patio or café where there was neither before, or an improved HVAC system from a health and wellness perspective. A better employee experience is of prime importance.
What advice do you give to your clients around timing?
Time is always a tenant’s friend. It takes longer than ever to identify the perfect office space that meets all of a tenant’s needs and requirements so they should start looking at their leases well in advance. Allow yourself time to take a critical look at your space, how you use it, and to explore potential relocation options with your real estate advisor.
Have you seen instances where a company shrank in the pandemic and is now reaching out to you to expand?
We moved a law firm into a smaller, brand new office space. We are now having conversations with them about needing more space because the environment that they have moved into is so fantastic, and they made it so welcoming, that everyone wants to work in the office – and they don’t have the room for them.
In the last six to 12 months, there's been more movement in our market than I've seen in 18 years. Frankly, I would suggest that most of our clients are either keeping the same amount of space or they’re growing into larger spaces to future proof their business as they continue to attract and retain the best talent. It’s all about delivering a space that makes employees want to come in and collaborate.
In the last six to 12 months, there's been more movement in our market than I've seen in 18 years. Frankly, I would suggest that most of our clients are either keeping the same amount of space or they’re growing into larger spaces to future proof their business as they continue to attract and retain the best talent. It’s all about delivering a space that makes employees want to come in and collaborate.
The view from Toronto
Why are some bucking the trend by expanding their footprints – and how and why is this happening in Toronto?
There are certainly cases where tenants are committing to more space, and we’ve seen instances of that since the pandemic started. Lately, we’ve seen a trend of clients moving from shorter-term coworking memberships to larger, more dedicated space. Coworking served a great purpose over the past few years of uncertainty, but with office utilization steadily trending upwards, many companies now have the desire to get their own space and the confidence to make slightly longer-term decisions.
For those expanding, what are their selection criteria?
The driving factors seem to be, in order of importance: location (proximity to Union Station – our main transit hub in Toronto), value, and quality. Most of our clients are trading up to better quality space and buildings versus the opposite. Right now, it’s all about providing an inspiring place to work that is “commute worthy.” Buildings that are highly amenitized (restaurants, gyms, tenant lounges, end of trip facilities) are in high demand and those features are more commonly found in higher class buildings.
Have you seen buyer’s or lessor’s remorse – where a client shrank their footprint during the pandemic, now they regret their decision and they’re actually expanding?
We have! We subleased one of our client’s spaces for their staff to work fully remote. Less than a few months later, a new CEO was brought in who determined that was the wrong approach and wanted their office back. By that point, it was too late, but we secured an even more optimal space within the same building (in competition, no less!), so it all worked out in the end.
For those taking up more space, what are the hot office areas to expand into?
Most of our clients are looking to be within walking distance from Union Station and would favour the financial core due to that proximity and having ample access to restaurants, services, and our underground PATH system. But for those seeking better value, we have struck some great deals in the periphery submarkets that surround the financial core as well as in midtown.
As more new space enters the market, are tenants taking up more space to plan for future growth?
The Trophy tower market is performing extremely well at only 4.4% vacant as of Q1 2024 and with very limited new AAA office construction planned, I think we’ll start seeing more companies take more space in these buildings to help future proof. In contrast to some of the ‘doom and gloom’ headlines we’ve seen lately, it is remarkable how few opportunities there really are for tenants looking for quality, built-out space in the Trophy towers. We were recently engaged to market the top floor at Bay Wellington Tower in Brookfield Place for sublease, a once-in-a-generation opportunity in one of the most sought-after office complexes in Canada. We’ve had a lot of interest so far and it will be interesting to see who ends up taking this space.
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Article contributors
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Glenn Gardner
Principal
Vancouver
Consulting & Advisory, Office Leasing, Sales & Leasing
+1 604 687 7331
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