West Coast landlords seeking office tenants may have to take a closer look at how convenient their space is for commuters.
Access to transit, parking and commute times are dominating the conversation in the office market, according to a Feb. 12 report from Colliers Canada.
The commercial real estate firm predicts the national vacancy rate will reach 15 per cent by the second quarter of 2025.
Lesley Heieis, a vice-president at Colliers’ B.C. office, was not able to say when Vancouver would reach its peak vacancy, which her company estimated to be at 8.6 per cent as of the fourth quarter of last year.
“Commute times are really having a significant impact on how much time an employee will spend at the office, and Vancouver tends to have those longer commute times. So as a result, it might take slightly longer for the vacancy rate to peak and then stabilize,” said Heieis.
The Colliers report concluded hybrid work is putting pressure on vacancy rates in regions such as Metro Vancouver of the Greater Toronto Area.
“This is mainly attributable to longer commute times leading to heightened employee resistance to work at the office, and in turn, heightened pressure for companies to re-evaluate their space needs,” the report said.
It is estimated that an average commute time lower than 10 minutes is correlated to an average market vacancy that is two per cent lower, said the report.
In addition, companies are 10 per cent more likely to renew a lease for every additional day that the majority of employees are in the office.
“One thing that many employers are doing, our tenants in Vancouver, is they're mandating employees back to the office. But they are offering some flexibility as to what those days and hours might look like, which then in turn helps those tenants possibly reduce their commute times,” said Heieis.
The number of days that employees are mandated to be in the office has grown from 2.5 to 3.3 days between 2022 and 2023, according to Colliers.
In addition, the number of companies that have finalized their approach to in-office versus remote-work days has risen from 49 per cent to 62 per cent during the same period.
Cost of rent and transportation accessibility were identified as the top two tenant priorities when deciding whether to lease or renew office space.
Heieis said that tenants are offering creative solutions like shuttle services to attract employees back into the office.
“Whether that is helping with the commute time, locating space closer to transit or just having a work environment that is so desirable that the commute time is less of an issue … every landlord is looking at their own building to say, ‘What makes sense for our tenants?’” she said.
