Remote workers are transforming Canada’s real estate industry

Commercial real estate experts gathered in downtown Vancouver in October to discuss the impacts remote workers are having on Canadian cities. The panel discussion, hosted by UBC Sauder’s Centre for Urban Economics and Real Estate, revealed that businesses are adapting to changing work styles in creative ways. Here are some highlights from the discussion. 

Canada leads the developed world in remote work days

In Canada, people work from home or out of the office more days per week than anywhere else in the developed world – ahead of the U.S., UK, Europe, Africa, Latin America, Asia, Australia, and New Zealand. The reasons why Canadians work from home are many, but statistics show English-speaking countries lead non-English speaking countries in remote work habits. 

“Remote work propensity varies a lot across sectors, cities, and countries, but remote work is definitely here to stay,” says Victor Couture, UBC Sauder Distinguished Scholar and Associate Professor of Economics at the Vancouver School of Economics. “However, in Canada, the share of remote workers is not rising. What we’re seeing is the hybrid work model becoming more common with people typically working three days in the office and two at home.”

Redesigning office spaces to feel more like home 

Not all workers are happy about being called back to the office. According to Lisa Chan, Vice President of Corporate Real Estate at QuadReal, employers are redesigning office spaces to create a more welcoming office experience. 

“In a competitive marketplace where it’s tough to recruit top talent, employers need to invest in their office space to make it appealing,” explains Chan. “The tech companies have historically been amazing at this, but other industries are starting to catch up by creating amenity-rich workspaces.” 

Office cubicles are being replaced with reservable desks and boardrooms as well as collaborative spaces such as lounges with comfy couches, high-end kitchens, and outdoor seating for meeting and socializing. Employers are also answering the call for a healthier work environment by providing quiet rooms for work, prayer or meditation. 

Residential developments that cater to remote workers 

The remote work movement is not just revolutionizing the office experience, it’s also impacting the condominium market. Chaya Bains, Senior Manager of the Commercial Banking Real Estate Finance Division at CIBC, says common areas now include shared workspaces for residents. 

“Spaces you would see in office towers are being built into residential towers,” says Bains. “We’re seeing boardrooms with technology, desks and other amenities for residents to use. Also, residential units have additional flexibility, so the space can be both a home and an office.”

Bains believes the real estate sector will continue to evolve and offices with deluxe amenities, environmental sustainability, and easy access to public transit will have the best chance of winning over Canadian workers. 

Finding new uses for empty office buildings 

Pedro Tavares, Senior Vice President of Vancouver-based JLL Valuation and Risk Advisory, told the audience that some cities in Canada are converting office buildings to condos and hotels. 

“Calgary is leading the country on this trend, likely influenced by the fact the local government is helping to fund the construction costs,” confirms Tavares. “In Vancouver, we’ve seen a few office buildings converted to hotels, but conversions are very expensive, so the return on investment makes it really challenging.”

Tavares, who analyzes and determines the value of commercial real estate in Canada, confirmed that investor sentiment is down.  “The market has really changed and values are off. Investors are on the sidelines and older buildings in particular with high vacancies are going to continue to struggle.”

Graham Drexel, Executive Vice President and Chief Financial Office of real estate firm Grosvenor – the sponsor of the UBC Sauder event – says one of the best ways to understand the impact of remote work is to watch where the capital is flowing. 
“Especially post-pandemic, there’s been a big shift away from office and retail towards multi-family and industrial,” says Drexel.
 “According to the NCRIEF Property Index, in the United States, office and retail account for 40 per cent of capital allocation across the four sectors: office, retail, industrial and multi-family. If you jump back 10 years, office and retail accounted for 60 per cent of the index. Why is the capital is moving? One of the reasons is this whole theme around how to return to the office.”

What’s next?

The panelists predicted that employers will continue to reduce their office footprints to better match their hybrid workforce – sub-leasing their unwanted space to other tenants. As the supply of sub-lease offerings grows, those shopping for office space may find some bargains.

Tom Davidoff, Director of UBC Sauder’s Centre for Urban Economics and Real Estate, agreed with the panelists that there is still uncertainty around the future of office demand, location, and design.
"There are powerful forces pushing both towards and away from remote work,” says Davidoff. Office space is expensive to employers. Commuting is both expensive and unpleasant for employees, and many parents value being able to do chores and pickups during the work day. However, the premiums firms have paid to have offices in downtown locations is evidence that there are real benefits to concentrated employment centres that can’t easily be replicated remotely.”

To view a recording of the October 26, 2023 panel discussion, click here.