Commercial real estate in the hybrid working era
Over the past two years, all indications are that hybrid workplace model adoption is not only growing but will stay a dominant choice for the foreseeable future. This is a result of a number of factors, including the significant investments businesses have made in remote work infrastructure capabilities, and the growing employee demand for choices in terms of where, when, and how they want to work.
Hybrid models in place today take on many forms. Some public service agencies, financial institutions, and companies such as Apple and Intuit, are requiring staff to work on site a minimum number of days a week. Enterprise operations such as Intact Financial and Airbnb, have announced hybrid models that allow teams to discuss and plan when they will work from home and when they will work out of the office. Others, such as Ubisoft and OpenText, have announced a 100% hybrid model with no minimum requirement for in-office hours.
When we wrote the future of work article in August 2020, everything was in a state of uncertainty. Today, the picture is clearer as the hybrid model gains traction. However, additional investments will be needed to strike the right balance and ensure a smooth integration of remote and on-site work environments.
The impact on the commercial estate industry
Before looking at the technology picture, let’s first consider how changes in commercial real estate may be impacting hybrid workplace decisions. Colliers reports that in the GTA, net asking rent per square foot has actually increased since the pandemic, largely due to the increase in available space in costlier downtown buildings.
When we look at specific areas within the GTA, such as downtown or GTA West, we see rents have been relatively flat over the past two years, while availability rates (the ratio of available space to total rentable space) continue to increase quarter by quarter. [1]
In summary, office space is not getting materially cheaper, but there is more space and therefore more options available than before the pandemic.
The first step in determining where and how to invest is to assess current space requirements and consider how technology can play a role in reaching a workable hybrid model. When considering physical space with the hybrid model, options such as hoteling and shared spaces, or overall reductions in space could be key discussion points in hybrid workplace planning.
Hybrid work technology brings challenges and opportunities
The introduction of the hybrid work era comes with a new list of requirements for your physical and virtual workplaces, including technology. Yet only a small percentage of businesses are fully prepared to reap the benefits. Mick Heys, VP of Future of WorkSpace & Imaging at market intelligence firm IDC has been quoted as saying:
“Only about 10 percent of workplace managers said they thought that they were prepared for a hybrid workforce,” [2]
It is essential that businesses have sufficient resources and policies in place to support seamless transitions between home and in-office work activities. Much of the groundwork is in place already as businesses were pushed to accelerate their digital transformation agendas by several years. [3]
For example, the pandemic led to a dramatic increase in investments in cloud solutions, ready-made software, and collaboration tools. These have gone a long way in enabling employees to securely access and share files from any location and work collaboratively in real time (e.g., Microsoft SharePoint, Google Drive, Dropbox).
Adopting digital tools has also reduced IT costs as system design, maintenance, hardware/software acquisition, and updates are handled externally.
The rise in both remote and hybrid workforces also requires a significant shift in cybersecurity strategies and processes. Organizations need to review their stance on safeguarding information privacy, personal device usage, and the inherent security threats, securing information transmission between offices and homes, employee authentication and access protocols, and policies around public Wi-Fi usage.
Talk to the experts
As the hybrid work model becomes mainstream, organizations need to ensure that they have the right tools, processes, and protocols in place – from redesigning their office spaces and workplace policies to investing in the technology tools that allow for safe and secure collaboration.
Our real estate and construction group have experience providing practical insight and understanding the trends that impact your business.
About the author
Matthew Downey, CPA, CA, CBV, CFF, is a Senior Manager in our Valuations team and a member of the real estate and construction group at Fuller Landau. He can be reached at 416-645-6513 or mdowney@fullerllp.com.
[1] https://www.collierscanada.com/en-ca/research/canada-cap-rate-report-2022-q2
[2] https://www.propmodo.com/technology-investment-is-the-only-way-to-make-hybrid-work-work/.
[3] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever