chris@officesearchtoronto.com

Location Supersedes Space as Key Driver to GTA’s Office Market Activity

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While Colliers’ latest office report offers up no real surprises, the unexpected may still be coming down the road when new inventory in the pipeline takes root in the market, executive managing director John Arnoldi tells us. The study showed that Toronto’s office market continued to thrive during Q1 ’14, particularly the downtown core. The average vacancy rate across the GTA dropped by two basis points to 5.8%, while average asking rent inched up from $18.48/SF at the end of 2013 to $18.60/SF. A big trend: taking smaller office space in premium locations, John says. Activity in the downtown core was fueled by financial, insurance, and tech tenants.

- Premium location and smaller footprints to dictate office market trend in the coming years

- Migration of tenants from suburbs to downtown may cause market imbalance

- Industrial market benefits from retail resurgence

Toronto’s office market continued to thrive during the first quarter of 2014, especially in the downtown core area according to Colliers International’s GTA report released today. The average vacancy rate across the GTA dropped by two basis points to 5.8 percent quarter-over-quarter, while the average asking net rent inched upward from $18.48 per square foot at the end of 2013 to $18.60 per square foot during the first three months of the year. However, the Colliers report forecasts a possible reverse trend in vacancy rates in the coming years as tenants start shifting their focus and demand to premium location over office size, a trend that is increasingly gaining ground in the city.

“Our research shows the emergence of a few trends that have the potential to re-shape the future of the GTA’s office market,” says John Arnoldi, executive managing director, Toronto Region with Colliers International. “Firstly, the migration of suburbs and uptown tenants south along public transportation lines, coupled with demand for smaller parcels of office space in premium locations, are likely to push vacancy rates in other sub-markets upwards. Additionally, there is a pipeline of 5.4 million square feet of office space under construction in the GTA.”

GTA Office Market Trends and Forecast

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The downtown core has been a strong performer during the first quarter of the year. Activity was fueled by financial, insurance and tech tenants looking to upgrade to newer and more efficient space. Vacancy rates in this sub-market fell below four percent (3.8 percent down from 4.1 percent) for the relevant quarter, especially in the downtown west area (2 percent in Q1 2014, down from 3.6 percent in Q4 2013). However, as new supply is expected to become available, these low vacancy rates are expected to rise.

“The big question mark that is lingering over the GTA office market stems from the origins that will absorb the new supply of space. A balanced absorption from various markets across the GTA is not likely going to significantly affect market fundamentals and performance over the long-run. However as an example, an exodus of a large number of tenants from select markets into downtown may cause a spike in vacancy rates elsewhere and stimulate market imbalance,” adds John Arnoldi.

Toronto office market report q1 2014 from Chris Fyvie

DTZ – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Dtz commercial office leasing market report 2014 from Chris Fyvie

 

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Cushman & Wakefield – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Cushman toronto office leasing market report 2014 from Chris Fyvie

 

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CRESA – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Cresa office leasing market report toronto 2014 from Chris Fyvie

 

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CBRE – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Cbre office leasing market report 2014 from Chris Fyvie

 

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Avison Young – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Avison commercial office leasing market report toronto 2014 from Chris Fyvie

 

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Jones Lang LaSalle – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Jll commercial real estate market report toronto 2014 from Chris Fyvie

 

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Colliers – Toronto Office Leasing #CRE Reports 2013 – Year In Review

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What are your bold predictions for the commercial real estate office leasing market in Toronto for 2014?

Colliers toronto office leasing market report 2014 from Chris Fyvie

 

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Top 20 posts about Toronto from BlogTO

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These are the top 20 posts from BlogTO for 2013. Not all real estate but some interesting stuff!

20. Photos show Rob Ford meeting with alleged drug dealer
19. New fantasy map imagines the TTC network in 2054
18. Letterman gets celebrities to do their best Rob Ford
17. Watch the Rob Ford re-election campaign video
16. The top 10 Rob Ford videos of all time
15. Gawker says it’s seen video of Rob Ford smoking crack
14. Big budget TV show liquidates its wardrobe & props
13. 30 photos of naked people riding bikes around Toronto
12. Rob Ford admits he smoked crack cocaine
11. Toronto to get $500 million bike lane network
10. 8 Hamilton restaurants & food shops worth driving for
9. Dean Blundell Show suspended by 102.1 the Edge
8. The top wing night deals in Toronto by day of the week
7. New map charts Toronto neighbourhoods by stereotype
6. 25 photos of the new Ripley’s Aquarium in Toronto
5. Jon Stewart weighs in on Rob Ford’s latest gaffe
4. Photos of the 2013 Toronto ice storm
3. 10 quirky things you might not know about Toronto
2. Daily Show parody of Rob Ford might be best yet
1. Massive rain storm hits Toronto causing flooding and power outages

The Changing Work Environment

Why today’s real estate choices will affect your future business.

The next evolution of the workplace is underway. The office now plays a vital role in a company’s ability to attract and retain talent, breed innovation and do more with less.

Traditionally, employees were restricted to a physical office, but today, the office can be accessed through the palm of your hands. This paradigm shift is ongoing and change is inevitable for companies to stay competitive. In the next decade, savvy business leaders will be focused on three connected factors driving change in the workplace:

  • Talent Attraction and Retention

  • Productivity: Innovation Through Collaboration

  • Technology: Doing More With Less

 

Talent Attraction & Retention
Gen Y: Get Ready, They’re Here

Gen Y, Millennials, Echo Boomers – no matter what you call them, most agree that they are a force to be reckoned with. In less than a decade, they will make up nearly half of Canada’s workforce and are already driving a major shift in ideas as to how and where we work.

Gen Y (most commonly referred to those born between 1981 and 2000) represent the future of our workforce. With a preference for flexible hours, and a need for work-life balance, Gen Y can sometimes be perceived as lazy, unprofessional and having a sense of entitlement. However, reality has shown they are dedicated and hard-working, with the majority of them growing up using technology and willing to work anytime and anywhere.

In a recent survey conducted by Odgers Berndtson, only 41 percent of global executives said they are prepared for the cultural changes that will take place as these generations replace current leaders. However, the majority of the respondents agreed that their organizations are willing to make the necessary changes in order to attract the best talent.1

Since 2011, Canada has seen more employees leaving the workforce than entering it,2 which takes the “war for talent” to a whole new level. Understanding what motivates Gen Y, and putting the framework in place to deliver on it, will give companies a considerable edge over their competition.

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In terms of the workplace, Gen Y has different needs than previous generations:

  • Central location

    Gen Y choose where they want to live, and then, where they want to work. Often choosing not to own a vehicle, easily-accessible locations are paramount to this generation. Over the last few years, several companies have relocated to more central areas near transit hubs, including Telus, Coca-Cola, and Google, all opening additional offices or relocating their suburban offices to Downtown Toronto.

  • Flexibility

    Gen Y value the independence and flexibility of working where and when they choose, both in and out of the office.

  • Connectivity

    Gen Y have grown up with a constant connection to others through social media and other outlets. They value a workplace that enables open collaboration and social interaction.

Currently, many managers are trying to keep up with the workforce changes. With Baby Boomers, Gen X and Gen Y all in the workplace at the same time, and all with very different needs and expectations, the rate of change has been somewhat tempered by this clash of cultures. Considering Gen Y are already here, planning now for the future is critical.

Take Action: Profile your employees to understand generational composition. Employee surveys are a great tool to gather insight on wants and needs.

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Productivity
Innovation Through Collaboration

In the past, maximizing profits depended on the implementation of ‘systems’ and ‘stream-lined’ processes that got things done better, faster, and cheaper. Only recently have those ideas started to change. Employers have begun to realize that happy, healthy and stimulated employees and an improved office culture directly affect productivity, frequently leading to more innovation and ultimately to business growth.

Successful companies are now viewing real estate as more than just office space, realizing that having dynamic office space creates a competitive advantage. High-tech firms are making headlines with trendy workspaces that include mini-golf courses and video games scattered throughout the office. However, behind the fun and games, there are very sophisticated design principles at work to ensure that these offices not only support collaboration and creativity, but breed it. Research has shown that “the average worker only sits at their desk around 35 percent of the time,”4 leading to more emphasis being placed on communal areas including lounges, kitchens, brainstorming spots and even spaces designed to simply allow for casual interactions.

Take Action: Review departments and functions to determine which would benefit from specific workspaces to increase team collaboration, casual meetings, and multi-media conferencing.

Technology
Doing More With Less

Telecommuting (or teleworking) is a trend on the rise and although it doesn’t work for all companies, certain industries are benefitting from a large boost in productivity and reduced costs. In addition to the flexibility it offers employees, there are increased cost savings to the employer as well.

Advances in technology have allowed us to not only access files and documents from outside the four walls of the office, but to have face-to-face meetings on a national or international basis with virtual meeting software or even apps on your smart phone. While nothing will ever replace the in-person feel, the cost and time savings in using this technology are unquestionable.

In cases where employees work both remotely and on-site, hoteling stations can be arranged to make better use of a company’s floor plan, resulting in a smaller footprint per person in the office and allowing additional costs to be allocated to common area space.

Colliers projects that by 2018, square feet per employee bench-marks will fall as low as 145 square feet, compared to today’s average of 172 square feet per person. Despite a decrease in individual space requirements, the need for additional meeting rooms and common areas has kept the total amount of space required from plummeting.

Take Action: Technology enables mobility, mobility enables shared workspaces, and shared spaces result in a decrease in square footage per employee. Evaluate how current office space is being used to ensure maximum efficiency.

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Final Thoughts

Business leaders today have a lot to consider when planning the future of their workplaces – how can they leverage real estate to act as a tool not only to attract and retain talent, but also as a means of boosting productivity and containing costs?

Individually, people, productivity, and technology are not driving change, but collectively, they have created a perfect storm. Real estate has gone beyond just bricks and mortar, and companies that are prepared to take action now will have the potential to accelerate their success.

For more information, please contact:
Shawna Rogowski – shawna.rogowski@colliers.com
or
Chris Fyvie – chrisfyvie@colliers.com

Source
1. Odgers Berndtson: “After the Baby Boomers – The Next Generation of Leadership,” 2012

2. Stats Canada, May 2011

3. Bill Haas, Haas Performance Consultants LLC, AAPEX Expo, 2012

4. WORKshift Canada: “The Bottom Line on Telework,” 2011, David Craig, Director, DEGW quoted.

5. Colliers International Research

Spark the changing work environment from Chris Fyvie