Issue #2 - Suburban Office Migration
Suburban Offices Showing Signs of Life
The Toronto office market vacancy was 1.2% in Q1 2020 and has steadily increased quarter after quarter, reflecting a 9.1% vacancy rate in Q3 2022. Though Downtown Toronto’s vacancy rates continue to climb, we are starting to see signs of life in the suburban office markets of the Greater Toronto and Hamilton region. Renewed interest in the Burlington, Oakville and Hamilton regions for office leasing and subleasing proves that the office market is rebounding. We’ve identified three main factors contributing to office migration.
Employees want to be closer to home
Though the lockdown had many downfalls, the undisputed upside to being able to work from home was a lack of commute. Flexibility to arrange childcare, and appointments, and focus on work-life balance were noted as added benefits to being close to home.
Though time is valuable, the actual amount saved on travel expenses is tangible – without a commute, employees can pocket money that would have been spent on fuel, car maintenance, and transit. In 2022, weekday ridership for GO Transit is at 49% of what it was in 2019. Weekend ridership, however, has recovered 102% – meaning that people are not afraid of taking public transit to head Downtown for work, they don’t need to spend their time commuting downtown.
Hub and Spoke Model
With many businesses introducing a more flexible working schedule with remote and hybrid options it’s time to retire the old idea that a business needs one central, flagship location for all employees to work. Instead, employers are realizing that a hub and spoke model with multiple small-medium sized locations is more convenient for employees and offers more options for clients. This provides more flexibility for regional collaboration giving employees who want to work.
We have seen success with this model in the region. Tyler Cowie, CEO at Westinghouse HQ says, “We have installed a flexible short-term furnished office product called Branch HQ that has proven to be very successful (at the time of writing this we are at capacity). The last 6 months or so have shown to be far more promising… more tours, prospects, offers, signed deals, and excitement. What we have learned is that businesses are looking to provide workplace options closer to where their employees are.” Typically, these business centers include internet, printing, reception services, and cleaning services and often provide furnished offices, resulting in lower operating costs for the tenant.
Businesses Save on Lease Rates
Halton and Hamilton’s average lease rates in Q4 2022 were $16.97 compared to Central Downtown Toronto at $38.22. Employee parking in Downtown Toronto averages $20-25 per day, an average of $400-$500 per month in parking whereas the average daily rate in Downtown Hamilton is $5.75 per day, an average of $115 per month.
With such a significant difference in cost for employers, and employees wanting to be closer to home, it makes sense to consider a smaller square footage downtown with a hub and spoke model or for some relocation altogether.
If relocation is something your business is considering, our team can help. Get in touch with a member of Team Murray & Faldowski to show you options for leasing in the Halton and Hamilton region.
References
Canada’s office market fights on, industrial stays strong: Colliers
https://renx.ca/colliers-q4-national-report-covers-office-and-industrial
National Market Snapshot Q4 2022
https://www.collierscanada.com/en-ca/research/national-market-snapshot-2022-q4
More people take GO Transit on weekends now than before the pandemic. That may not be good news