eResearch | The tech industry has always been a trend-setter for the corporate office environment, from open-office concepts to agile development, and now due to the pandemic, several large tech companies are announcing transitions to permanent work-from-home operations.
According to Statistics Canada, 40% of the workforce has shifted day-to-day operations to home since the outbreak of the COVID-19 virus. In March, the number of Canadian employees working from home increased by 178% to five million.
Transition to Permanent Remote Workspaces
In light of the COVID-19 pandemic, several online-based technology companies have announced plans to allow employees to work remotely from home, permanently.
In early May, Twitter Inc. (NYSE: TWTR) became one of the first companies to announce that it would allow its employees to work permanently from home, even after the COVID-19 pandemic passes, as it works towards becoming a more “distributed” workforce.
Last week, Shopify Inc. (TSX: SHOP), the Canada-based e-commerce platform, announced the closure of all its offices until 2021, after which its employees are expected to primarily work from home even if the pandemic ends. This event concerns the commercial real estate market, as earlier this year Shopify announced plans to lease a new 70,000 sq. ft. office space in Vancouver, which was expected to add 1,000 new employees.
In the same week, Facebook Inc. (NASDAQ: FB) announced plans to restructure its operations to allow up to 50% of its 45,000 employees to work from home. In addition, Facebook is expected to start becoming more active in hiring remotely outside the San Francisco Bay area where its headquarters are based.
The rapid transition into remote workspaces was only possible due to several key technology companies who developed platforms and tools that supported digital transformation in areas such as cloud storage, workplace communication, and video conferencing.
Tools for the Stay-at-Home Worker
Dropbox Inc. (NASDAQ: DBX), Slack Technologies Inc. (NYSE: WORK), and Zoom Video Communications Inc. (NASDAQ: ZM) are all different companies focused on supporting the transition to remote work spaces through virtual and online platforms and tools.
On March 31, 2020, we highlighted Dropbox, Slack, and Zoom, in an article called “Dropbox, Slack, and Zoom: Essential Technologies for Transforming Businesses into Remote Environments”
Canadian Office Real-Estate Market
In the past couple of years, the Canadian real-estate market experienced vibrant growth due to increased exposure in the technology sector, stimulating increased investments into supply for office spaces.
The pandemic may have slowed down demand for office spaces temporarily, however, overall supply in the market maintained stability. According to Altus Group (TSX: AIF), a commercial real estate services firm, in Q1/2020, the vacancy rate in Canada dropped to 9.5% compared with 10.3%, year-over-year.
The lockdowns mainly impacted smaller businesses, while average asking rental rates remained unchanged. In Q1/2020, Canada had 102 office projects under construction, totalling 21 million sq. ft.
In Toronto, the tech industry’s rapid growth has stimulated multiple technology companies to expand office spaces within the downtown core area, which has pushed Toronto’s vacancy rate to a record low of 1.9%.
Major recent lease transactions in Toronto were led by Alphabet Inc. (NASDAQ: GOOGL), who now occupies a 400,000 sq. ft. office owned by Carterra Inc., and IBM Corp. (NYSE: IBM), who recently signed an agreement to occupy a 60,000 sq. ft. office owned by Cadillac Fairview Corp. and the Ontario Pension Board.
Though Canada’s real-estate market was in a comfortable spot before the pandemic, as more and more companies announce changes in workplace standards, the stable supply and demand may drastically change.
Transportation and Commuting
Several large technology companies had plans for extensive office space expansions, but if these plans are put into question due to the viability of remote work spaces, it could create a domino effect impacting public policy and the commercial real-estate market.
In Toronto, Ontario, where nearly half the employees are office workers, the government invested billions into the transit system, in an effort to develop the needed infrastructure for commuting workers from the outskirts of the downtown core area.
Since Toronto has limited space for residential properties, public policies have been pushed to improve public transportation to allow employees who live outside of the city to commute in to work.
If more and more companies adapt to permanent remote work spaces, less people will congest commuting lines such as highways and public transit. In addition, if vacancy rates increase for offices in Toronto, policies may be implemented to allow office buildings to transform into residential properties.
The future is still widely uncertain as we still have no idea when a vaccine will be developed for the COVID-19 virus and what new standards will become implemented across economies and societies.
It will be interesting to see how many more companies follow suit in the new trend of permanent remote work spaces throughout the rest of the year.
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