Office vacancy rate could peak in 2024 as hybrid work models gain popularity: report

Office towers, condos and apartment buildings are seen in downtown and the west end of Vancouver, on Thursday, January 19, 2023. (THE CANADIAN PRESS/Darryl Dyck)

TORONTO -

A new report by Colliers Canada predicts the national office vacancy rate could peak at approximately 15 per cent by the end of 2024 as the rise of hybrid work models prompt companies to reduce their office space.

It says office vacancy in Canada has risen from around eight to 14 per cent since 2020, but that figure is expected to fall in early 2025 barring a major economic downturn over the next 18 months.

Economic growth is tempering vacancy growth, even as hybrid work becomes more popular, thanks to businesses expanding and new companies entering the market.

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Fifty-five per cent of companies say they have finalized their approach to balancing in-office and remote work, up from 49 per cent in the fourth quarter. Eighty-six per cent of tenants indicated they are satisfied with their current hybrid arrangements.

The report says the average number of days companies are mandating employees to work at the office increased from 2.5 in late 2022 to three last quarter.

Colliers says commercial tenants are 10 percentage points more likely to renew a lease for each additional day their employees work at the office, with companies most likely to keep their current square footage of space if staff work in-office at least four days per week.

This report by The Canadian Press was first published Aug. 15, 2023.