BLOG: The Future of Office Space post COVID-19, My Place, or the Office?

By Glenn Miller, Iain Dobson, and Stephen Johnson, SRRA

The challenge of imagining the future of cities in a post-pandemic world has been taken up by a wide range of opinion leaders, policy makers and urban practitioners, ranging from urban planners and architects to real estate professionals, economists, and institutional lenders. Thoughtful commentaries by Adam Gopnik in the New Yorker and Jack Shenker in the Guardian remind us that plagues, pandemics and comparable disruptions have shaped cities and civic behaviour over many centuries. Expect more of the same, they suggest, and then some. What lies ahead for Greater Toronto which has survived SARS in 2003, the financial meltdown in 2008 and a host of other shocks to the economy? None of these events changed the distribution of office space development in the Region or materially affected the rate of employment growth. One of the central questions being asked as companies and their employees discover that working from home is possible on a grand scale, is whether this will have long-term impacts on the demand for new office space especially in established high density clusters.

Colliers Real Estate (‘The office of tomorrow is here — and you’d better get used to it’), and Eric Reguly in the Report on Business (‘COVID-19 may change the office tower business forever’) suggest that working from home could indeed become the new normal. This is not first time that city dwellers have been faced with confident predictions that their working world is about to be disrupted.1 There are many reminders that illustrate how hard it is to successfully predict how business will respond to potential disruptions. The work at home solution to productivity has a long history of starting and stopping. Until the COVID-19 crisis, working from home had largely been driven by employers as a cost-cutting measure2. Starting with the introduction of electronic file storage, employers have consistently relied on technology to reduce the cost of office space and increase employee densities. Companies like Xerox in the 1980s, IBM in the 1990s and Compaq after 2000, all drove investments to encourage working from home for mostly cost-cutting reasons. With every innovation, affordable desktop-based video conferencing, messaging apps and other aids to network-based connectivity, industry observers and policy makers alike have historically predicted that technology will reduce office space demand by orders of magnitude. The advent of the personal computer in the mid-1980s, followed by the impact of a severe recession in the 1990s, saw a major shift in the ratio of ‘professional’ to ‘support’ staff, as lawyers, engineers, administrators and the like learned to do their own typing. While this resulted in less personal space per worker, who by now were working in cubicles instead of private offices, the requirement for more meeting rooms and spaces for collaboration had little effect on the overall quantum of office space needed by each company. Despite considerable advances in the efficiency and concentration of employees in office space, the requirement for new offices in the GTA continued unabated. From the late 1970s through to today, construction of new office buildings continued at an average close to 3 million sq. ft per annum., much of it in suburban locations beyond the reach of reliable public transit3. The Region’s office inventory now stands at more than 200M sq. ft., the third largest such concentration of office space in North America. The COVID-inspired requirement for self-isolation is a social experiment that has been imposed abruptly at an unimaginable scale. Will this impact the creation of new office? From the moment a prime tenant agrees to have a major new building built to the time it is ready for occupancy is a minimum of five years. The full impact of the depth and scope of city-building outcomes will depend on whether major tenants will continue to provoke new construction. That will not be apparent for several years. After the 2008 financial crisis the new supply of office space was only reduced in 2013 to 2014, then followed by greater than normal supply to catch up to demand. The reality is that working from home is not a viable option for many workers. Only those with the luxury of space at home and the freedom to work without interruption can realistically choose that option. The trend to apartment /condo living is on the rise, which means that competition for workspace at home will be at a premium for many in the years ahead.

In the search for villains and potential solutions, it will be important to avoid demonizing high density development clusters and close-packed work environments such as offices as factors that facilitate the spread of the virus. Taipei is one of the highest density cities in the world, with massive concentrations of office space, but stringent public health measures imposed by Taiwan, including physical distancing, have effectively mitigated the impact of COVID-194. In contrast, low-density suburbs like New Rochelle are among the hardest hit areas in New York, currently the epicenter of the pandemic. While the world-wide work-from-home experiment was instituted to separate and isolate people, will technological breakthroughs in telecommunications be implemented from home or from an office? It is worth asking if this capability will outweigh the attraction of face-to-face communication or prove to be an effective substitute for personal interaction over the long-term. One of the principal benefits of the modern office environment is the potential to blend networked connectivity with innovation stimulated by face-to-face interaction. Once vaccines, early detection processes and other complementary strategies are in place, can we expect that city life defined by proximity will return?