A Q&A with John Duda on the Age of Hybrid Work

The president of Colliers Real Estate Management Services sat down with CB to discuss the evolution of commercial office real estate amidst shifting workplace norms

How has the emergence of hybrid work impacted the state of commercial office real estate?

I believe we’re at the beginning of that journey. Pre-covid, there were a number of very large global firms like IBM and Yahoo Finance that had large work-from-home programs. Over time, as productivity began to decline, they brought everyone back into the office. It’s an issue that hasn’t been resolved, and as more businesses have experienced this over the course of the pandemic, discussions around productivity and culture are taking place. It’s why we’ve conducted our research on The New Age of Hybrid Work because it does impact the office and determine how we improve things like productivity and company culture.

As office property managers, our role is to provide all of the services needed to maintain and operate these offices and to meet the needs of both our tenants and our investors. Amidst the emergence of hybrid work, it’s important for us to understand the behaviour of our tenants in order to better serve both them and our investors. This way, we can be sure to provide the right services that make up a desirable and functional place of work.

Have you witnessed a growing demand for flexible office space?

There absolutely is and this was a significant topic in our New Age of Hybrid Work survey. What’s interesting is that the supply for flexible office space pre-covid was for roughly 1% of the office space, whereas the demand for it today proposes 8% of the office space be used this way. A lot of capital is required to create these spaces, so what we anticipate is a lot more options in the marketplace over the next few years. Owners and tenants are going to get more creative about how they address their lease space in order to create a variety of uses for the office.

What role does commercial real estate play in the long-term success of businesses that embrace hybrid work?

Office spaces can and should accommodate the evolving needs of tenants. We’re focused on reducing friction and barriers that make a return to the office sometimes difficult. Parking, food and daycare are examples of the critical factors many employees face in a return to the office. Generally speaking, commercial real estate can support the success of a business best by adhering to the different types of amenities that businesses need. There are even tenant apps that we’ve begun using to communicate updates directly with our tenants on matters like security, safety protocols, new amenities and more.

The concept of wellness at work has also taken off since the pandemic. This requires a higher degree of collaboration between ourselves and the tenants in order to better understand their interests and how to design a better office culture. At Colliers-managed 95 St.Clair West, we replaced the concrete in front of the office tower with an urban farm. Most of the vegetables harvested are provided to a homeless shelter in the neighbourhood, but some are available for tenants as well. It’s a small example of how forming a space with meaning and purpose builds community and a greater desire to be in that space.

How does hybrid work impact small to mid-sized businesses in comparison to large ones?

In our research, we looked at small, medium and large businesses. To our surprise, small businesses are back in offices more so than any other. Medium-sized businesses we found have made the move a little less and it seems larger companies are working more from home or in a permanent hybrid model. I think one of the most significant ways that hybrid work impacts small versus large businesses is in the ability to facilitate a return to the office.

Within small businesses, people are often wearing many different hats. Whereas large businesses might have entire floors of staff dedicated to specific, individual tasks. When processes turn out to work less productively at home, a return to the office can be easier to facilitate for some businesses rather than others. It all comes down to structure and how easy it is to transfer your workforce, who is being impacted and what the day-to-day will look like.

How can business executives and their investors remain on the pulse of Canadian real estate trends?

Colliers produces all kinds of reports that come up quarterly. These reports address things like vacancy rates, financial trends, marketplace forecasts and more. So, executives and investors can leverage these reports to determine their investment plans for the future based on where we think the markets are headed. It’s all about using the resources available to you.

What are some of the most prevalent findings in Colliers’ The New Age of Hybrid Work report?

Another important finding from this report is the state of vacancy in commercial office real estate in Canada. We are going to see the average rate increase from 13% to about 15% over the course of the next year. It’s not equal in all markets and it’s not equal across all asset classes, but we do see this increase already taking place, though it’s estimated that by 2025 this will begin to decline and absorb back into the marketplace.

How can businesses prepare for a shift toward hybrid work today?

You must be certain about what your business needs to do to stay relevant and competitive. Once you have a list of determinants, if you choose to address your employees and begin a shift toward hybrid work, I would advise that this is done with as much intention as possible. Disclose why you’re making the proposed changes that you are. It’s important to build a culture of purpose instead of simply expecting employees to show up. Discussions with staff about what is and isn’t working are also a very important part of remaining flexible.

Watch the fireside chat with John Duda.

Joseph Cicerone
Joseph Cicerone