Occupancy Index

Occupancy Index - March 1st

occupany index (report),  2021-03-01.png

Comments –

Recent interviews suggest that HR specialists and executives are spending even more time working out the logistics of partial in office and work at home strategies. Of note is the increased frequency of individuals who are requesting to return as permission and regulations permit. This trend is not moving the needle on the Index although it is close to being 5% again. 

The projections for an increase in occupancy by some are moving up from a few months ago.  We may see an increase later in March, by as much as a couple of points, subject to any new restrictions.

For those who were able to attend the Forum on the Future of Office Space, you can expect the summary to go directly to you early next week. For those how missed it we will be putting a summary on the website by March 29th… Stay Safe…

 

Links to Articles of Interest

Pandemic will impact growth rates in and within cities, affecting talent attraction among other trends

UK suffered through three lockdowns, but office occupancy increased each time people were allowed to return.

UK opinions range on back to the office

Who will bear the cost of alterations to office layouts?

U.S. execs suggest proof of vaccination key to entry back to the office

US companies criticized for lack of forward planning in anticipation of return to the office

The role of an HQ post-pandemic raises questions ranging from floor design to ‘messaging’ – likely to have greater impact in larger US market that has multiple large metros

Occupancy Index - February 15th

occupany index (report),  2021-02-19  (1).png

Comments –

The Future of Office Space

SRRA is conducting a Forum to discuss the future of office space. The Forum is based on the research done to create the Occupancy Index, best practices world-wide and the Economic Impact of COVID on Downtown Toronto.

If you are not registered and would like to attend please reply to this email and we will send you registration details.

The Forum is on Tuesday March 2nd from 8:30am to 10:30am

Links to Articles of Interest

Potential downside of remote work as concerns emerges about bullying on line.

Reshaping rush hour? The argument that work from home will reduce the need to attend offices.

European practices on requiring employees to return to the office influence U.S.

Even tech firms see in-office work in future, but surveys confirm wide range of thinking.

Why Offices have changed forever

Occupancy Index - February 1st

occupany index (report),  2021-02-01.png

Comments

The Future of Office Space

SRRA is conducting a Forum to discuss the future of office space. The Forum is based on the research done to create the Occupancy Index, best practices world-wide and the Economic Impact of COVID on Downtown Toronto.

If you are not registered and would like to attend please reply to this email and we will send you registration details.

The Forum is on Tuesday March 2nd from 8:30am to 10:30am - reading background please see SRRA website Occupancy Index — COVID — SRRA (srraresearch.org)

Links to Articles of Interest

Click to Read - Two global surveys covering several continents track evolving views on remote walking

Click to Read - U.S. companies debate pros and cons of investing in changes to office space in view of continuing uncertainties over the future of remote working

 Click to Read - North America’s largest landlord dismisses concerns about the long-term viability of offices as a place to do business

 Click to Read - Comprehensive mini-history of office space utilization, with perspectives on research-based office layout designs completed prior to the pandemic (also links to a remarkable documentary)

Click to Read - Toronto-based review of practicalities and economics of converting older office buildings to residential

 Click to Read - UK-based co-working companies see strength in the concept now and post-pandemic

Click to Read - Large-scale surveys on work from home productivity reveal broad range of viewpoints

Occupancy Index - January 15th

occupany index (standalone),  2021-01-15 .png

Comments

According to the most recent results for the Occupancy Index, there has been a 30% reduction in the number of office workers returning to the office in downtown Toronto since imposition of the latest lockdown. In addition, employers are becoming more concerned about what the return to the office will look like. 

Work from home literally began overnight but the return will not be as straightforward. CEOs, human resources professionals and facilities managers have all been learning and adapting throughout this enforced period of working from home. Balancing the benefits of office culture, in-person collaboration, the reality that some work simply cannot be done at home with the benefits many have discovered by working at home is creating tough decisions.

Serious challenges are emerging:

  • The dynamics of recruitment are changing.

  • Suburban and downtown employers alike face the complex problem of managing employee density to accommodate social distancing norms while also allowing for the use of common facilities in office buildings.

  • For some, the home environment is not conducive to a home office even though it is technically possible based solely on the nature of the job.

  • A partial return – where some staff come into the office, but others work from home is a logistical nightmare.

  • What changes to premises are short-term and what changes will need to be permanent?

  • Downtown employers face the additional complexities of persuading staff that it is safe to take public transit.

  • The strain on transit planners to avoid “crush hour” will be enhanced by irregular and unpredictable return.

These are just some of the issues facing the return to a new normal. 

To help address these challenges, SRRA is planning a Forum in the week of February 22nd where experts and practitioners can exchange ideas and discuss strategies in advance of the anticipated lifting of restrictions to allow a safe return to the office.

Notice and an invitation to this Forum will be sent by January 21st.

Links to Articles of Interest

Click to Read - A pre-Pandemic view of how large corporations viewed working from home

Click to Read - An historical perspective on working from home

Click to Read - A summary of insights into how leading tech companies view the future of work from home

Click to Read - Xerox surveyed its customers to present its vision for ‘the future of work’

Click to Read - HR specialist ADP Canada surveyed its customer base to better understand telework

Click to Read - Britain’s PM is bullish on post-pandemic future for offices

Click to Read - Insights into remote work from a U.S. perspective

Click to Read - Practical advice on striking a balance between safety and efficiency

Click to Read - Thoughtful review of trends affecting on-line activity

Click to Read - Richard Florida misses an opportunity to speak knowledgeably about Toronto

Occupancy Index - December 15th

occupany index (standalone),  2020-12-16 .png

The findings of “The Economic Impact of COVID on the Downtown” are summarized here, The entire report can be found here.

THE IMPACT OF COVID ON JOBS AND REDUCED CONTRIBUTION OF DOWNTOWN TO GDP

  • If COVID-related restrictions persist, Toronto’s GDP could decline by as much as 20%.

  • Although 70% of wealth-creating and institutional jobs can be performed remotely, the 190,000 jobs that require face-to-face contact with customers or cannot be performed remotely are at significant short to mid term risk.

  • More than 120,000 jobs are largely dependent for their survival on a return to “normal.” In total, more than 6,750 establishments – 43% of all establishments downtown – are at risk and these account for almost 9% of all businesses in the City.

  • 81,000 jobs in small/medium-sized businesses are poorly suited to surviving the second wave of the pandemic.

  • Although small/medium-sized businesses account for just over 5% of the downtown’s total GDP, they represent more than 25% of all establishments.

  • Salaried, high-paying jobs in the wealth-creating and institutional sectors are not at risk, the downtown economy is nevertheless being damaged by the absence of office employees still working remotely.

THE ‘DEMAND-LED’ RECESSION CAUSED BY COVID WILL BE K-SHAPED, PLACING THE BURDEN OF THE ECONOMIC DOWNTURN ON THE SHOULDERS OF THE LOWEST-PAID WORKERS

  • A significant percentage of economic demand in downtown has disappeared as a result of COVID, resulting in a ‘demand-led recession.’

  • More than 400,000 office workers continue to work remotely, with massive impacts on downtown’s economic ecosystem of small and medium-sized businesses that depends on their spending.

  • With the border closed and other travel restrictions, tourism, other visitation and nearly all business travel has halted, which before COVID delivered 28M visits annually, removing up to 45% of demand.

  • Almost a quarter million post-secondary students are now studying on-line, further reducing the daytime population of downtown.

  • Under a worst-case scenario, the GDP of downtown could contract by 20%.

FACTORS AFFECTING TORONTO’S ‘REPUTATIONAL RISK’ RANGE FROM LOST MOMENTUM FROM TOURISM TO GROWING COMPLAINTS ABOUT PETTY CRIME ON SUDDENLY EMPTY STREETS

  • Downtown Toronto’s attractiveness as a destination for business travel, domestic and international tourism could be at long-term risk if current conditions persist.

  • The absence of office workers, tourists and post-secondary students adds up to a dramatic reduction in footfall on the streets of downtown.

  • The attractiveness of the downtown is significantly related to the amenities and activities that are available. Areas such as the Bloor-Yorkville BIA, the Entertainment District BIA, the Downtown Yonge BIA, the Waterfront BIA, the St. Lawrence Market Neighborhood BIA and the Financial District BIA are “live, work, play, learn, and shop” neighborhoods. The very activities that have made these destinations attractive, however, are now profoundly undermined by the restrictions required by COVID.

  • Cultural activities, hospitality and the tourism sectors are important attributes of the fabric of these neighborhoods and critical to their reputational attractiveness. This vibrancy also feeds into the attractiveness and desirability to base corporate HQs in the Financial District BIA.

  • The loss of both the physical presence in terms of foot traffic and physical spending on goods, food and drink etc. by so many tourists, students and non-resident workers underscores how critically important these customers are to the viability and character of downtown.

RISKS TO GOVERNMENT REVENUES ARE MANAGEABLE, WITH THE SIGNIFICANT EXCEPTION OF THE LOSS OF TTC REVENUE OF MORE THAN HALF A BILLION DOLLARS FOR THE CURRENT BUDGET YEAR.

  • The fact that so much of the high-value commercial real estate in downtown is owned by pension funds and other investors with long-term financial goals suggests that property tax revenues from commercial real estate will not be unduly affected by COVID restrictions.

  • The biggest revenue challenge confronting the City is transit fare revenues, which should prudently be assumed to experience a 50% reduction – $600 million – annual challenge through the medium-term.

  • Assuming a $7.8 billion GDP reduction, the assumed annual Provincial revenue loss would be approximately $1.1 billion in foregone tax revenues from all sources and the Federal loss would be approximately $1.6 billion in foregone tax revenues from all sources. This risk would increase over the medium-term.

DOWNTOWN TORONTO’S FUNDAMENTALS ARE STRONG AND RESILIENT BUT THE AREA IS AN ECONOMIC ECOSYSTEM THAT NEEDS ALL ITS MOVING PARTS TO FUNCTION IN HARMONY

  • With just over 273,000 residents, Downtown Toronto now accounts for just over 9% of the City’s population and has grown three times faster than the rest of the City since 2014.

  • The quality of life in neighbourhoods throughout downtown has been immeasurably improved in recent decades with the rapid growth in housing but if younger workers are denied opportunities for networking or access to downtown’s nightlife, their commitment to living in expensive rental accommodation may be called into question.

  • The raison d’etre for many to live downtown is linked to a lifestyle snuffed out by COVID.  This has led to a softening of the condo-based rental market, which accounts for 61% of all rentals.

  • Many younger workers, including ‘gig’ workers and students, with jobs in the service sector that are at risk, live downtown, and could be forced to leave.

  • Just under two-thirds of the nearly 155,000 households downtown live in rental units. Economic pressures and the unique demographics of the downtown population combined suggest that more than one-third of these households may face economic pressures in the medium term that could lead to re-location out of the Downtown.

  • Restoring consumer and commuter confidence is key to downtown’s resurgence.

  • The downtown economy is well suited, at the aggregate level, to survive COVID related restrictions. This, however, can obscure the very significant risk to many employees and businesses.

Links to Articles of Interest

Click to read - New York transit earns a reprieve that protects levels of service

Click to read - Restoring faith in downtowns begins with getting office workers back

Click to read - Colliers reports documents downside to working from home over the long-term  

Click to read - Tough times for transit in the U.S. as operators plead for bail outs

Click to read - Experts disagree on the future of the office

Click to read - Global survey on the future of office space

Click to read - Important research suggests that transit not a driver of disease

Click to read - More caution from U.S. real estate execs on the return to the office

Click to read - Is New York entering a down cycle inspired by COVID?

 

Occupancy Index - December 1st

occupany index (standalone),  2020-12-02 .png

Office building occupancy has declined to pre-September levels. Interviews with landlords and tenants suggest that compliance with public health guidance is the principal driver behind shutting down or slowing the pace of voluntary return and permitting access for essential workers.

SRRA’s research, however, has shown a change in approach by employers. Throughout the Fall, interviewees expressed an increasing desire for a return to work in the office. Adjusting to remote work has created an awareness that while some remote work could become permanent, determining how to arrive at a balance between personal choice and the value of in-office interaction and collaboration remains a critical human resource challenge. The resulting impact on employee density in office space and facilities planning is very much an open question.

New employee density metrics will initially focus on groups of employees with the greatest demonstrated need to return to the office. Employee densities will be measured in response to the functionality served rather than overall ratios of employees to the amount of leased space. Coordinating functionality through steps such as ensuring that specific teams are fully staffed will continue to be a work in progress.

Although COVID outbreaks have been linked to industrial workplaces and institutional care settings, we are not aware of any outbreaks associated with office-based environments. It is not known, however, whether this because office-based work represents a lower risk or if this is the result of effective risk management on the part of landlords and tenants to reduce or eliminate close physical contact.

As employers continue to heed public health guidance by delaying planned returns to working in-office, decision makers are focusing on specific actions and communications strategies regarding employee safety that can be implemented as soon as it is appropriate to do so. This mirrors steps being taken by the region’s major transit agencies the TTC and Metrolinx.

While announcements regarding potentially effective COVID-19 vaccines have stimulated discussions about returning to ‘normal life,’ the public conversation in Toronto rarely includes the benefits of a return to the office, as is occurring in peer jurisdictions like London and New York. For as long as office workers remain absent from downtown, small businesses such as retail and restaurants will continue to suffer, leading to more and more ‘for lease’ signs in shop windows.

Our interviews indicate that Toronto’s business leaders continue to catalogue unprecedented levels of COVID-related social and economic impacts on downtown, which has been disproportionately affected by the reduced economic activity caused by shut downs to address the virus. The best way to help downtown businesses survive and thrive is to encourage the earliest possible safe return of office workers. Figuring out how to do that remains our biggest challenge.

Links to Articles of Interest

Click to Read - How New York transit is approaching communications with the public

Click to Read - London businesses calling attention to impact on economic ecosystem of retail, restaurants, pubs etc.

Click to Read - New York mayor pushing employers to return to the office

Click to Read - Montreal’s mayor also focusing on a return to the office

Click to Read - Rare mentions from government regarding the role of office workers

Click to Read - Quebec green lights opening offices

Click to Read - What will happen to London’s talent pool if Brexit limits trading?

Click to Read - Important to look beyond the headlines: buried in the article, World Economic Forum foresees working remotely as a temporary fix

Click to Read - Public sentiment against return to the office is frustrating landlords, companies

Occupancy Index - November 1st

occupany index (standalone),  2020-11-13 .png

Notes from Tenant Interviews

While the return to the office remains a voluntary personal decision the fear of increased COVID cases in the region is restraining the growing pressure to return. The efforts companies and landlords have gone to create the best possible environment has been extensive. While evidence mounts that remote work fatigue and COVID fatigue are building it has yet to emerge in the data.

Companies are beginning to consider significant investment in reconfiguring the office premises with an eye to potentially more permanent change. Few believe that office densities of 60 sq ft per person will prevail and may be replaced by new layouts which work for collaborative, creative and communal activity.

Projecting a date when things will return to normal is no longer a matter of conversation. Expectations in the Spring, early July and mid September that people will return to the office simply did not materialize. Few are projecting a fixed date in the future. The future return to the office will likely be staged over time as companies respond to employee needs.

Links to Articles of Interest

Click to Read - England’s second largest city is enduring a second lockdown. This article explains how damage to the economic ecosystem will drive a K-shaped recovery

Click to Read - Employers keen to get their workers back in the office can face legal hurdles

Click to Read - PwC, one of England’s largest employers, commits to retaining all office space

Click to Watch - This short web video that illustrates the importance of equitable public transit during COVID to serve essential workers

Occupancy Index - October 15th

SRRA has completed its review of occupancy prior to September 1st, The Data was obtained from building access card reports and from interviews with tenants from large financial services companies to midsized tech and non-financial services companies.

Occupancy Index.jpg

All figures are calculated by taking the number of employees who attended in the weeks following the late March shut down over the normal number of employees who attended the offices on a weekly basis in January of 2020. The importance of this methodology is that it recognizes that currently collected data using card access information and other property management tools and interviews with tenants is only about those who attend the office. This number can not be divided by total employees at the company because there is a normal number of employees who do not come to the office due to holidays, sick days, pre-COVID work at home permissions, business travel and other normal course of business reasons.

Occupancy Oct 15th Sample size.jpg

The sample size used by SRRA to collect the data was less than 10% prior to September but is considered to be accurate within 20%. The sample size of building data and tenant interviews since September 1st has increased to between 20 and 30%. This sample size also has few data points which vary from the average by any significant amount. For example, no tenant reported that more than 25% of their employees had returned to the office and the vast majority of tenants reported some essential services employment required to be in attendance.

For the period October 1st to October 15th there were no material changes to the Index. The next report will include occupancy results post Thanks giving weekend and the increase in cases reported.

Occupancy Index - October 1st

For September 2020, the numbers of tenants and landlords reporting occupancy increased to the point where the sample size exceeded our minimum of 10%. Building managers submitted data representing 24% of buildings in the study area. Tenants interviewed for the study occupied 8% of the office space. While every attempt was made to get an even representation from large buildings and small and from tenants who represented different types of business the process of obtaining a complete balance is still underway and will be reported on in greater detail in future reports.

Buildings reporting represents                               21,657,013 sq. ft. or 24% of all buildings

Returned to work in those buildings as a percentage of normal occupancy

Sept 1st                       Sept 15th                      Oct 1st

    7%                               10%                             9%

31 Tenants interviewed represents                        7,586,456 sq. ft. or 8% of all tenants

During the interviews questions related to;

·         working remotely pre-COVID during COVID and post COVID

·         current number of employees who work in office

·         conditions in premises to allow for return to work

·         use of transit pre-COVID and currently

Responses:

Pre-COVID employees working remotely was 4%. During September companies with all their people working remotely was less than 20%. Companies planning a gradual return was approx. 40%. Companies not planning a significant return before January 2021 was approx. 40%

All companies were reporting compliance with Government regulations and recommendations.