Just as many companies are thinking about, in the midst of or have already moved large portions of their offices to the suburbs (mainly to “reduce costs”) new trends are threatening to undermine the offices in the ‘burbs. A recent study by PriceWaterhouseCoopers indicates that in many areas younger workers prefer urban locations for living and working, triggering a reverse migration of companies to suburbs and back into cities. In the war for talent perhaps having an office in the suburbs is as much as a deal-breaker for new recruits as having antiquated IT.
We’ve never seen so much office construction in downtown Vancouver or downtown Toronto. New construction of downtown office buildings in Canada is threatening to leave older towers behind and the suburbs out in the cold. “What’s different about this cycle is that we have more downtown development. We’ve never seen so much office construction in downtown Vancouver or downtown Toronto,” said a fund manager.
Given such abundant choice of office space, tenants catering to younger workers tend to choose the newer towers. The same trend of catering to younger works who prefer to live and work downtown could leave suburban office complexes with vacancy issues.
“The kids know exactly what they want as it relates to office,” said Lori-Anne Beausoleil, national real estate leader for Canada for PwC. “We have a whole urbanization trend. While before it was we want to be out in the burbs, people want to be in the core. People want to work eat and play all in the same area. Part of this is we don’t have the infrastructure so you either face hours of traffic or you can be walking distance or near transit.”
“Suburban offices are being vacated and becoming satellite offices and the core [of workers] are moving downtown,” said Ms. Beausoleil. “The trend across Canada is urbanization.”
Blake Hutcheson, chief executive of Oxford Properties Group, one of the largest landlords in the country with a record of developing properties and leasing out existing buildings, says there is a worldwide trend towards urbanization. He says the key for landlords is to keep on top of their existing holdings and make sure the properties don’t become dated.
Dean Newman, a principal at Cresa Toronto Inc. which acts for tenants, said corporations today have started to realize the importance of what he called “human capital.” “When you are trying to attract and retain people and build culture, there is a recognition that the environment that you are in has an impact on that,” said Mr. Newman.