The office sector continues to navigate the challenges of hybrid work and the residual effects of the pandemic, but forward-thinking businesses are preparing for the next wave of change.

This was a central theme of a recent discussion at a Real Estate Forum in Toronto, which focused on tenant expectations and landlord responses.

Adapting to a Hybrid Work Environment
Hybrid work has become a core component of effective workplace strategies, with research emphasizing that mandating in-office attendance can lower employee engagement. Tenants are looking for exciting and dynamic office spaces that cater to employee preferences.

Experts suggest that successful workplace strategies require input from various departments, including real estate, human resources, communications, and IT. Companies are advised to think 10 to 15 years ahead when planning office space needs, considering advancements in AI and technology that will shape future workplaces.

Office Space as a Strategic Asset
Some businesses view office space as a strategic asset rather than a cost center. By focusing on the hierarchy of work rather than organizational hierarchy, companies are optimizing space efficiency. Technology and digitization are playing pivotal roles in this transformation.

Location remains a critical factor, particularly proximity to public transit. Reducing commuting friction and offering a variety of amenities are key priorities. Features like access to Toronto’s PATH system, which connects businesses to an extensive network of shops and services, are seen as valuable.

Landlords are recognizing the importance of providing high-quality amenities to attract and retain tenants, even if it means foregoing immediate profits.

Positive Outlook for the Office Sector
Experts believe the Canadian office market may have reached its lowest point in terms of vacancy rates and building valuations. Positive indicators suggest the market is on the cusp of recovery, with increasing activity in downtown Toronto and other markets across the country.

Some landlords are investing significantly in improving their properties, including upgrades to lobbies, tenant gyms, and other amenities. Retail spaces within office buildings are also being enhanced to serve as valuable tenant perks.

Creating a High-End Office Experience
Landlords are focusing on transforming office spaces to resemble luxury hotels or private clubs, integrating wellness centers, conference facilities, and outdoor spaces. Technology upgrades are being incorporated into both new and older buildings to make life easier for tenants.

Aligning Landlords and Tenants
A strong value alignment between landlords and tenants is increasingly important. Successful real estate partnerships now go beyond lease agreements, emphasizing collaboration and shared goals. Metrics for success include employee engagement and vibrancy, in addition to traditional measures like cost per square foot.

Tenants are willing to pay more for spaces that deliver clear value, reinforcing the shift toward integrated and people-focused workplace solutions.