What a Surplus of Office Space Means for the CRE Industry
1 min read.
Throughout the past couple of years, we have seen a significant reduction in demand for office space due to the introduction of remote and hybrid work arrangements brought on by the pandemic.
We can see the office availability rates rising each quarter. During 2023 Q1, the availability rate rose from 10 percent to 17.5 percent, with approximately 40 million square feet of office space in development. A study commissioned by NAIOP, National Association for Industrial and Office Parks, determined that even with employees adopting a hybrid work schedule by 2041, an office inventory of 217 million square feet and approximately 49 million square feet will be left vacant.
So, what does this mean for the commercial real estate industry (CRE)? There is increased demand from developers pleading with government bodies to enact policies that allow and encourage the redevelopment of existing vacant office space into other uses like residential purposes. We are likely to see companies work in flexible workspaces that are occupied not by one tenant alone, but multiple and we will also see older vacant office space be reinvented into housing to supply the demand.
References
Toronto Naiop. (n.d.). https://torontonaiop.org/wp-content/uploads/2023/05/NAIOP-Greater-Toronto-Office-Needs-and-Policy-Directions-in-the-GTA-Altus-Group.pdf
Demarco, Z. (2023, May 24). GTA to see “significant oversupply” of office space until at least 2041. STOREYS. https://storeys.com/gta-office-space-oversupply/#:~:text=GTA%20to%20See%20%E2%80%9CSignificant%20Oversupply,Space%20Until%20at%20Least%202041&text=Dwindling%20demand%20for%20office%20space,Area%20until%20at%20least%202041.
McLean, S. (2023, June 6). Toronto’s office space glut could persist for 20 years. RENX. https://renx.ca/oversupply-gta-office-space-long-term-problem-naiop
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