The office sector continues to suffer from the pandemic, despite some encouraging signs that appeared in the third quarter. The long-awaited return of workers, however, risks being delayed with the spread of the Omicron variant.
The number of new COVID-19 cases rose to 1,200 on Wednesday. There are growing concerns that new restrictions will appear that will limit Christmas and New Years celebrations.
“I’m not a diviner,” says Jean Laurin, president and general manager of Avison Young in Quebec, “but it is obvious that companies will have to respect the standards that will be dictated. The real estate agency published earlier this week its analysis of the office market in Montreal in the third quarter of 2021.
“The more the number of cases will increase,” he continues, “the more it will slow down the process of returning to the office and the more it will delay it. What I realize is that it seems that we are able to find solutions more quickly when there are variants, ”he says optimistically.
Rising availability rate
As we wait for the news, here’s what the office tower market looked like at the end of September.
The office availability rate in the Montreal region continued to increase, but at a more relaxed pace. It now stands at 15.5%, according to Avison Young. He was under 11% before the pandemic. Availability in the city center has increased by 67% since the outbreak of the virus.
Also in the city center, the leasable area currently leased has decreased by 1.79 million square feet, the equivalent of three office towers such as 1100 René-Lévesque Boulevard West.
After almost two years of teleworking, habits are formed. There will definitely be a before and after COVID-19. Hybrid working, partly in the office and partly in telecommuting, will be widespread.
PHOTO EDOUARD PLANTE-FRÉCHETTE, THE PRESS
Jean Laurin, President and CEO of Avison Young in Quebec
“We see that companies will lower their footprint probably by a minimum of 10%, to perhaps 25 to 30%, depending on the type of business and the occupation model they are going to follow,” said M Laurin.
See the glass half full
In this most gloomy context, encouraging signs nevertheless appeared in the third quarter.
Gross rents, including operating costs and taxes, held up despite greater office availability, with landlords preferring to compromise on leasehold improvements and other small goodies given to tenants rather than cutting corners. the rental rate.
“It’s interesting that in most cases where businesses have decided to relocate, they have chosen to stay downtown,” Avison Young observes in his report.
What’s more, some areas even saw total leasehold office space increase in the last quarter, known as a positive absorption of office square footage. This is the case for both the east and the west of the city, Laval and the sector located on the outskirts of the city center. An illustration of the popularity of satellite offices, recalls the firm Avison Young.
Investment in office products has also picked up, and the return demanded by investors has not budged lately. Petra bought the 1000, De la Gauchetière Ouest for 482 million, by far the largest of 19 deals in the third quarter. “This level of activity in the office investment sector is a clear indication that investors remain confident in Montreal’s economy and recovery,” says the real estate agency.
The Chamber of Commerce notes a return
Quietly, the city center comes back to life. A new survey released Wednesday by the Chamber of Commerce of Metropolitan Montreal indicates that 61% of workers are back in the office, either full-time (29%) or part-time (32%). “This is a clear improvement compared to the rate of return observed in August (47%) and June (28%) and a very promising advance for the revitalization of downtown Montreal,” said in a press release Michel Leblanc, President and CEO of the Chamber of Commerce of Metropolitan Montreal.
At the same time, foot traffic is on the rise, according to an in-house indicator developed for Avison Young using geolocation data from smartphones. In Montreal, about half of the people are back downtown, a higher result than elsewhere in America.
The strong residential component of our downtown area and the return of students to campuses this fall largely explain this encouraging performance, according to Mr. Laurin.
Finally, companies are preparing for the return of workers. For example, as of November 15, it is expected that provincial officials will return to the office at least two days a week.