Office Recovery: The Great Experiment

Reporting on COVID-19
May 2021
Office Recovery:
The Great
Experiment
Prepared by Colliers
Real Estate Management Services
What’s Inside
As we prepare for a return to the office,
there is a growing sense of optimism.
While we may not know exactly when we can
put COVID-19 behind us, the commercial real
estate industry is focused on recovery. Together,
stakeholders are viewing the challenges of this
past year as opportunities to emerge more
resilient and innovative than ever before.
Colliers Real Estate Management Services
surveyed a sample of our tenant base to
understand how asset classes have fared and
the anticipated changes to physical office space,
in-person and remote work, and employer
expectations following the pandemic.
Methodology 2
Key takeaways for owners 2
Findings 4
1-2 The impact of remote work
during the pandemic
3-5 The future of a hybrid model of
work post-pandemic
6-7 Office vacancy and the
changing footprint
8-10 How office space will be used 10
4
5
8
This report is the first of a three-report series on
the recovery of each asset class: office, retail, and
industrial.

Methodology
To analyze our portfolio, we surveyed a stratified sample
of tenants out of our 31 million square foot national
office portfolio based on geography, business size,
and industry. The survey contains responses from 156
companies, with a 95% confidence level.
This is the third survey that has been issued to office
tenants since the beginning of the pandemic. The first
survey was issued in June 2020, the second in November
2020, and the third in April 2021.
Key takeaways
1. The great hybrid work experiment is beginning,
with most companies (58%) saying they will
implement a hybrid model of work.
Employers are largely undecided on how to
manage a combination of in-person and remote
work, with 66% unsure on the number of days
employees will be expected to be in the office and
33% unsure on how this will be managed across
the various parts of the organization. We expect a
lot of experimentation with in-person and remote
work that may impact usage of space in the near
future.
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 2

2. In this experiment, flexible office spaces are
expected to make up about 6% of future total
office space in the market.
One in almost four tenants indicated their desire
to make use of flexible office space in the course
of their operations. Flexible office space could
refer to designated space in an office building
that is shared by all the tenants in the building,
such as bookable boardrooms and co-working
spaces, short-term leases of turnkey space, or
other models. This trend is likely to be prominent
as businesses experiment with the hybrid model
of work. The ability of landlords to anticipate and
respond to this trend, based on the tenant mixes in
their buildings, could drive both the success of the
return to office and the hybrid work experiment.
3. Office vacancy is predicted to increase by
another 5.7% over the next few years, a forecast
that is holding steady from our June 2020 report.
As more companies expect to adopt hybrid and
fully remote models of work, they will reduce their
traditional office leasing footprints, leading to
increased vacancies. Alongside the 2.15% increase
in vacancy we have seen over the past year, the
additional 5.7% increase expected within the next
four years will bring the total vacancy impact close
to the 8.5% we forecasted in June 2020.
4. When making decisions on office space,
employers rank employee productivity, culture,
and collaboration as more important than
operational savings.
Although safety remains the most important
decision-making factor, employers indicated that
productivity, culture, and collaboration have all
deteriorated during the pandemic. For building
owners and managers, the communication of
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 3

health and safety protocols remains paramount.
At the same time, finding ways to enhance the
productivity, culture and collaboration on behalf of
occupants through creating building communities,
rethinking usage of shared spaces, programming,
and other initiatives will add to the office experience.
Findings
1. Remote work is negatively affecting office culture,
opportunities for collaboration, and employee
productivity and well-being.
Maintaining a strong office culture has been notably
difficult to achieve through remote work, with
employers feeling like that sense of culture has
diminished by 28%. Furthermore, opportunities for
meaningful collaboration, employee productivity,
and employee well-being have declined by
approximately 20%.
“Employers feel that
a sense of culture in
their organization has
diminished by 28%
during pandemic.”
Figure 1: The impact of remote work during the pandemic
-18%
Employee well-being
-20%
Productivity
-21%
Collaboration
-28%
Culture
-30%
-25%
-20%
-15%
-10% -5%
0%
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 4

2. When it is deemed safe to return to the office,
employee productivity, collaboration, and culture
are more important than operational savings.
When making decisions on in-person or remote
work, employers rated employee safety as their
top consideration. Once it is deemed safe to return
to the office, the results indicate that employee
productivity, opportunities for collaboration, and
office culture will play a more significant role
in decision making, over and above factors like
operational savings.
Figure 2: Employer considerations when deciding between
in-person or remote work
Employee safety
3.88
Productivity
3.71
Collaboration
3.68
Culture
3.38
Operational
savings
2.77
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Degree of importance
3. The hybrid model of work will feature
prominently in the future, next to fully
in-person work. Only 2% of companies plan to
have employees work remotely full-time.
When employers were asked about their
future workforce, 58% indicated they would be
implementing a hybrid model, where employees
will have an option to work remotely for a
percentage of the week. 40% of employers will
expect employees to be in the office full-time and
only 2% said their workforce will be entirely remote.
“58% of employers
indicated they would
be implementing a
hybrid model of work.”
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 5

Figure 3: The future workforce
40%
2%
58%
Hybrid model of work
Office full-time
(once it is deemed safe)
Remote full-time
4. For companies anticipating a hybrid model of
work, two-thirds are undecided on the number
of days employees will be expected to be in the
office and a third are uncertain on how it will be
managed across the organization.
At this time, only a third of employers who indicated
that they will use a hybrid model could identify how
many days they will expect employees to be in the
office. 66% were undecided, while 14% said two days
per week, 12% said three days per week, and only
8% said one day per week.
“In their hybrid model,
66% of employers
are undecided on the
balance between inperson
and remote
work.”
Figure 4: Anticipated number of days employees will work at the office
in a hybrid model
1 day per week
8%
3 days per week
12%
2 days per week
14%
Undecided
66%
0% 10% 20% 30% 40% 50% 60% 70%
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 6

Companies are largely undecided on how they will
manage the hybrid model of work, and much of it
will vary across the organization. For example, 26%
said they would leave the choice to individuals and
departments/teams, 18% said they would preassign
days for departments/teams to work in the office, and
17% indicated it will depend on levels or positions.
Figure 5: Implementing the hybrid model
Some departments/teams will be
fully remote, and others will be
fully in the office
Certain level/positions will be
required to come into the office more
often
Some departments/teams will come
into the office on preassigned days
Will leave the choice of days up to
individuals and departments/teams
6%
17%
18%
26%
“The Great Experiment
will see a large variety
of hybrid models
being tested, with little
consensus on the best
approach.”
Not sure yet
33%
0% 5% 10% 15% 20% 25% 30% 35%
5. The need for physical human presence is the
main driver for companies requiring employees to
return to the office full-time, with tech companies
being the exception.
Companies planning to return to the office full-time
indicated their business needing physical human
presence as the main factor in their decision. This
trend was uniform across all industries, with the
exception of tech companies, who indicated the
ability to foster innovation as the primary driver.
One outcome of this could be that tech companies
require a different office layout compared to
other tenants; one that promotes innovation and
collaboration rather than having static desks for all
employees.
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 7

Figure 6: The motivation behind returning to the office full-time,
by industry
Technology
Other services
Industry
Finance,
insurance and
real estate
Healthcare
Professional
services
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Our business needs physical human presence
Productivity has declined
The ability to generate ideas and innovation
The culture has deteriorated
6. Almost half of the tenants surveyed indicated
they want to keep the same amount of office
space, with 29% saying they need less space than
what they currently lease.
Tenants are feeling more optimistic about their
need for office space. In June 2020, 46% of tenants
surveyed were looking to decrease their office
space compared to 29% in April 2021. Furthermore,
in June 2020, 32% of tenants were looking to keep
the same amount of office space compared to 49%
in April 2021.
“Tenants are feeling
more optimistic about
their need for office
space.”
Figure 7: Tenant analysis on their future space needs
100%
90%
80%
70%
46% 41% 49%
60%
50%
40%
30%
20%
32% 37%
29%
10%
0%
22% 18% 19%
4% 3%
June 2020 November 2020 April 2021
Need more space
Need less space
Not sure
Keep same office space
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 8

7. Office vacancy is set to increase 5.7% nationally
from current levels, totaling close to the 8.5%
increase we predicted in June 2020.
Tenants who indicated they would like to reduce
their office footprint would like to do so by an
average of 41%. This would drive vacancy rates
approximately 5.7% higher than current market
levels, not accounting for new construction or
economic growth.
Our report in June 2020, “Office Recovery:
Productivity, Working from Home and Space
Demand” forecasted an increase in vacancy by
8.5% due to remote work. Since then, the market
has seen an average rise of 2.15%, according to
research by Colliers. Following an additional 5.7%
that we expect will be added in the next few years,
the market will start to rebound after absorbing the
shock of the changing work environment.
“Over the next few
years, office vacancy
will increase by an
additional 5.7% from
current levels, but it
will rebound.”
The majority of companies (73%) indicated they
see this change happening as soon as possible or
in 2022. This could lead to an intensification of an
already present trend of more subleases becoming
available in the market.
Figure 8: The timeline for tenants who plan to reduce their office space
50%
46%
40%
30%
27%
20%
16%
11%
10%
0%
As soon
as possible
2022 2024 2023
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 9

8. Higher quality office buildings are in demand
for all tenants, yet additional priorities differ
depending on whether they are returning to the
office full-time or operating on a hybrid model.
Regardless of whether tenants are choosing to
return to the office full-time or operating a hybrid
model, the desire for higher quality office buildings
increased by 6% and 3% respectfully. That said, the
choice of operating model shaped other priorities.
For those returning to the office full-time, walking
access to amenities and access to a dedicated
parking lot were deemed more important than
before the pandemic and less important to those
operating a hybrid model. Access to public transit
remained unchanged for those returning full-time,
while decreasing 9% for those planning for a
hybrid model.
“For employers
anticipating a hybrid
model of work, the
importance of access
to public transit
decreased by 9%.”
One outcome of this could be that companies on
a hybrid model start relocating to the suburbs
as their employees do not need to rely on public
transit every day. In contrast, companies who plan
to return to the office full-time will continue to see
public transit as an essential criterion in the office
they choose.
Figure 9: How the pandemic has shifted priorities for office
space
10%
5%
5% 5%
6%
3%
0%
0%
1% 1%
-1%
-2%
-5%
-10%
-9%
Access to
public transit
(rail/bus/
subway)
Access to
highways/
drivable
commutes
Walking
access to
amenities for
your staff
Access to a
dedicated
parking lot
Higher
quality office
buildings
Companies returning to office full-time
Companies returning to a hybrid model
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 10

9. Almost one in four tenants can see their company
using more flexible office space, outside of their
core leases, in their current or future office building.
Flexible office space is a unique arrangement
between tenants and the space required for their
operations. It could refer to designated space in an
office building that is shared by all the tenants in the
building, such as bookable boardrooms or co-working
spaces. It might also refer to short-term leases of
turnkey space.
The supply of flexible office space outside of a
tenant’s core lease will be a consideration for almost
one in four tenants as they decide where to lease
space in the future, which they anticipate could
encompass an average of 30% of the office. 31% of
tenants are unsure about the future use of flexible
office space and 46% saying they do not see that
change happening.
Figure 10: The demand for flexible office space as an amenity in
office buildings
23%
46%
We won’t be considering
flexible workspace as part
of our space strategy
Not sure yet
We would consider flexible
workspace as part of our
space strategy
“Flexible office space,
in addition to a
traditional lease, is a
growing consideration
for tenants.”
31%
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10. For companies expressing a need for flexible office
space outside of their core leases, the amount
of space varies according to business size, for an
average of 6% of the market.
The percentage of flexible office space required by
each tenant varies according to business size. Small
businesses were more than twice as likely (2.25x)
than international businesses to indicate they require
flexible office space as part of their total space needs.
Small businesses anticipate needing approximately
9% of flexible office space, while international
businesses anticipate needing 4%.
“Small businesses were
more than twice as
likely (2.25x) to indicate
they require flexible
office space as part
of their total space
needs.”
Figure 11: The need for flexible office space varies according to
business size
National/
international
businesses
4%
Regional
businesses
5%
Small
businesses
9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Flexible office space
Space within traditional lease
Colliers Real Estate Management Services | Office Recovery: The Great Experiment Spring 2021 12

John Duda
President,
Real Estate Management
Services Canada
Direct: +1 416 643 3728
john.duda@colliers.com
Abdallah Al-Qashlan
Senior Research Analyst,
Real Estate Management
Services Canada
Direct: +1 416 643 3771
abdallah.alqashlan@colliers.com
collierscanada.com/covid-19
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