Office vacancies reached a record high in Canada at the end of 2023, according to a new report  — a record that was heavily impacted by Toronto, where an oversupply of new office space tipped the scales considerably. With employers still navigating the new world of hybrid work, we asked Michele Romanow, co-founder of investment giant Clearco, for her insight on what the downtown core can expect this year. 

Why do you think Toronto in particular has struggled with the return to the office?

People have struggled with the economics of paying for and maintaining an office full-time, but it doesn’t look like that’s a world we’re going back to. Most tech companies are going to offer some level of flexibility — people can choose which days and times they’re in the office. People need less space and that’s a very different floor plan than we’ve ever seen before because they are working in offices very differently. During the pandemic, so many companies hired workers outside their geographic area — you can’t demand everyone returns to the office. So I think that’s a little bit of the struggle we’re seeing. I still believe there is magic when teams are in the same physical office spaces and people want to spend some of their time in the office.

How are companies approaching office lease agreements now?

Companies are putting leases on hold. Everyone is still trying to figure out how to manage their workforce. Companies are very uncertain about signing a five to 10 year deal when the way people work has changed considerably, even just in the last 12 months. It underscores the need for flexibility in long-term commitments.

What types of office environments are most coveted now? 

I believe beautiful spaces and work environments that are conducive to teamwork are very important. Everyone working in tech has an office setup at home. They don’t need to leave their home to work.

It gets expensive for someone to spend a day in the office — gas, parking, transit, thirty dollars a day on food. So if you can afford to pull out all the stops, then great! But if a company can’t offer perks, you really need to focus on the team-building and collaboration piece and make the in-office time productive.

What impact will the eventual interest rate cuts have on the workforce in Toronto?

As interest rates drop we’re going to see more people that are interested in buying in the city, so we might see a greater demand for office spaces downtown.

How might the ever-increasing affordability crisis, for young people especially, impact the workforce?

I’ve never heard of any city becoming more affordable! People just move to more affordable cities. Every big city becomes more unaffordable every year, and it hasn’t stopped young people moving to and living in cities all over the world. It will definitely deter some but not all. Toronto is busy and alive again. The allure of the big city will always be there. If the economy is thriving, the young will continue to figure out how to make smaller spaces work. Just look at N.Y.C. — the rent for a tiny apartment is outrageous, but if you want to live there, you make it work.