LATEST NEWS Heavy Equipment
October 30, 2013
Evolution of technology impacts built space requirements: expert
The ways that companies harness technologies and think towards the future can affect their need for physical space which then impacts the Canadian construction sector, says one expert.
In terms of office space, more tenants are moving downtown and changes in workplace strategies are seeing tenants reduce their footprints, said Raymond Wong, executive director of Americas Research Operations for CBRE Research and Consulting.
“The private offices are less, the shared workspaces are more efficient... you’re seeing that trend. You’re seeing job growth still, but you’re not going to see the same elation, in the way of office demand, going forward. It will still increase, but not at the same pace,” he explained at the recent CanaData 2013 conference.
“You’re seeing the average space for employees really shrinking. Companies are currently more creative on how to employ their employees.”
He pointed to ideas such as touchdown spaces that can be reserved instead of personal desks as an example of how companies are using space more efficiently.
Those changes in behaviours are affecting how companies use office buildings.
On a national supply basis, Canada has around an 8.9 per cent vacancy rate, according to Wong’s third quarter numbers.
He attributed the increase in vacancy rates in part to new supply and in part because the demand for space has lessened.
“We’re seeing a lot of new supply into the market... you need new construction in the market just to rejuvenate the older stock and to meet the new requirements of the tenants based on increased capacity of the HVAC system as well as the technology requirements,” he said.
Wong pointed out that at one point, vacancy rates for downtown Toronto office spaces were forecast to be in the 16-17 per cent range due to downsizing.
“That just never happened because of the expansion of the banks and that area of growth. Downtown Toronto is looking at three to five per cent right now for (its) vacancy rating,” he said.
Toronto and Calgary are the two big markets in terms of the Canadian office development pipeline.
There is currently a little more than five million square feet worth of construction currently ongoing in the Toronto market with just over seven million square feet of anticipated construction.
In downtown Toronto alone, there is 3.8 million square feet of office projects under construction right now.
“We’re watching Toronto carefully. There’s a lot of cranes and 90 per cent of this new supply is happening in downtown Toronto,” he said.
In Calgary, there is about three million square feet under construction, with less than four million square feet of anticipated construction.
In terms of retail development, there is only so much spending going on in Canada as the entire sector continues to build its business online, particularly through social media.
“These types of companies are taking advantage of it and creating more communities and social events rather than advertising in newspapers and opening new stores. It’s a different way of looking at retail,” he said.
Currently, online retail sales account for less than 10 per cent of total retail sales in Canada and that number is expected to grow to 20 per cent by 2020.
In Toronto there is almost five million square feet of retail space under construction, with just more than 3.5 million square feet under construction in Calgary and about three million square feet in Vancouver and in Edmonton.
In terms of industrial development, there is a move towards automation to reduce labour costs, which requires a different type of building, said Wong.
E-commerce will continue to influence the type of buildings needed from the industrial side, for instance, many companies are trying to introduce same-day deliveries, which will drive movement into the major centres.
“Because of the limitation of space, you’re going to see that horizontal move (out) in the way of vertical warehouses,” he said.
Despite these new technological changes in the marketplace, the Canadian market should remain strong over the long term, concluded Wong.
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