Why tech companies are opening new offices in Ontario despite allowing remote work
In the first months of the COVID-19 pandemic, Shopify Inc.'s Tobi Lutke was among the first tech leaders to declare most of his staff would "permanently work remotely" because "office centricity is over."
His belief in remote work went so far that he even dropped listing Ottawa as the e-commerce giant's headquarters in news releases in favour of using "internet, Everywhere."
But more than two years later, his software company will become a key tenant of the very thing Lutke criticized: an office building.
Shopify's impending move into The Well -- a high-profile retail, office and residential development encompassing 3.1 hectares at King Street West and Spadina Avenue in Toronto -- makes it one of the many tech companies not backing away from new digs even as their leaders espouse hybrid or remote work arrangements that will have staff visiting an office much less frequently than pre-pandemic.
Google will similarly takeover a new building at 65 King St. E. in Toronto, despite Alphabet Inc. CEO Sundar Pichai requiring staff work only three days a week in office.
Amazon's third Toronto office, YYZ18 at 18 York St., will soon expand from eight to 11 floors, though the e-commerce firm's tech and corporate employees were told a year ago they can work remotely two days a week.
Facebook parent company Meta even revealed 2,500 new hires announced in March would mostly be housed in a new downtown Toronto space larger than its current MaRS Discovery District home, but has declined to share its size or whereabouts. Meta CEO Mark Zuckerberg has allowed all full-time employees to apply to work from home, if their jobs allow for remote work.
So why spend on new and often bigger offices most staff will only use half the time or less?
There's several reasons, said John Trougakos, a University of Toronto professor of organizational behaviour and human resources management.
"Some of this is momentum they had before the pandemic and plans they had that they are just following through with," he said.
Shopify and Google, for example, announced Toronto offices before the health crisis helped make remote and hybrid work widespread.
Google spokesperson Lauren Skelly said in an email that thecompany keeps investing in offices, despite its hybrid model, because it believes "intentional, in-person collaboration is key to driving innovation, supporting creativity and solving complex problems."
As for Shopify, spokesperson Jackie Warren said the company is "digital by design," but continues to "value highly intentional, in-person gatherings" a few times a year.
She added Shopify was initially slated to occupy 254,000 square feet at The Well in downtown Toronto, with the option to expand to up to 433,752 square feet.
The firms behind The Well, Allied Properties Real Estate Investment Trust and RioCan Real Estate Investment Trust, said after exercising its first option to expand to an additional 90,000 square feet in June 2020, Shopify declined another 90,000 square feet. RioCan added Shopify's total leased space will now total 340,000 square feet.
Warren would not confirm or share why the option was declined, but Allied's chief financial officer Cecilia Williams said in an email her company was able to lease the space at "materially higher net rents within four weeks to a tech user."
That doesn't surprise Michael Case, the managing director for office leasing for downtown Toronto at real estate firm CBRE.
"We're still seeing many tech companies expand and take more office space in downtown Toronto, but arguably that pace of growth has slowed," he said.
CBRE found downtown Toronto's office vacancy rate was two per cent pre-pandemic -- the lowest in North America and the third lowest in the world by Case's count. It's since jumped to 11.6 per cent, a rate he still considers "healthy."
The national downtown office vacancy rate was 9.4 per cent at the onset of the health crisis and has since risen to 16.9 per cent.
Case attributes the slowing growth and higher vacancy rates to fading investor exuberance within the sector, which already triggered layoffs at tech companies such as Shopify, Netflix, Clearco and HootSuite.
But Trougakos said prominent tech companies are still keen on new offices because they see them as a chance to get ahead and create space for future needs.
He thinks they consider splashy new offices a "physical monument" to a brand that can be a way to attract and retain talent, when the sector rebounds again.
These companies are targeting those in-office days as being collaborative and creative, "as opposed to the head down work," Trougakos said.
"Some of the spaces are going to have to be reconfigured space that's more conducive to the new way that people are going to be working."
Meta spokesperson Alex Kucharski alluded to this feeling, writing in an email that offices will "always" be important to the company, which will "adapt these spaces to suit the needs of our employees no matter where they're working."
Meanwhile, Amazon spokesperson Dave Bauer wrote, "there is no one-size-fits-all approach for how every team works best for a company of our size."
That's true for corporate approaches to real estate too, Trougakos said.
While some companies will adopt remote or hybrid work forever and downsize or close offices, others will be more liberal with space or even stringent about how many and which days staff need to be in an office and when they can be at home.
"We're past the point where there's only one standard way to work," he said. "Companies are going to have to figure out what works best for them and their people."
This report by The Canadian Press was first published Sept. 29, 2022.
CTVNews.ca Top Stories
NEW Life got in the way of one woman's reunion with her father, but a DNA test gained her a family
Anne Marie Cavner was the closest she'd ever been to meeting her biological father, but then life dealt her a blow. From an unexpected loss to a host of new relationships, a DNA test changed her life, and she doesn't regret a thing.
How quietly promised law changes in the 2024 federal budget could impact your day-to-day life
The 2024 federal budget released last week includes numerous big spending promises that have garnered headlines. But, tucked into the 416-page document are also series of smaller items, such as promising to amend the law regarding infant formula and to force banks to label government rebates, that you may have missed.
Which foods have the most plastics? You may be surprised
'How much plastic will you have for dinner, sir? And you, ma'am?' While that may seem like a line from a satirical skit on Saturday Night Live, research is showing it's much too close to reality.
opinion I've been a criminal attorney for decades. Here's what I think about the case against Trump
Joey Jackson, a criminal defence attorney and a legal analyst for CNN, outlines what he thinks about the criminal case against Donald Trump in the 'hush money trial.'
$3.8M home in B.C.'s Okanagan has steel shell for extra wildfire protection
A home in B.C.'s Okanagan that features a weathering steel shell designed to provide some protection against wildfires has been listed for sale at $3.8 million.
Diver pinned under water by an alligator figured he had choice. Lose his arm or lose his life
An alligator attacked a diver on April 15 as he surfaced from his dive, nearly out of air. His tank emptied with the gator's jaws crushing the arm he put up in defence.
Psychologist becomes first person in Peru to die by euthanasia after fighting in court for years
A Peruvian psychologist who suffered from an incurable disease that weakened her muscles and had her confined to her bed for several years, died by euthanasia, her lawyer said Monday, becoming the first person in the country to obtain the right to die with medical assistance.
Mystery surrounds giant custom Canucks jerseys worn by Lions Gate Bridge statues
The giant stone statues guarding the Lions Gate Bridge have been dressed in custom Vancouver Canucks jerseys as the NHL playoffs get underway.
Celebrity designer sentenced to 18 months in prison for smuggling crocodile handbags
A leading fashion designer whose accessories were used by celebrities from Britney Spears to the cast of the 'Sex and the City' TV series was sentenced Monday to 18 months in prison after pleading guilty in Miami federal court on charges of smuggling crocodile handbags from her native Colombia.