Looser office densities could be an easier economic stretch in Toronto than in some major U.S. cities similarly competing to draw and retain investment and employment. Newly released analysis from JLL’s global benchmarking services places Toronto among seven global markets with a combination of space and cost factors that could appeal to tenants seeking to enlarge space-per-person ratios.
Employers who have conventionally housed substantial workforces in highly priced space are expected to have less appetite for expanding their quarters to allow for more social distancing or for accommodating a now diminished daily occupancy in their pre-pandemic footprint. JLL analysts identify a number of so-called high-order global business hubs — Hong Kong, London, New York, Frankfurt and Tokyo — where average allotted space-per-person shrank in the years leading up to 2020, along with some select markets where they gauge flexibility to stretch ratios wider. Toronto is the lone North American candidate in the latter category.
“There is another group of cities with comparatively tight densities but where relatively lower space costs mean that the opportunity cost of de-densification may be more compelling — Singapore, Sydney, Melbourne, Toronto, Paris, Milan and Madrid, for example,” the benchmarking report states.
The benchmarking exercise assesses nearly 97 million square feet of office space in 32 global markets spanning North America, Europe and Asia-Pacific, which housed nearly 800,000 employees in pre-pandemic times. Density is calculated on a standard definition of total usable floor area.
Prior to the COVID-19 pandemic, Toronto’s average office density, at approximately 138 square feet per person, was tighter than the global 143-square-foot average. Toronto office workers were also compacted into less space than their peers in Chicago, Los Angeles, Washington, D.C., Houston or New York. Chicagoans notably enjoyed an average of 245 square feet per person, while New York, with an average ratio of 172 square feet per person, is characterized as a having a tight density “relative to its national average”.
Among the seven markets tapped for potential de-densification, Singapore and Sydney are coziest with respective ratios of 107 square feet and 119 square feet per person. Toronto and Madrid, both at 138 square feet per person, are the most spacious, and are tied at 13th on the list of 32 cities.
Meanwhile, JLL’s premium office rent tracker places Toronto midway in the pack of 100 global markets as of December 2020, with average space costs (net effective rent and additional costs) pegged at CAD $89.11 (USD $70) per square foot based on the exchange rate as of Dec. 31. That compares to CAD $134.94 (USD $106) in downtown New York; CAD $113.30 (USD $89) in Los Angeles; and CAD $98.02 (USD $77) in Washington, D.C.. In the list of cities with de-densification potential, premium rents are higher in Singapore, Paris, Sydney and Milan, lower in Melbourne, and equivalent to Toronto’s in Madrid.
Beyond space costs and pre-pandemic densities, JLL analysts see the economic and employment base as an indicator of workers’ demands and employers’ general propensity to expand per-person allocations, retain existing office footprints or, alternatively, sublet space deemed unnecessary. In this, Toronto’s STEM (science, technology, engineering, math/medicine) job engine and traditional financial services stronghold could both come into play.
“There are clearly sector differences in the ability to work remotely. Technology companies are most able to operate remotely, while the health care sector (especially those roles requiring lab access) are less able,” the report observes. “Cultural factors, too, will have a bearing, with sectors tending to be more traditional in their approach to work and management styles expected to see less change. The legal sector — where densities can be typically around 30 to 35 square metres (323 to 376 square feet) per person — will likely experience fewer pressures to de-densify.”