The office of the future may be coming to a mall near you, as shuttered Sears stores are proving to be much-desired office space for would-be tenants.
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“What used to be perceived as potentially value space I would argue is now viewed as premium space,” Cadillac Fairview Executive Vice President Wayne Barwise said.
The company purchased a large, closed Sears in Vancouver a few years back.
“We converted the first two floors to retail and then we put in four levels of office. We put Microsoft in there. And Sony moved their worldwide animation there as well. People want it because of the quality of the space — the large floor plates, the high ceilings, the light. But they also want it because of the amenity-rich environment. You walk downstairs … anything you want is available.”
Barwise said his company plans to continue the office-for-retail switch.
"We're looking to do this on more of our malls across the country. There's a whole trend towards urbanization, and we see a lot of our malls becoming urbanized."
Barwise spoke Tuesday at Bisnow's The Toronto Workplace of the Future event. Panelists said landlords need to be proactive when it comes to building amenities. Tenants are demanding connectivity, high ceilings, outdoor space or gyms.
“Tenants are demanding more,” Ivanhoé Cambridge Senior Vice President Jonathan Pearce said. “They are demanding more spaces where they can communicate. And it doesn’t really work to have a place where people sit and eat lunch. These areas need to be multipurpose.”
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But it does not just end indoors for the office worker. Modern companies also love their green space.
“Every single city you go to, you look at the office space and what is renting and what isn’t, and it’s the stuff with outdoor space,” Pearce said. “The places with outdoor space are not only renting first, they’re renting at premium.”
Crown Realty Partners Managing Partner Les Miller said landlords need to figure out what their tenants want and adjust their buildings to draw the potential tenants in. He said his company charges no rent for a hip main floor coffee shop in one building.
“The people that come in the building that are under 40, they don’t want to be in their dad’s building,” he said. “They want cutting edge. They want it to be funky. It’s important to have that amenity in order to attract the tenancies … and they shouldn’t be profit centres.”
The shared work environment of companies like WeWork have taken the office market by storm in a short period of time. And it is not just smaller companies with not enough space that are signing up. Larger companies are finding WeWork useful as an amenity — providing their workers with an alternative work environment removed from their usual space. Still, are companies like WeWork just more competition for landlords?
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“The notion that someone is coming in and leasing your space, and they’re making a profit on your space, is something that probably doesn’t sit well with the landlord community,” Pearce said.
“When you look past that, and you see what it does to your building — it basically changes it from your father’s office building to something completely different. We actually see them as an opportunity to get potential business.”
Pearce thinks one of the biggest threats to the office market may be technology, which could end up eliminating the middleman and upend how leases are handled.
“We’re one jump away from being able to lease office space online. I think that’s coming."
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