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Office real estate has historically been an incredibly profitable investment for savvy investors looking to enter the world of commercial real estate. However, recent years have seen more and more businesses move away from the office and into people’s homes through remote and hybrid work structures. So, the question now stands – should you be investing in office real estate?
First of all, the question is a little bit misleading. After all, there is never going to be one specific investment that you should or should not be pursuing. Instead, you should be making investments that make sense for your portfolio and help you achieve your specific goals as an investor.
However, that does not change the shifting landscape for businesses across Canada and how that is impacting the demand for office real estate. So, let’s take a closer look at the situation.
Before we get started we would like to offer you a free strategy call with our team to discuss financing office spaces and commercial real estate. To claim this opportunity, simply click the link below.
Office Spaces and Business Real Estate
Office spaces are a classification of commercial real estate that is traditionally categorized according to the size and quality of the property.
First, there are Class A buildings that are traditionally considered some of the best investments. These properties are often found in prime locations, have plenty of space and are in the best condition. Frequently these buildings are relatively easy to find tenants for since the space is usually move-in ready for the businesses who would seek to occupy these spaces.
Then, you have Class B buildings. These are usually in pretty good condition but are not necessarily located in the most ideal places. These are not bad properties by any means, but they can be a bit more difficult to find tenants for than Class A properties.
Finally, you have Class C buildings. These buildings typically have noticeable work that needs to be completed and are not located in the best neighbourhoods for their businesses.
These properties can also be sorted into high-rise, mid-rise and low-rise classifications based on their size and number of floors.
The Rise in Hybrid and Remote Work Environments
Recent years have seen a massive increase in the number of Canadians who work hybrid or fully remote jobs, many of which would have previously worked in an office setting. As a result, some businesses have downsized their offices or outright eliminated their office spaces.
However, many companies who offer hybrid and remote jobs still require their office spaces for key positions that cannot be moved into a remote environment, so while some may see this as a signal for the end of office real estate as we know it, the truth is that most companies are not going anywhere despite the record-high number of employees working from home.
Why Do Many Companies Still Need Offices?
Some companies and businesses will always need their offices in order to perform key functions of their business. Here are some key reasons why many companies cannot say goodbye to their offices anytime soon.
Direct Client Interaction
If a business works directly with clients in-person, then an office is going to be a definitive need for their operations. This includes businesses such as law firms, financial institutions, and public relations/marketing firms.
While it is possible to meet with clients in outside locations, it can be difficult to find secure locations to discuss sensitive client information without the risk of outside listeners outside of a dedicated office.
Working With Seniors and People Without Technology
One of the leading reasons why companies have not tried to make the push to fully remote operations is due to the risk of alienating clients who are seniors and may not have access to or fully understand modern technology as well as other clients who do not have experience or access to their online systems.
Digital workspaces are only productive to people who have the ability to get online, otherwise they are a hindrance and a barrier to entry for a business.
Increased Employment Opportunities
Having an office space largely increases the number of potential candidates and employees a company can consider. This is because not only will they be able to accommodate talent that may not have access to the technology to complete the job from home, but because they will be more capable of training their team by having them present in the office to receive more direct guidance and feedback.
Team Cooperation and Accountability
Finally, by having your staff all in one location – or primarily in one location – you increase the potential for cooperation within your team as well as the sense of accountability each team member feels towards their coworkers. After all, most employees will not feel comfortable slacking off and putting their work onto their coworkers if they see them every single day.
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Are Office Spaces Worth It?
In conclusion, office spaces are absolutely a worthwhile investment as long as there are businesses in the area that are seeking out office space, or businesses that may wish to move into the area that will need a work environment.
However, this should not be a problem because before making any sort of real estate investment you should always start by gauging the demand in the community for the specific property type. This means if you find companies saying they need office space, you are likely to find success by buying one and offering it to those companies.
Financing an Office Building in 2023
Much like the world of business has been changing, so has the world of commercial real estate financing. This means that if you want to get the best rates for your investments, you want to work with a broker who is embracing the modern world.
That is why at LendCity, our dedicated commercial financing department is dedicated to sending your deals to the best lender the first time so that you can get to work even faster.
To get started today, give us a call at 519-960-0370 or visit us online at LendCity.ca Alternatively, you can click the link below to book a free strategy call with our commercial financing team.