How many square feet people are willing to live in has been shrinking for years, and now their offices are shrinking too.

The City of Toronto announced Wednesday it will reduce the office space it leases and owns by 25 per cent over five years, for savings of $30 million a year — and in doing so became part of a North American trend.

“Clients are coming to us because of wanting to be smarter about how to use their real estate,” said Angie Lee, global workplace sector leader for Stantec, a global design firm.

“Real estate is generally the highest capital expense outside of people, it just makes perfect sense.”

She said her firm was recently able to create a smaller footprint for a big-city tech company, and to reduce the amount of space occupied by a firm in Chicago by an entire floor, resulting in millions of dollars in savings for each of the clients.

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The City of Toronto expects to save $750 million over the next 25 years, and liberate eight city-owned buildings for other uses, including community housing. The move will affect 3,930 City of Toronto employees, including 1,630 from the eight city-owned buildings and 2,300 occupying leased office spaces. The changes will be made over five years.

For most companies, downsizing their office footprint isn’t just about the money saved, said Lee.

Millennials are fast becoming the dominant demographic in the workplace, and they have different expectations, Lee said. With tech getting smaller all the time, millennials are fine with smaller personal workstations, but they want more from their offices than a desk and a filing cabinet.

They want spaces that are tech-enabled, they want a hub where they can socialize with co-workers, rooms where they can meet as a group, offices that provide privacy when they need it, and furniture and spaces that promote wellness, including easily accessible stairs so they don’t have to take the elevator if they want to walk.

Companies are also less willing to maintain big offices for managers who are rarely in them, said Kevin Katigbak, senior workplace strategist at Gensler, an architecture and planning firm.

Office design is something tech companies like Uber think about a lot. Uber Canada employs 250 employees across five floors at its new Toronto office at 121 Bloor St. E. The office features 60 flexible conference rooms, eight team spaces for smaller meetings and 13 phone booths for quieter conversations. There is a library on the 12th floor, two outdoor terraces and a gathering space on the 16th floor.

“We were thinking beyond the stereotypical ping-pong table with a focus on creating open-air, interconnected spaces that give our employees room to breathe and share ideas,” said spokesperson Josh McConnell.

Uber expects to eventually have more than 400 people working in the 80,000 square foot space. At 400, that works out to an average of 200 square feet of office space per person — somewhat less if more than 400 are hired.

The average size of condos for sale in Toronto has recently climbed back up to around 900 square feet, from a low of around 800 square feet between 2012 and 2016, according to Patricia Arsenault, executive vice-president, data solutions at Altus Group.

But micro-condos, under 300-square feet, have also become a fixture of the local urban landscape.

Record-low office vacancy rates drove top rents in Toronto’s financial core to more than $40 per square foot for the first time ever in the second quarter of 2019, making Toronto, along with Vancouver, North America’s hottest office market, according to data from commercial real estate company CBRE Group.

Currently, City of Toronto office workers occupy about 200 square feet of office space each. The city is hoping that after the rationalization is complete, that figure will sit at 150 square feet. The recommended standard is 140 square feet per workstation, according to a consultant’s report prepared for the city.

The consultant found that there were significant opportunities for efficiencies at the city, pointing to among other things, office furniture that was over 20 years old, with design concepts dating from the 1980s and 1990s.

“Current workstations (i.e. traditional high walled cubicles) are also generally obsolete,” according to the city report.

Katigbak agreed cubicles are probably a thing of the past and work stations no longer necessarily have to support desktop computers that are two feet wide.

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“Tech is becoming smaller — you don’t need the same space that you used to require in the past. Unless you require layout space, you can be fairly compact in regards to your day-to-day work.”

Ergonomics are more important now, he added.

“Sit-stand desks are more of an option, and can be lower profile. The overly huge desks are kind of a thing of the past. They’re impractical, bulky.”

Mayor Tory said the changes will not affect customer service.

“It is something in the 21st century we should do,” said Tory, adding that much of the office space was designed at a time when people used typewriters at the office.

The plan was a long time coming and was made possible by the creation of CreateTO, Tory said. CreateTO was established to provide oversight and direction for the city’s real estate portfolio and develop lands for city purposes.

Previously, responsibility for real estate was scattered in various city departments.

The CUPE union representing inside workers at the city doesn’t have a problem with the proposed move and approves of the idea of using the excess properties for community housing.

“We applaud any effort the city makes to invest in affordable housing and improve front line staff’s ability to deliver services to Toronto’s communities,” said CUPE Local 79 president Dave Mitchell.

“We look forward to working with the city to ensure that displaced staff have a smooth transition to a new workplace.”

An execution plan is expected to land in the third quarter of 2020.

The buildings housing the TTC, Toronto Community Housing, Toronto Parking Authority and Toronto Public Health at 277 Victoria St. are among the eight that will be made available for new uses as the rationalization project is completed. The building at Victoria Street also houses The Works, a harm reduction program provided by the public health agency.

“We have not been informed of any immediate plans to relocate,” said agency spokesperson Lenore Bromley.

“However, it is our understanding that the delivery of (Toronto Public Health) programs and services at 277 Victoria Street, including The Works, will not be impacted by the CreateTO initiative, other than by location. The City will be working with (Toronto Public Health) to find a solution to ensure the services currently offered to the public continue in a new location.”

With files from David Rider

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