Northern Ontario office market 'frozen' as companies wait-and-see on work-from-home

A year since offices emptied out across northern Ontario, it's still unclear how many of those workers will ever be back.

"It's pretty much status quo, just everybody's frozen, slow motion," says Paul Zulich, executive director of Zulich Enterprises, which has some 300,000 sq. ft of commercial space in the Sudbury area. 

"People are not making decisions."

Zulich says he's had a few non-profit tenants decide to go totally virtual, but most others are deciding to go month-to-month or sign one-year deals instead of longer term leases. 

He says his company currently has about 5 per cent vacancy on the commercial side, which was in the normal range before COVID. 

Zulich says he agrees with experts who predict that a blended workplace with more people continuing to punch in from their homes at least some of the time could shrink office footprints by 10 per cent post-pandemic, but he says that extra space might be needed for physical distancing anyway.

Elm Place property manager Robert Green says they've had a few offers for empty office space in their downtown Sudbury mall and office complex, including some expecting to get a deal because of the pandemic.

"Many are sort of waiting to see. So there are many offers we've seen where people are kicking tires," says Green. 

"We've really yet to see the dust settle."

He says the office side of the former Rainbow Centre is about 20 per cent vacant, but that's because of some very large spaces looking for a tenant, which has seen some interest in the past year.

Green says he doesn't worry that renting those offices will become even tougher in the years ahead, predicting that the "pendulum won't swing too far" to work-from-home arrangements. 

"It's been different, but still very active," says Chris Tammi, director and broker of record with Mallette-Goring in Sudbury. 

"It's not necessarily that the market's worse, just that the market's different. A lot of companies are waiting to see how things will unfold."

He says in the years ahead we will likely see more short-term office use, such as the "hoteling" trend where at-home workers book space for a few days at a time.

Tammi says there is a lot of office space in Sudbury that was built in the 1970s and now needs expensive upgrades, that scares away many prospective tenants, especially with the rising cost of construction in recent years.

James Caicco, the owner of Century 21 Choice Realty in Sault Ste. Marie, says many people seem to assume that office buildings have been all but abandoned over the past year. 

"We're not seeing that. The commercial sector and the industrial sector have been relatively strong," he says.

Caicco says he's also seeing an increase in people from southern Ontario moving to the Sault and some are bringing their businesses with them. 

"I'm getting a call from other real estate offices in Ontario sending clients here almost every day now," he says. 

"It's residential, but there's a commercial component to it. You can rent an office in our downtown for $200."