Commercial real estate industry experts in Montreal say new tenant requirements for smaller, smarter and more sustainable space is bringing about change in the office markets.
“At CGI we are hoping not to be a large tenant,” said Avrum Miller, Vice President of Corporate Real Estate with the CGI Group Inc., speaking at the Montreal Real Estate Forum on March 20. In a push for a better utilization of space, CGI has taken a million square feet off of their inventory since December 30, 2010.
CGI has approximately one-third of its 31,000 employees globally working in client offices or remotely. The remote offices each have about 1,500 people, and CGI says its strategy is focused on “right sizing” these locations. The term, according to Miller, is just a polite way of saying that they are really downsizing.
“We get to downsizing through consolidation,” said Miller. “We’ve changed our footprint for individuals who work in our space. Our workspaces are smaller, our offices are smaller, and our conference rooms are multifunctional. We keep a very close eye on the space we actually create.”
Because the spaces are in the vicinity of 100 square feet per person, HVAC, light and noise reduction, and the type of seating provided, are all important factors to consider.
“Although our members might have physically less space they also have a comfortable working environment in which to work,” he said. “We’ve been making an investment to get the density we are after.”
To meet their target, changes include: shared workplaces, reservations for office space and sales people are no longer being given an office space. “Our philosophy is they should be out in market selling to clients not sitting at an office,” Miller continued.
`Pain before gain’ is the motto – in other words CGI wants to make sure that before they start providing more space to employees they have to really need it.
Another important consider for CGI when choosing a location is the need to be close to the client, accessible by transit for their employees and cost. “We are definitely a long-range company we look at our costs and we put a lot of focus on what is the least cost solution,” said Miller. “Reduce our risk before we venture, and we prefer long term leases rather than short-term lease.”
Montreal experiences a shift in tenant priorities
According to commercial real estate experts attending the Montreal conference, there has been a shift in the priorities of tenants. Their focus is now mobility, flexibility and sustainability.
“More and more tenants have sustainability groups and green polices,” said Avrum Miller. “It is now becoming a commonplace in tenants we are talking to across the country, sustainability is a very important issue. Investors are certainly putting it in the top drawer of their investment criteria.”
Richard Hylands the President of Kevric Real Estate Corporation in Montreal said that new LEED building are generating big savings for tenants and consequently are becoming the more desirable locations.
“The city of Montreal offers grants for new builds. Up to a $100 million available in new building grants for five years,” said Hylands. “It’s about $8 per square foot – for many tenants that pay more $50 per square foot – this is attractive.”
Mixed-use buildings are catching on
Another interesting trend that’s becoming a more commonplace in North America is the desire for mixed-used buildings. According to Lloyd Cooper a Senior Vice President with Cushman & Wakefield Ltd, mixed-use projects can offer great value and top signage on the tallest floor.
“In Montreal we will see what’s being done in New York in Times Square,” said Cooper, “where they have mixed-use buildings, hotels, theatre, and residential.”
Another trend that has become prevalent in choosing an office location is proximity to transit.
“All of our offices are on Montreal Island are driven by access to transit stops,” said Miller of the CGI Group. “When you have mass transit it’s always an advantage. The suburban locations are getting to be more and more of a challenge for us. Yesterday for example we received a default from one of our landlords because we were overusing parking. In the suburbs the big problem is that everyone has got to take a car to get to work. Suburban locations are a challenge for us because we bust parking numbers all the time.”
Daniel D. Peritz a Senior Vice President for Montreal and Ottawa with property development firm Canderel, says that if situated near transit employees will be prompted to utilize it.
Lloyd Cooper who is the Senior Vice President of Cushman & Wakefield Ltd. in Montreal sees location where families live, work, and play as being an important issue.
“We are doing postal code studies so that we can locate offices closer to where employees live work and play,” said Cooper. “We are finding that employees might not choose to migrate downtown to sit in traffic, so for example some want to work in Laval. We have a lot of employees coming from the surrounding areas. We just negotiated 45,000 square feet of building space. All growth coming from the suburbs.”
As client and employee needs change, so too does the office market. Building owners, managers, and the city of Montreal as a whole continue to place importance on environmental sustainability, space reduction, and convenience.