Canadian office vacancy could peak in 2024 as tenants balance smaller space requirements with employees’ increasing hybrid work patterns, says a new Colliers report.

Barring a major economic downturn, Colliers expects vacancy to rise another 1% to 15% by year-end 2024 and then subside. Vacancy has risen 8% to its current 14% since 2020, said the Vancouver-based company.

The Colliers outlook comes as investors, such as CanFirst Capital, are converting office buildings to other building types due to high vacancies.

Colliers anticipates that hybrid work will increase vacancy. Most tenants intend to keep the same amount of space.

Economic growth and new tenants are offsetting declines caused by increases in hybrid. Colliers expects vacancy pressures to ease as employees work at the office more often.

Tenants are 10 percentage points more likely to renew their leases in accordance with every additional day that an employee works in the office. If employees work in the office four days per week, tenants will be more keep the same space footprint.