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Lessons in Office Leasing: What We Can Learn From London, Ontario
January 29, 2024 4 Minute Read
London, Ontario’s downtown office market is looking to bounce back after ending 2023 at a record-high vacancy rate of 28.5%.
CBRE’s Greg Harris and Theresa Kimmerly have been at the centre of the effort.
As companies have shifted their approach to the workplace, so have Harris and Kimmerly. They have been working closely with businesses to adapt to the evolving needs of the workforce and new ways of working. They’ve noticed that most companies aren’t looking to forgo their offices, but rather to maximize their benefits by rethinking them.
“Companies are being more intentional than ever and shifting their focus to creating workspace that supports their culture. Despite what people might think, we’re not seeing many companies let go of their offices entirely,” says Kimmerly. “It shows that the office is still important, but it’s taking a different form."
Harris adds, “So far we’ve mostly seen strategic renewals and smaller deals as companies move through the process of incorporating hybrid work into their office space strategies.”
Rightsizing and Saving Costs
In 2021, Harris and Kimmerly were contacted by law firm Shillington McCall LLP, which was looking at office space options following a merger.
After going on several tours of different spaces, it was determined that relocating did not make financial sense, since a 10-year lease would be required to offset build-out expenses. So Harris and Kimmerly helped the firm to negotiate a 25% downsizing of their existing office space and an extension of their lease.
The deal included reduced employees parking rates and minor renovations, including new flooring and paint. The right-sizing resulted in a monthly savings of 20%.
“Landlords are willing to collaborate with tenants and find solutions to keep them in their buildings,” says Harris. “It’s more beneficial for landlords to renew tenants with good track records at smaller footprints and with concessions, as opposed to re-leasing the space and risking a long period of vacancy.
“In other words, there’s never been a better time for tenants to renegotiate their leases.”
Staying Put
It was a similar story for the Brain Tumour Foundation of Canada.
Nearing the end of its seven-year lease, the London-based organization realized it would need to reduce its footprint as it had adopted a hybrid working model and was no longer making full use of its office space.
The group reached out to Harris and Kimmerly in early 2023. Like with Shillington McCall LLP, they concluded that a relocation would be cost prohibitive, and they would have to commit to a long lease to amortize the renovation costs.
So Harris and Kimmerly negotiated a renewal in the Brain Tumour Foundation’s existing office building. They achieved a 30% reduction of the tenant’s spaces, back to pre-expansion levels, for a 5-year duration. This ensured future flexibility for the Brain Tumour Foundation, while resulting in monthly savings
“A lot of tenants are finding it difficult to justify relocating due to the cost of build-outs and the lengthy leases required,” says Harris. “We’re here to show them that there are options.”
Greg Harris and Theresa Kimmerly
Moving Fast
In 2022, Neogen Canada, a solutions provider for the food processing, animal protein and agriculture industries, merged with 3M Food Safety and began searching for a new London location. They called on Harris and Kimmerly for guidance.
“They primarily needed office space, but also required a lab component for testing and repairing the equipment they sold,” Kimmerly explains. “The twist was that they were under a time constraint and needed to move in within four months.”
Harris and Kimmerly found a range of potential spaces that could suit Neogen’s requirements. They booked tours of the properties and Neogen representatives narrowed down the options to two, ultimately securing a move-in ready space that suited their needs, with room to grow.
Office leasing activity in London is a microcosm for business decisions being made across the country. The physical office has a vital future to most businesses, but finding the right fit and location requires even more analysis and planning than ever before.
“The office market is changing quickly and we all have to keep up,” says Harris. “Tenants who are proactive about their office use today will reap the benefits in the long term.”
And with most office leases being 5-10 years long, it’s important to get the guidance to make the right decision for your business.
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