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“People who feel good when they come to the office are more productive, which means that the bottom line gets impacted. The reality is that the increase in rent for quality buildings and the flight to quality pays for itself in spades because your employees are more productive. “Then it’s not a discussion of how many square feet you’re renting and what the cost per square foot is; it’s about what value you’re getting. Then we’ll work the math backwards to make sure that the rent justifies itself, which, spoiler alert, it always does.” AS CLASS A SUPPLY BECOMES TIGHT, WHAT’S NEXT FOR CLASS B? While flight-to-quality is still very much in play, conversations are starting to turn to what happens when Class A supply becomes scarcer. One option that David thinks is becoming increasingly feasible is converting C-class to B-class. But it’s a specific kind of transition, he argues.
“For me, where I think the opportunities are is where you have institutional-grade landlords that own B buildings.
“You go from 96 per cent occupancy on average for trophy A-class buildings, then you go to B, and you’ll find 20 to 30 per cent vacancy. But some of those are really good landlords. And they’ll spend money on their buildings for covenant-worthy tenants. There’s something to be said for having an institutional landlord that can stand the test of time and invest in their properties.” THE COMING WAVE Just as there are signs of more positive momentum in the office market, a new challenge enters the room. Artificial intelligence. In the worst-case scenario put forward, AI causes widespread job losses, leading to the office market falling off a cliff. According to a recent report by Cushman & Wakefield, over the next decade, AI will drive a transformation in what we mean by office space, with a knock-on impact on demand.
“For occupiers, the question moves from ‘how many desks do we need’ to ‘which decisions do we need to make faster and better’ - and whether the office is designed to consistently produce those outcomes. For investors, the question becomes which assets are positioned to support that shift - and which are still priced on a model of work that AI increasingly compresses,” says the report.
David says he has yet to see evidence of a reduction in the need for office space resulting directly from AI.
The key issue with AI is one that is much less discussed, he says: the impact of its energy consumption on tenants’ requirements. “If our tenants start to use AI more and their electrical requirements become more important and significant as a result of using AI daily, are our buildings okay to accommodate that for the future or what needs to happen?”
The coming does illustrate David’s fundamental argument — that how we assess the value of offices must change.
“Investors need to look beyond the calculations and to the value,” asserts David. “The industry has evolved. Times have changed, and it’s our job on the front line to educate people about how it’s changed.”
■ Alex Gray
realestateforums.com
realestateforums.com
Canadian Real Estate Forums / Spring 2026 26
Canadian Real Estate Forums / Spring 2026 27
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