Rapid rise of co-working providing needed space as big cities feel crunch

'In the last 20 years, the average square feet per employee that's needed has been shrinking'
By Ian Bickis
|hrreporter.com|Last Updated: 09/18/2019
staffing, relocation
A WeWork location in downtown Toronto. Google Street View

TORONTO (CP) — When Rahul Raj was ready to move his small but growing business out of his home, he found a range of flexible options waiting for him despite Toronto's tight office market thanks to a boom in co-working.

The rapid rise of flexible office spaces, which provide a broadening range of workspace options with little commitment or up front cost, has meant both independent workers and entire companies can ramp their space needs up or down as needed more seamlessly than ever before.

This new real estate model comes about via companies that lease floors or buildings and then subdivide and remodel them to suit their brands. An increasing number of co-working companies are also working with building owners to share in the risks and profits.

Co-working is seeing huge growth in Canada as global market leaders like WeWork and IWG look to add floor space and fill a strong demand for smaller, more flexible office spaces in a real estate crunch.

Flexibility was key for Raj, who is working to add at least two more staff to his team of two full-timers and a few contractors at his 5&Vine firm that helps tech start-ups raise venture capital.

``Because it's month to month, if our need changes, so too can our arrangement,'' said Raj.

He was able to secure a space that had the right mix of design, light, bustle and location to fill the growing needs of the company thanks to a co-working company called Spaces.

``It's hard to think of an alternative that has the same flexibility and economics. These guys can provide what I can't access on my own.''

Canada's flexible office market has grown from about 138,000 square metres (1.5 million square feet) in 2014 to over 562,000 square metres (6.05 million sq. ft) this year, according to commercial real estate firm CBRE Group Inc.

Toronto accounts for about half of that space, with more than 30 companies offering some sort of flexible office space including options for freelancers with children, women looking for a supportive environment, and large-scale, multi-floor options for major companies.

The growth not only responds to demands for more flexible space, but for any space at all as Toronto and Vancouver face unprecedented office space demand.

``We're one of the tightest, if not the tightest, office market in terms of available stock in the world right now,'' said Jon Ramscar, managing director of CBRE's Canadian division.

IWG, which has about 279,000 square metres (three million sq. ft) of flexible office space in Canada, says it plans to double that in the next three years.

Co-working offices are helping to add capacity to the market in part by being more efficient with office layouts, as their revenue depends on how many people they can fit into a space.

A report by CB Insights noted that WeWork's buildings average about 4.6 square metres (50 sq. ft) per person, compared with an industry-wide average of 23.2 square metres (250 sq. ft) for commercial offices.

The shrinking space is part of a longer-term trend, said Ray Wong, vice-president at Altus Group.

``Especially in the last 20 years, the average square feet per employee that's needed has been shrinking, and that's based on technology and people multitasking and more flexible workspace.''

The efficiency isn't just coming on a space per person level. Larger companies are taking advantage of the ease of adding office space by not leasing out the typical seven to 10 per cent extra space for future growth, said Wong.

Flexible offices, especially co-working spaces, also help businesses attract skilled employees who are looking for a more interesting and pleasing place to work, said Wong.

``The key challenge right now for companies, especially on the 1/8 intellectual property 3/8 side, is the ability to retain and attract talent.''

The tighter layouts at co-working spaces allows for more collaboration, while also avoiding the unused spaces of traditional offices, said Wayne Berger, CEO of IWG Canada and Latin America.

``There's no doubt that we and our peers operate on a higher density rate than we would see traditionally.''

And while there are more people in the office, companies like IWG, which runs the Spaces and Regus brands among others, is also responding to the need for some people only to be in the office part time.

``Employees want the option, and the ability, to work wherever they want to work, in a productive office, at whatever time to get a job done,'' said Berger.

For Raj, the model means he can provide full-time desk space for his team, while he is signed up to only be in the co-working space 10 days a month.

``I can be at the co-working facility, be at a client site, or choose to work from home, if that's somehow conducive to the work that I'm doing.''

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