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Flexible Real Estate Has Arrived – Now What?
Whether you’re a commercial real estate investor, occupier or owner, there’s no escaping the topic on the tip of everyone’s tongue: Flexible real estate.
Last year, flexible space operators accounted for a record 13.4 million sq. ft. of office space. By 2020, over two million people are expected to work in over 22,000 flexible spaces worldwide.
Canada is the world’s seventh largest flexible real estate market, with 2.8 new locations for every million citizens. In the tight Toronto office market, a new location opens every 13 days.
As freelancers continue to account for more of the workforce, operators are scrambling to expand. Here’s what you need to know about this growing trend, and what it could mean for your business.
Where Does Canada Stand on the World Stage?
It’s been quite the year for Canadian flexible real estate. In April, WeWork announced its newest headquarters at Bloor and Bathurst, while in August, Staples Canada opened its second flexible office location, part of the company’s bid to diversify its business and rejuvenate its brick-and-mortar stores.
IWS, with its Regus and Spaces offerings, accounts for 45% of the Canadian market, while WeWork has a 16% share, followed by Workhause (4%), and Canadian-founded iQ (3%). These businesses represent 2,119,000 sq. ft. of the downtown Toronto market, an astonishing 85% growth since 2017.
Though Toronto and Vancouver currently have the highest density of flexible space locations, companies are quickly establishing themselves in smaller hubs. IWS is operating in Montreal, and iQ recently announced openings in Calgary and Ottawa.
As these operations spread across the country, the question of demand and available space will continue to dog them – is there enough viable real estate to meet their clients’ needs? More importantly, can they compete with other flexible offerings, which are growing by the day.
What Commercial Real Estate Professionals Need to Know
As the market diversifies, companies are looking for new ways to stand out in a crowded field. WeWork is now offering a “headquarters” service, where companies with 50-250 employees can occupy a whole floor for a two-year period.
Meanwhile competition for space is fierce in tight markets, as building owners and larger occupiers begin to compete with their own flexible spaces. As market fundamentals continue to tighten, competition for high-quality flexible-ready space is likely to rise.
These headwinds could shift in the coming months, as the relatively young industry continues to grow and mature. Whether you’re an investor, owner or occupier, flexible real estate isn’t an industry you’ll be able to ignore – but if you work with the right partner, you might be able to profit.