Canada’s Office Coworking Market Has Expanded by 303% in 5 Years

Flexible office operators are transforming the nation’s real estate landscape

The trend that started with coworking has become a transformational force in the Canadian business landscape. New work styles are in demand and a growing number of flexible office operators are increasingly dominating office leasing, having grown their footprint from a modest 1.5 million sq. ft. in 2014 to 6.1 million sq. ft. in 2019. This represents an increase of 303%, and an additional 1.3 million sq. ft. of flexible real estate is slated to open across the country in the coming years, according to CBRE Canada’s inaugural Canadian Flexible Real Estate Report.

Flexible office solutions, the best-known form of which is co-working, now appeal to entrepreneurs, scaling businesses and large enterprises alike. This has spurred demand for flex operators and is adding fuel to an already hot office market. Flexible office operators accounted for four of the 10 largest office deals nationally in 2019’s first half, and the largest lease transaction in Vancouver and Montreal during that same period was by a Flexible office operator.

The next wave of flexible office space has already committed to leases in new buildings currently under construction. The aggressive expansion of flexible office operators is helping drive down vacancy in major centres, particularly Toronto, where downtown office vacancy dropped to a new record low in the third quarter of 2019, 2.3%, as Canada’s largest city continues its unprecedented run as North America’s tightest office market. While flexible real estate growth has been most pronounced in Canada’s urban cores, the CBRE report notes that the suburban footprint of flexible workspace operators has expanded by 42% nationwide in the past two years.

“We haven’t seen a new type of office tenant emerge with such speed and dominance since the dot-com boom. The rise of flexible office operators reflects the pace at which work and the workplace are evolving along with new technology, changing demographics and an overall push for innovation,” says CBRE Canada Vice Chairman Paul Morassutti. “This has led to the birth, adoption and replication of agile real estate strategies at a remarkable pace.”

The bulk of Canada’s flexible workspace expansion is taking place in Toronto, Vancouver and Montreal, which combined accounted for 78% of the nation’s total flexible office space, according to the CBRE report. Here is a breakdown of the situation in those markets as of Q2 2019:

Toronto

• Flexible real estate operators occupy 3.1 million sq. ft. of office space or 1.8% of the region’s total office stock. The bulk of the space, 2.3 million sq. ft., is downtown: 147 locations out of a total of 216 flexible workspaces across the GTA.
• There’s been 100% growth in the downtown flexible supply since 2017, or 1.2 million sq. ft.
• Regus/Spaces is Toronto’s largest flexible operator, with a 1.3 million sq. ft. footprint across 56 locations, or 42% of the market by square footage, and plans to add 347,000 sq. ft. over the next two years.

Vancouver

• Flexible real estate represents 1.7 million sq. ft. of office space in Metro Vancouver, or 3.3% of the region’s total office stock. Like in Toronto, most of this flexible workspace, 1.0 million sq. ft., is located downtown, accounting for 37 of the 83 total flexible locations.
• Downtown Vancouver has seen 136% growth in flexible office space in the past two years.
• WeWork is Metro Vancouver’s largest flexible operator, with a footprint of 678,000 sq. ft. across nine locations, or 39% of the market by square footage, which includes plans to open 400,000 sq. ft. of new space.

Montreal

• Flexible real estate comprised 959,000 sq. ft. of the Greater Montreal Area’s total office supply, or 1.2% of the region’s total office stock. Over half of this, 621,000 sq. ft., is downtown: 46 of 95 flexible locations.
• There has been 60% growth in flex office space across the GMA since 2017, or 358,000 sq. ft. Downtown has seen 103% growth in flexible office space in that same period.
• WeWork is the largest flexible office operator in Montreal, with a total footprint of 348,000 sq. ft., or 36% of the market by square footage. WeWork is expanding rapidly, having logged 158% growth since 2017.

Flexible real estate solutions are re-shaping Canada’s other major markets. Calgary and Ottawa, along with Vancouver, have seen their flexible footprints expand by more than 80% since 2017. And in terms of market penetration of flexible workspace operations, Waterloo Region (with flexible representing 1.4% of its total office supply) is right up there with Toronto (1.8%). In Edmonton and Waterloo Region, suburban growth has outpaced downtown growth. Vancouver has seen 83% growth in its suburban flexible market since 2017.

“Flexible real estate is taking off across Canada and it’s not hard to see the appeal for office occupiers and owners,” says Morassutti. “Occupiers are able to deliver high-performing workplaces to their employees and ensure their portfolio can adapt to the changing needs of the organization. And office building owners and investors can utilize flexible solutions to modernize and future-proof their assets by incorporating new and innovative building features, maximizing returns in the long run.”

For further details and insights, download CBRE’s new Canadian Flexible Real Estate Report.