Demand for co-working spaces on the rise
Co-working office providers are continuing to sweep up downtown Vancouver office space as the business model shows no signs of slowing down.
In September, Spaces, the communal office space brand under the IWG Plc umbrella, announced that it is taking 120,000 square feet at the new 400 West Georgia St. tower, a project being developed by Allied and Westbank Corp. That building is expected to open in 2022.
That deal comes on the heels of the official launch of Spaces Gastown, a six-floor co-working space on Hastings Street that can accommodate up to 500 members.
“For Vancouver, Gastown is our first location,” said Wayne Berger, the CEO of Canada and Latin America for IWG Plc.
He said they are currently building another Spaces location of about 80,000 square feet at the Old Tom Lee building on Granville Street, which is set to open in early 2019. Spaces is working on another 40,000-square-foot location at a new building at 565 Great Northern Way, also set to open early next year.
Berger said there has been a major shift in how tenants and landlords view work space.
“Over the last four years, coworking (has) now become this aspirational choice amongst large companies and also startups and freelancers,” he said during a recent interview with Postmedia on the ground floor of Spaces Gastown.
He said leases (or memberships) with a co-working provider like Spaces could be as brief as one month, and the shift has allowed companies to remove expensive, long-term leases from their balance sheets.
“(Tenants) don’t have to worry about capital expenses, they don’t have to worry about investment or build-outs, security, Wi-Fi, (or) staffing,” he said. “Companies can focus on their core competency. They can move in as quickly as literally 24 hours.”
He said co-working is not just for freelancers. “We support about 60 per cent of the Fortune 500 companies around the globe,” he said.
Spaces Gastown has six floors with a mix of communal table workspaces, dedicated desks and fully furnished glassed-in private offices of various sizes.
It also has a rooftop social space and kitchen area.
The location includes couches, booths and meeting spaces spread throughout the brick-walled space.
Berger said many of their members work in film, TV, blockchain, financial technology, app development and various other types of tech.
Meanwhile, WeWork has launched a 200 per cent expansion to its local footprint in the 2018 calendar year, Postmedia has learned.
The New York-based co-working giant now has three locations operating in Vancouver, including at the Bentall complex and at its newest seven-floor site at 333 Seymour St.
WeWork has also leased two floors of a building under renovation at the “Main Alley ” campus at Main Street, between East Fourth and East Fifth avenues and Quebec Street. And WeWork has taken three floors of the Marine Gateway Building on 450 SW Marine Drive.
WeWork has plans to double its local footprint once again in the 2019 calendar year, a WeWork source told Postmedia.
The wave of co-working started to wash over downtown Vancouver less than two years ago, said Colin Scarlett, an executive vice-president with Colliers International, which handles Spaces’ Vancouver leases.
He said the business model filled a much-needed gap in which tenants want short-term flexibility and landlords desire stability.
“Those two forces are always opposing one another,” he said.
“Co-working steps in the middle and essentially solves it.”
Companies no longer need to spend a lot on finishing an office space, he said. “And no longer do you need to sign up for a 10-year lease.”
Scarlett foresees a downtown Vancouver office market that is eventually 30 to 40 per cent coworking businesses.
Vancouver tenants are facing high rents and the second-lowest office vacancy in North America, second only to Toronto, he said.
“Lots of companies would rather try to find a little bit of space today under the co-working model and have some flexibility.”
Like many firms, co-working companies like WeWork and Spaces probably aren’t getting as much space in Vancouver as they would like right now, he said.
“We’ve essentially run out of space,” Scarlett said.
“If you needed 30,000 square feet in the centre of the city, you can’t find it if you needed it today.”
Berger said the commercial property market has been on a lengthy bull run, but it won’t last forever.
A period of “rationalization” could hit co-working among other businesses, hurting the brands that are not well managed.
Scarlett said it would likely take major macro-economic problems to slow down the co-working model in Vancouver.
“The only thing that would stop it would be significant global economic forces,” he said.
Lots of companies would rather try to find a little bit of space today under the co-working model and have some flexibility.