ROOM FOR RENT
SMALL FIRMS ARE CASHING IN ON UNUSED SPACE
Jessica Graham is constantly on the go. As Lululemon’s regional manager for Ontario east, she bounces between the yoga apparel chain’s stores to ensure the customer experience is up to par.
Graham, who is based in Ottawa, often hosts colleagues in Toronto. Even though the Vancouver-based company has a smaller office in the city, she said all- day gatherings in the boardroom can be disruptive to the staff. On top of that, it doesn’t have the right ambiance for team building, training sessions or leadership development, she said. “When … you want everyone to come together and get connected quickly, being in a comfortable work environment really helps.”
There is a growing collection of temporary offsite workspace available for situations like Graham’s, scattered around cities across Canada and curated by startups such as This Space Works and Breather. The spaces vary in terms of size and amenities but typically include a white board, TV monitor, flip chart and perhaps a couch.
In the age of the freelance economy, it might seem unusual that a company with a sizable workforce would rent space. But the startups renting it out say a significant number of their clients are employees of a medium or large company.
What’s also surprising is that the space available isn’t exclusively downtown. Often it’s at small businesses, consulting agencies and notfor-profits, which are seeing an opportunity to rent out under- utilized space in exchange for cash.
Rhapsody Strategies, a branding and business consultancy in the heart of Ottawa’s By Ward Market, offers a training centre through This Space Works, that takes up roughly one- fifth of its 5,000- square- foot office for $ 60 an hour, or $ 500 a day. It includes free Wi-Fi, a bigscreen TV, flip charts, walls painted with white board paint, drop-down video backdrops, lighting equipment, and a full kitchen. It is also sealed off from the firm’s staff with a barn-style sliding door.
When the space was designed, president and CEO Trefor Munn-Venn realized Rhapsody wouldn’t use it every day. Beyond the financial benefit, he said it’s also opening the door to prospective clients. Since making it available last spring, Rhapsody has rented the space to government departments, large brands and IT firms looking to work away from their own offices.
This Space Works offers many options in Toronto and Ottawa, with capacity ranging from four to a few dozen people, and prices typically between $35 and $65 an hour.
Eighty per cent of This Space Works’ clients are larger operations and one of the most common reasons is to overcome the monotony of meeting fatigue in the same, tired space, said the startup’s founder Lise Snelgrove.
“It’s often hard for people to disconnect from their day to day when they just walk down the hall to a meeting,” she said. “But when you step outside the office and put your coat on and walk down the street, there’s something that wakes you up, gets you more inspired.”
Snelgrove contends there is a growing opportunity here because of the way organizations are structured. “Companies, as they grow their mobile workforce, aren’t going to be growing their real estate footprint,” she said.
Breather, a similar space provider, which has listings in Montreal, Ottawa, New York, San Francisco and next year Toronto and London, England, said an on-demand office appeals to sales people and recruiters who are frequently on the road.
Breather and This Space Works are in relatively new territory, and they are competing against a movement of co-op work environments and established business centres such as Regus.
John Arnoldi, executive managing director of commercial real estate firm Colliers International in Toronto, is skeptical the market has room for such intermediaries. “They’re competing against some big players,” he said.
But Julien Smith, CEO of Breather, disagrees. He said one big advantage they have over coffee shops or a shared work environment is a void of distractions. His company rents out only independent units with a private entrance in multi-tenant buildings.
“Privacy doesn’t sound interesting or valuable, but psychologically it is valuable for productivity,” he said.
In 2015, Breather raised a $ 26- million round led by Peter Thiel’s Valar Ventures.
Colliers second quarter outlook predicted downtown office vacancy rates would rise as an influx of real estate comes on the market in the next few years and tenants avoid lease commitments.
Snelgrove sees that as an opportunity to capitalize on empty offices caught between leases, but Arnoldi said this class of commercial space is out of range for intermediaries such as This Space Works.
“The companies that we deal with, I can’t see them being interested … it wouldn’t have a big enough impact on the bottom line to make the effort worthwhile,” he said.