IWG plans to open 13 new Canadian flexible workspace locations over the next eight months.
IWG will open HQ-branded workspaces in Edmonton, Winnipeg, London and Quebec City and two in Regina. It will expand its Regus presence to Burnaby (Metro Vancouver), as well as Mississauga, Woodbridge and Markham in southern Ontario, while opening three SPACES locations in Surrey (Metro Vancouver), Montreal and Halifax.
IWG Americas chief executive officer Wayne Berger told RENX demand for flexible workspace from small-, medium- and large-sized companies continues to outstrip supply.
“What we are doing is providing a solution to help support building owners and landlords facing this time of distress of increased office vacancy rates and availability rates,” said Berger. “Vacancy rates now in Canada are getting close to surpassing 18 per cent.
"That's up from 5.9 per cent in 2019. It's dramatic in terms of the shift and the reality is that this is not cyclical.
“This is the single biggest structural shift that we have experienced in the commercial real estate industry and the office sector.
"And what we've been working to do is to help building owners — entrepreneurial, regional and institutional — solve this growing issue.”
IWG partnering with building owners and developers
IWG, which bills itself as the world’s largest flexible workspace and office provider, is partnering with building owners and developers to convert existing empty space into one of its numerous brands of co-working sites.
“Our partners are investing capital to build and we are operating those locations on our unparalleled global platform and with our best-in-class operations and customer service,” Berger said.
“We're operating it for them in exchange for a management fee. It's a different model and does not involve a capital lease.”
All the net proceeds over and above the management fee, and the recouping of the centre's operating costs, go to the building owner.
Berger said the goal is for the building owner to earn a premium above what it might have been able to earn from gross market rent.
IWG monitors demand for flexible workspace in both current and potential new markets and contacts building owners with available space to gauge interest in partnership agreements.
A number of factors are taken into consideration when deciding what brand to put in what space. IWG looks at what brands it already has in a market and looks to diversify the portfolio to appeal to different client needs and price points.
Brands can also be selected by the initial capital allocation to be invested into a location. For example, SPACES sites typically require a higher investment than HQ outlets.
IWG’s global expansion
As companies of all sizes adopt hybrid working for the long term, it’s predicted 30 per cent of all office real estate could be flexible workspace by 2030.
Zug, Switzerland-headquartered IWG currently has approximately 3,500 locations across more than 120 countries and 83 per cent of Fortune 500 companies are customers.
IWG’s worldwide operations posted the highest-ever half-year revenue and added 400 locations to its network in the first six months of this year. It plans add 1,000 new global locations over the next year.
IWG annually invests around $85 million into its technology platform to provide partners with access to its expertise. It also provides fit-out support as well as sales and marketing capabilities.
Berger said IWG has entered into almost 800 partnerships globally. The company has signed deals with strategic partners for almost 40 Canadian locations over the past 18 months, pushing the national total to close to 160 locations in over 50 cities.
Changing work habits and patterns
“We've all proven that we can work from somewhere other than a corporate headquarters five days a week,” Berger said.
“Canadians want the ability to leave their house and go to work, but they want to do so within 10 to 15 minutes from the house.”
While Berger said he values in-person collaboration and the importance of a corporate headquarters, he doesn’t believe companies strengthening in-person office mandates will negatively impact IWG.
“The notion of a long-term lease for an office that requires millions of dollars to build and furnish and manage is going to become more of a thing of the past,” Berger predicted.
“Progressive companies that are getting it right are having their people come in when it's necessary and when there's value.”
Flexibility is the No. 1 driver as to why people stay or leave companies, according to Berger.
How WeWork could factor in
IWG competitor WeWork has experienced ongoing financial difficulties as net losses have piled up and it accrued long-term debt of nearly $2.9 billion US as of June 30.
The company issued a warning on Aug. 8 that it was at risk of bankruptcy if its lease renegotiations with landlords can’t turn things around.
CoStar News reported earlier in September that IWG had taken over a 55,000-square-foot former WeWork location in London, England.
IWG opened a 38,000-square-foot SPACES in another former WeWork site in Los Angeles' Fine Arts Building last year.
IWG also opened flexible workspaces in former WeWork locations in London and New York City in 2021.
While unable to speak to RENX directly about WeWork's situation and whether IWG is interested in some of its co-working facilities, Berger said his firm is always looking for new locations.
IWG is in ongoing negotiations with building owners to open its first upscale Signature-branded locations in Toronto, Montreal, Vancouver and Ottawa, said Berger.
IWG’s new Canadian locations
Here are the 13 new IWG locations set to open in Canada from November to May:
- SPACES will open a 22,895-square-foot facility that will be part of the lobby and on the mezzanine floor of Slate Office REIT’s newly renovated Maritime Centre in Halifax in the fourth quarter of this year.
- SPACES will have a staggered opening for a 34,807-square-foot location in the World Trade Centre Montreal starting in December.
- An 18,500-square-foot SPACES will open on the fourth floor of The Professional Centre in Surrey, B.C., in February.
- A 6,870-square-foot HQ will open on the first floor of London Tower at 379 Dundas St. in London, Ont., in December.
- A 6,698-square-foot HQ will open on the first floor of a building at 3700 Rue du Campanile in Quebec City in February.
- Two HQ locations will open in Regina in March: a 9,296-square-foot facility at 335 Hoffer Dr.; and a 6,727-square-foot site at 2125 11th Ave.
- A 5,500-square-foot HQ will open at 93 Lombard Ave. in Winnipeg in March.
- A 15,713-square-foot HQ will open in Edmonton’s Park Plaza Building in May, joining another HQ that opened this month in the city and a previously announced 17,000-square-foot SPACES location that will open in Peak Tower in early 2024.
- A 9,080-square-foot Regus will open on the eighth floor of an office building at 125 Commerce Valley Dr. W. in Markham, Ont., in November in partnership with Soneil Investments.
- A 13,215-square-foot Regus will open in Kings Crossing at 7300 Edmonds St. in Burnaby, B.C., in February.
- A 20,071-square-foot Regus will open on the third floor of a building at 6700 Century Ave. in Mississauga in March.
- A 5,355-square-foot Regus will open at 154 Woodbridge Ave. in Woodbridge, Ont., in March.