Partnership Co-Working Model Provides New Opportunities for Landlords
In 1989, the International Workplace Group (IWG) was founded in Brussels to provide convenient, comfortable, and accessible workspaces. The company has long been at the forefront of the workspace revolution and today, IWG operates more than 3,300 locations globally, supporting more than eight million people in 120 countries.
IWG is the parent company to brands such as Spaces, Regus, No.18., and HQ. Each of these brands empowers a more flexible way of working with most employees today working in the hybrid model – splitting their time working in a local workspace, home, and a head office. An integral part of the hybrid model is allowing sufficient time for workers to come together to meet and collaborate in person.
Recently, IWG shifted to a “capital-light” strategy, forging partnerships with property owners, franchisees, and investors to accelerate the growth of the network. This strategy enables partners to capitalize on the rapidly growing hybrid working sector and provides access to IWG’s digital platform along with its sales and marketing capabilities. The global firm is now heavily focused on investing in its technology platform, while the capital expenditure for real estate comes from its partners. The company is recognizing a notable shift as landlords are becoming increasingly attracted by profit-sharing and partnering on management agreements in the current market.
IWG’s network growth continues at a strong pace globally with over 125 partnership agreements signed in 2022 to date, including 10 in Canada.
In Toronto, IWG is very proud if its latest transaction at the stunning property located at 339 Queen Street East. With the assistance of Colliers advisors, Tim Bristow steered the interests of the ownership group to convert a fully vacant asset to being fully occupied during challenging market conditions, while Tobin Davis conveyed the vision and benefits of IWG’s unique offering in the marketplace.
Traditional office and flex space models merge
A flexible workplace trend forecast published by Colliers states that “Flexible workspace and the traditional office will blend to become workplace solutions, and industry professionals viewing the two in binary terms will dissipate.” Although flexible workspaces can take various forms, they are now being considered in most commercial real estate strategies, and asset owners are increasingly adding components of flexible workspaces to meet the demands of end users.
Following their initial 339 Queen Street East site visit, IWG recognized the space as a “floor plate” that could be well-positioned for businesses looking for unique office spaces. The building was designated Part IV on the Toronto Heritage Register in 2017, and extensive renovations had transformed the space, creating a better, more modern work environment.
This new property added to IWG’s global network without the usual bureaucracy. Negotiation times involved with a traditional tenant did not come into play as IWG offers clients a “pay-as-you-go” model, providing the option to pay for office space, dedicated desks, meeting rooms, and access to business lounges as and when needed, in the same way you would stream services from Netflix or Spotify. It results in a turnkey business experience for companies that require corporate locations, administrative assistance, and access to the world’s largest co-working network.
Revitalizing Queen Street and the surrounding area
Situated in Toronto’s Corktown neighbourhood, with more than 10 high-rise developments underway within 500 metres of 339 Queen Street East, the area is experiencing significant growth. The arrival of multiple new local businesses means flexible office space at 339 Queen Street East presents even further opportunity for economic growth. Prospective tenants have the benefit of convenient transit access, with the future Ontario Line just steps away from the property. Its close proximity to the King East Design District, St. Lawrence Market, and the Distillery District also fosters the live, work, play appeal.
“Across the country, we’re seeing workers demand a more flexible way of working, with the hybrid model proving incredibly popular. At the same time, businesses are attracted by hybrid, with its greater flexibility, substantially lower cost base, and in IWG’s case, our vast national and global network,” explains Wayne Berger, CEO, IWG Americas. “Brokers and landlords are paying close attention and seeing tremendous long-term opportunity as the corporate mindset changes and businesses of all sizes seek flexibility with their office spaces.”
In Western Canada, similar trends are emerging. In Calgary, for example, in the brand-new 60-storey TELUS Sky building, which incorporates retail, office, and residential space, Regus is already 90% leased in its first year of operation. This project is also a market indicator for Calgary’s business sector, which is showing gains from pre-pandemic times.
Calgary’s office vacancy rate sat at 2.40% in Q2 of 2022, compared to the vacancy rate of 9.6% in Toronto during the same period. Nonetheless, the curve of post-COVID vacancy growth is flattening in Toronto's office sector. If companies want to bring workers back on-site in a hybrid model, flexible office space is key to making it happen. Gradually, flexible and traditional workspaces will blend to become overall workplace solutions. Commercial real estate is finding a renewed way to operate in the era of flexible work, and time will reveal the benefits this brings about for landlords.