A decade ago, Vancouver co-working spaces were in their infancy. A step up from coffee shops, some of which had taken steps to restrict the overuse of their premises by online workers, the city’s first co-working spaces offered workers two key perks, according to Dane Brown, general manager of WorkSpace on Water Street: “getting out of the house and seeing other humans.”
A bricks-and-mortar address, meeting space and an in-house barista were among the practical offerings for startups such as Ruboss Technology Corp. and Sawa World Foundation. When WorkSpace closed in 2009, similar ventures including the Network Hub followed. Today, real estate brokerage NAI Commercial reports that 25 co-working spaces as well as 15 accelerator centres operate in Vancouver and around the region.
The result is significant demand for office space, best seen in WeWork Companies Inc.’s lease of seven floors in Bentall 3, totalling 80,000 square feet. WeWork was the largest single source of demand for office space in Manhattan last year.
“Rumour has it that with committing to that much space they understand an opportunity coming with a large tech company out of the States,” said Kaitlin Beaudry, a broker with NAI who equates such companies with the arrival of “a new head landlord in town.”
Reporting in the Vancouver office market in the first quarter of the year, NAI asked whether demand from co-working space providers represents true absorption in a market where vacancies sit at 8.6%, or if observers should view them as a use that delivers cash flow to landlords without substantially affecting vacancies.
It concluded that yes, co-working space providers are a legitimate use – just as legitimate, if not more so, than the sublease arrangements startup companies looked to in the past.
“People are looking for more of the flexible, packaged, higher-end office deals without the commitment,” Beaudry explained. “Rather than seeing large companies come in and lease out space, [co-working providers] are taking on the risk and they’re creating a business of absorbing and consuming a lot of the available square footage.”
The lease requirements are flexible, with tenants paying a monthly per-desk fee, and the finishes are high-end, with the provider effectively absorbing the cost of tenant improvements a company might have made had it been leasing its own space.
“Traditional leases are definitely not going to accommodate the current needs of tech companies,” Beaudry said. “These companies are creating a great short-term opportunity with a lot of flexibility.”
While co-working providers in the past provided a collaborative workspace with refreshments, the new generation of co-working spaces takes matters a step further.
Regus, the brand name of Jersey-based IWG PLC (IWG stands for International Workplace Group), is redeveloping 151 West Hastings as a campus-style office and event space.
“They’re creating events, they’re creating networking opportunities, they’re offering free beverages and food, and snack rooms and nursing rooms, co-ed washrooms. They’re putting a very interesting spin on it. When you look at the logistics of the deal, the type of build-out and the excess of quality in the space, typical businesses aren’t necessarily going to be able to afford that extent of a luxury build-out.”
This makes them popular with larger companies such as Seattle-based Tableau Software (NYSE:DATA), which is able to tailor space requirements to head counts as needed. Amazon (Nasdaq:AMZN) is looking to double its current commitment to 80,000 square feet at Telus Garden, and word on the street tips it as a contender for WeWork’s space at Bentall 3.
“We’re … starting to see more global companies take advantage of flexible co-working spaces to establish a footprint in Vancouver,” said Sean Elbe, who oversees tech-sector development for the Vancouver Economic Commission, which cheered WeWork’s arrival in Vancouver.
“The ecosystem around flexible co-working and flexible office space is really starting to mature in Vancouver, where there are as many options for the freelancers as there are for the scalable startup as there are for the major global corporates like Tableau,” he said. “It really, to me, signals the professionalization of co-working.”
