The trend that started with coworking has become a transformational force in the Canadian business landscape. New work styles are in demand and a growing number of flexible office companies are increasingly dominating office leasing, having grown their footprint from a modest 1.5 million sq. ft. in 2014 to more than 6.1 million sq. ft. in 2019. This represents a 303% increase, and an additional 1.3 million sq. ft. of flexible real estate is slated to open across the country in the coming years, according to CBRE inaugural Canadian Flexible Real Estate Report.
Flexible office solutions now appeal to entrepreneurs, scaling businesses and large enterprises alike. This has spurred demand for flex operators and is adding fuel to an already hot office market. Flexible space firms accounted for four of the 10 largest office deals nationally in 2019’s first half, and the largest lease transaction in Vancouver and Montreal during that same period was by a flexible space firm.
The next wave of flexible office space has already committed to leases in new buildings currently under construction. The aggressive expansion of flexible office operators is helping drive down vacancy in major centres, particularly Toronto, where downtown office vacancy dropped to 2.3% in the third quarter of 2019, a new record low, as Canada’s largest city continues its unprecedented run as North America’s tightest office market. While flexible real estate growth has been most pronounced in Canada’s urban cores, the suburban footprint of flexible workspace operators has expanded by 42% nationwide in the past two years.
“We haven’t seen a new type of office tenant emerge with such speed and dominance since the dot-com boom. The rise of flexible office operators reflects the pace at which work and the workplace are evolving along with new technology, changing demographics and an overall push for innovation,” says Paul Morassutti, Vice Chairman, CBRE. “This has led to the birth, adoption and replication of agile real estate strategies at a remarkable pace.”
The bulk of Canada’s flexible workspace expansion is taking place in Toronto, Vancouver and Montreal, which combined accounted for 78% of the nation’s total flexible office space.