Co-working primed to overhaul Ottawa commercial real estate market: experts

Maher
Entrepreneur Maher Arar is launching a new co-working space, Coworkly, in Westboro. Photo by Mark Holleron

Basking in the fresh-office smell of Ottawa’s newest co-working space, Maher Arar is confident he’s created a place where honest-to-goodness entrepreneurs will flock to work and nurture ideas that could one day turn into the capital’s next wave of great companies.

“This space is not for the people with suits,” the veteran businessman says of his Westboro-based facility, called Coworkly, which opened Tuesday. “We’re trying to build a homogeneous community. I want the incubation and the business advice and the help to happen organically and naturally here. The space is part of the story. The community is the bigger story.”

Arar’s Westboro space is his second Coworkly location in Ottawa, following the facility he opened in Vanier in early 2018. The bootstrapped venture is located on the second floor of a commercial building on Richmond Road, in the heart of one of the city’s trendiest neighbourhoods.

The 2,500-square-foot venue features space for about 15 workers in a common area as well as a couple of private offices with half a dozen dedicated desks. Tenants can rent space by the day or the month, park their laptops at an empty desk and come and go as they please. 

Monthly plans at the Vanier location start at $100 a month for part-time members, rising to $200 for full-time members with unlimited day visiting privileges. Private offices start at $1,000 a month for a four-member team.

Arar expects enough demand for the Westboro service that he’s already planning to take over 2,500 square feet of adjacent space next spring. Eventually, he hopes to occupy the entire second floor, which totals about 7,500 square feet.

“Our strategy is to go closer to where people live,” he says. “Here, we want to make sure that everyone knows everyone else’s first name at least, if not their life story. The big guys cannot compete with us on this.”

The “big guys” Arar is referring to include multinational co-working giants such as New York-based WeWork – a multibillion-dollar enterprise that recently announced plans to go public later this year – and Switzerland’s International Workplace Group.

Although WeWork has yet to put down roots in Ottawa, IWG has operated co-working space in Ottawa for a decade under its Regus brand. The company is set to expand its footprint in the capital this October when it opens 75,000 square feet of co-working facilities on the first six floors of 66 Slater St. under its Spaces banner.

Coworkly and Spaces are just part of a growing wave of new entrants into the capital’s rapidly expanding co-working market. Fuelled by the growing prevalence of startups in fields such as tech, the push toward a “gig” economy focused on short-term contracts and freelance jobs and the rise in the number of self-employed workers, co-working spaces are booming across North America, and Ottawa is no exception.

Although precise figures are hard to pin down, estimates of the amount of local office space now dedicated to short-term tenants range from about 115,000 square feet ​– the latest number from commercial property brokerage Cresa, which doesn’t factor in the Spaces deal or Toronto-based iQ Office Suites’ future 13,000-square-foot facility at 222 Queen St. ​– to CBRE’s tally of more than 300,000 square feet that includes several upcoming projects.

Whatever the exact number is, it still lags far behind co-working hotbeds such as Toronto and Vancouver, which both have more than 1.7 million square feet of real estate devoted to flexible, temporary work space.

‘Flexible work strategy’

Most experts agree, however, that while Ottawa was late to hop on the co-working bandwagon, it’s now on board for the long haul. 

Part of the demand for co-working space is being driven by a new generation of workers who can set up shop anywhere as long as they have a laptop or mobile device and access to WiFi, says Wayne Berger, IWG’s chief executive in Canada and Latin America. 

Nearly one-third of the Canadian workforce now consists of contractors, consultants, freelancers and other “on-demand” employees, he adds, a figure that’s expected to top 50 per cent within the next decade. Co-working spaces, with their focus on housing workers for just days or months at a time, go hand-in-hand with that trend, he argues. 

“Companies are really looking to say that if they want to attract the top talent and retain the top talent, they need to be able to offer a flexible working strategy,” says Berger, who grew up in Ottawa.

For startups, it’s far more economical to pay a slight premium for co-working space that comes ready-equipped with furniture, WiFi and other amenities than shelling out hundreds of thousands of dollars to fit up traditional office space, adds Ross Moore, a senior vice-president at Cresa’s Vancouver office who has studied the Canadian co-working scene.

“Everything is there. I think that’s the attraction,” he says, adding the ability to rent space on a month-to-month basis rather than being locked into a long-term lease holds plenty of appeal to tenants both large and small.

“I may need double the amount of space a year from now, but you know what? I may need half the amount of space. It’s not just for startups. You have Fortune 500, top-tier corporate Canada moving into co-working space.” 

Tenants say co-working environments offer a host of benefits for employees who don’t have a permanent office to call home.

“I could not have continued to work remotely if I hadn’t found this space,” says Joe Rhodes, an engineer with Boston-based blockchain infrastructure developer PureStake. 

The Stittsville resident commutes each day to Head Office Ottawa, a co-working facility that opened last November in Kanata. Rhodes, one of the firm’s two employees in the National Capital Region, says he tried working at home when he started his job in January but found it too distracting. 

He then bounced around a few other venues, including coffee shops and the library, before discovering Head Office Ottawa.

Almost instantly, he says, he was hooked on the space’s casual vibe. The 15,000-square-foot facility features palm trees, couches and a pool table to help tenants relax in their down time.

Head Office Ottawa
head office ottawa 2
Photos of Head Office Ottawa in Kanata. Provided.

After starting with a basic monthly package that allowed him to use his desk only from 9-5, Rhodes quickly upgraded his membership to gain 24-7 access to the facility.

“The biggest thing really – it sounds weird and it’s hard to put your thumb on it – but it’s atmosphere,” he says. “The place is professional, but it’s got a great energy here. There’s a little bit of music playing, there’s people walking around, it’s got beautiful plants. You want to be here. But it’s not just you want to be here – you actually feel motivated to do cool stuff when you’re here.”

Even the federal government – long considered one of the biggest impediments to the growth of co-working in the nation’s capital – is embracing the concept. In late August, the feds announced they plan to open several offices across Ottawa and Gatineau geared toward employees who wish to work remotely or require a desk while shuttling between meetings.

But not everyone is thrilled with the sudden proliferation of funky offices filled with nomadic tenants. Moore says co-working hubs sometimes spark “friction” with landlords who no longer have the final say over who’s occupying large swaths of their property.

“Landlords hate to lose control,” he says. “Landlords want to maintain a certain image and they want to protect the value of their building. Part of that is getting the right tenant mix. Buildings do get a reputation and it’s very difficult to change that reputation once you have it.”

In addition, Moore says, some property owners and managers might resent tenants charging a premium to sublease their space, as most co-working providers do.

Okay with upcharging

But Hugh Gorman, the CEO of local property management firm Colonnade BridgePort, says he thinks such worries are overblown. 

“I think as the (co-working) business matures, and it is maturing, I think a lot of those original … concerns that landlords had are starting to dissipate,” says Gorman, whose firm manages 66 Slater St., where Spaces is set to occupy six floors this fall.

"I don’t really have any issue with them upcharging because we aren’t, as the landlord, providing that flexibility and those services. We kind of see it as a complement as opposed to a threat."

“They’re providing a service that we don’t provide,” he adds, referring to amenities such as WiFi, fully furnished areas and IT support. “I don’t really have any issue with them upcharging because we aren’t, as the landlord, providing that flexibility and those services. We kind of see it as a complement as opposed to a threat.”

Kane Willmott is CEO of Toronto-based co-working firm iQ Office Suites, which is expanding to Ottawa early next year. He says more and more landlords now view co-working spaces as an asset that enhances the value of their property.

“It brings a lot of energy to the building,” says Willmott, the former president of the Global Workspace Association, a major industry group. “It brings more clientele to the building. It gives people access to smaller spaces as opposed to having to go in and take on their own spaces. So it really becomes a great offering for the landlord.”

As an added bonus, Gorman notes, some of the startups that will be renting individual desks at Spaces come October might eventually blossom into thriving companies that ink long-term leases at his properties down the road.

“I think it’s introducing new players to the market, and if they grow, maybe they’ll grow into more traditional occupants as they grow out of those incubator-type situations,” he explains.

But whether the Shopifys of the future will still be locked into long-term leases remains to be seen. As more and more tenants grow accustomed to the shorter terms offered by co-working providers, many observers believe Colonnade BridgePort and other landlords will be forced to change their approach or risk losing clients.

Before the birth of modern co-working spaces about 15 years ago, “there was essentially one business model for real estate and that was a (long-term) lease,” says Ian Graham, who founded the Code Factory, one of the city’s first co-working spaces. “Your option was essentially one of two things: will that be five or 10 years?”

He predicts landlords will adapt by offering more flexible lease terms. Moore agrees.

“I’m not suggesting that the five- or 10-year lease is going to go away, but I think that there’s just more of a question mark over, maybe three years is the new norm,” he says.

As another way to cash in on the co-working boom, landlords south of the border are now starting to enter into revenue-sharing agreements with co-working spaces, a trend that could eventually gain traction here as well, Willmott says.

Whatever changes the flexible office space craze heralds for the real estate industry, one thing appears certain: co-working is here to stay.

“The difference between this and a coffee shop or a library, it wasn’t even a comparison,” Rhodes says from his desk at Head Office Ottawa. “Now that I’ve worked in an office that I enjoy this much, I don’t think I’ll ever be able to work in a cubicle farm again.”