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Co-working spaces expand through Southern Alberta

"Shadow vacancy" addressed as IWG continues expansion plans
Medicine Hat's 640 Professional Building will be the newest addition to IWG's network of locations in Canada when it opens in May.

Stubbornly high office vacancies in Alberta’s biggest cities have started to fall as the economy strengthens, but lower class space continues to be an issue as tenants seek new, higher-performing space and options that appeal to the new hybrid work culture.

A report last fall from commercial brokerage Avison Young said that office conversions had shaved two percentage points off the city’s downtown office vacancy rate.

“The biggest impact is in the C-class space, with a 7.6 per cent decrease in vacancy. Class B properties experienced a 6.2 per cent drop,” the report says.

But the topline numbers don’t account for so-called shadow vacancies – underutilized space on which tenants are paying rent but not occupying to the full extent possible.

This has driven the rise of managed workspace, with corporate tenants contracting with companies such as IWG plc to manage and fill the space.

“We’re seeing companies reducing their square footage of workspace that they would traditionally have under conventional lease, and then they’re offsetting that reduction with providing their team members with access across their workspaces,” Wayne Berger, CEO, Americas with IWG, said. “I think we’re going to continue to see demand for flexible workspace solutions continue to increase.”

Western Canada, where a strong economy has also seen office vacancies fall – particularly in Alberta – is a case in point.

“The biggest increase we’re seeing is in Western Canada,” Berger said. “We’ve seen an extraordinary surge of demand in Calgary. We’ve continued to add more flexible workspace locations downtown as well as in each one of the quadrants, and the demand continues to outpace the supply.”

“Part of that is because we’ve seen economic activity continue to increase in Calgary,” he said. “You have new companies forming and flexible workspace is their workspace of choice in this stage.”

IWG currently operates 13 Regus locations in Calgary, five in Edmonton and will open its first in Red Deer in May. This week, it announced its first location in Medicine Hat.

Small spaces are in demand, and in smaller markets that would otherwise be bedroom communities for the big cities, those are ideal for the size of the market and the spaces available.

“For those just looking to get into business, it’s an affordable option,” said Shauneen Vanderham, a commercial agent with Re/Max Medalta Real Estate in Medicine Hat. “In the last three years, we’ve seen so many people come from Ontario and B.C. … So we’re seeing those start-ups.”

Smaller spaces are ideal, because they’re larger than a home office with the amenities of a receptionist and business address, and not as expensive as a self-contained office.

IWG’s location at 640 3rd St. SE in Medicine Hat will be a 16,000-square-foot Regus-branded flexible workspace offering approximately 120 co-working seats, 60 private and semi-private offices, two meeting rooms, kitchen space and outdoor patio.

The space originally opened in 2008 as the headquarters of Luc and Jean Beriault’s recruitment business, and had long offered flex space to both local entrepreneurs and out-of-town companies looking for a temporary home in town. It was successful enough to expand twice over the past 15 years, as well as several upgrades.

Coming under IWG’s management will see the improvements continue as well as expanding the centre’s reach.

“Opening a Regus centre in Medicine Hat is the perfect example of the locations IWG is expanding into,” Berger said in announcing the location.

Over the next two years, IWG plans to expand to 250 locations across Canada, with a focus on smaller markets. It currently operates 120 locations across Canada.