WeWork’s financial troubles, culminating in a Chapter 11 bankruptcy filing in the U.S. earlier this week, has U.S. commercial real estate markets in a scramble. However, experts believe the impact on Canada’s markets won’t be as bad.
In response to the bankruptcy filing, WeWork stated plans to abandon 69 leases — which includes leases in Canada. According to the Financial Post, the company is looking to leave two leases in Toronto, two in Vancouver, and one in Burnaby. Colliers Canada reports that WeWork only makes up 0.5% of all the office space in Toronto.
The company’s restructuring plan aims to substantially reduce its funded debt and improve financial stability. CEO David Tolley announced that around $3 billion of the company’s debt is expected to be alleviated with their plan.
Canada’s real estate market, like many markets around the world, has seen a rise in office vacancy rates due to remote and hybrid work arrangements — in addition to high inflation. It’s reported that Toronto’s downtown office vacancy rates have soared to 15% in the third quarter of 2023 — a dramatic increase from just 2% in the third quarter of 2019.
As companies adapt to these changes in commercial real estate markets, it will likely lead to more innovative uses of traditional office spaces and a rethinking of what the workplace means in a post-pandemic world. WeWork’s spaces, making up a small percentage of total office space in Toronto, Vancouver, and Burnaby, have the possibility to remain coworking spaces after WeWork due to the health of the coworking industry overall.