Effects of WeWork bankruptcy on Canadian non-profits unknown

The bankruptcy of large U.S. workplace-sharing company WeWork is unlikely to affect Canadian non-profits, according to some in the coworking sector.

 “I don’t think there were many non-profits that used WeWork, at least not in Toronto,” said Tonya Surman, CEO of the Centre for Social Innovation, a social enterprise specializing in shared workspaces.

 “I think anybody who was at a non-profit knew that we were the place for them, or at least I sure hope so.”

 WeWork operates 660 shared workspaces globally, including 18 in five Canadian cities: Vancouver, Burnaby, Calgary, Toronto, and Montreal. Once valued at $47 billion, the U.S.-based company filed for bankruptcy earlier this month.

 “Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” said WeWork CEO David Tolley in a recent press release. 

Five Canadian locations are expected to close in the coming weeks, including two in Toronto, and more closures could follow.

 It’s unknown how many non-profits currently rely on WeWork, and the company did not respond to requests for comment.

 Jason Abbott, founder and CEO of Launch Coworking Space in Winnipeg, said new coworking operators will likely take over defunct WeWork locations.

 “There is going to be some, I would say, transition. One sign will come down, but there’s potentially a new sign going up depending on the nature of that location, the nature of the clientele it serves, and the build-out,” he said.

 Only about five per cent of Launch’s 400 clients are non-profits, but Abbott would like to see more take advantage of the benefits coworking space offers organizations working in the social purpose sector.

 Many non-profits adjust staffing levels to program funding or grants, something traditional long-term leases make difficult.

 “Suddenly, program funding or a grant comes through, and they need to add three or four more bodies, but their physical environment doesn’t allow them to do that because of space restraints and because they’re locked into a long-term lease,” Abbott said.

 “The number one benefit to not-for-profits using a coworking space is that we scale to suit your program requirements today and in the future, whether that’s up or down.”

 Coworking can also save money when it comes to office management, he said.

 Surman agrees.

 “The number one benefit of coworking is reduced overhead; that’s the big one,” she said.

“But coworking, particularly in places like CSI, also offers the opportunity to connect with other kinds of social purpose organizations.”

 About 40 per cent of the centre’s clients are non-profits, while another 40 per cent fall into the social purpose category.

 “What we found during the pandemic is that non-profits lasted longer and had more staying power than the for-profits, which basically closed up shop, in many cases, forever,” Surman said.

 However, the pandemic and subsequent inflation have impacted the Centre for Social Innovation, which will sell off its 36,000 sq. ft. location in Toronto’s Annex neighbourhood sometime next year.

 Surman hopes the building will fetch more than $20 million and ensure the survival of CSI’s largest coworking space on Spadina Avenue near Toronto’s Chinatown. The building’s 275-odd tenants, including many non-profits, must find new homes.

 The CSI’s Regent Park community living room closed in February of this year.

 “Anybody who is in a mortgage or a lease is being affected by interest rates in a huge way. And, at the same time, property taxes are going through the roof — at least in Toronto,” said Surman. “Staff costs have also gone up, easily by 20 per cent, and all of this has had an impact.”

 However, Launch plans to open a fourth location in Winnipeg next year.

 “I think we’re at the early stages of what I’d describe as an emerging coworking workplace culture,” Abbot said. “Fundamentally, workplace decisions have shifted from a centralized location to each individual.”

 The key is to expand slowly, something Abbot said WeWork failed to do.

 “Coworking will continue to be vitally important to the non-profit sector,” Surman said, adding organizations are choosing to collaborate and support their staff in ways that don’t tie them to an expensive lease or mortgage.

 “Being in an office is not nearly as important as being together to align our vision,” she said. 

“It’s an interesting time, one that’s indicative of a fundamental shift in our economic system, one that is going to affect and has already affected huge swaths of our communities and our cities, and our lives.”