Google has walked away from a potential Toronto lease with WeWork after months of negotiations, agreeing to take space from rival co-working firm IWG Plc instead, according to people familiar with the matter.
Google signed a multiyear deal for about 24,000 square feet across two floors at IWG’s Spaces location in Royal Bank Plaza, in the heart of the city’s financial district, said the people, who asked not to be identified because the matter is private.
The tech giant had been in talks with WeWork to rent space in its planned location at 357 Bay St., the people said. It’s unclear why discussions for that site fell through. WeWork, the SoftBank-backed startup, has been reeling since it shelved an initial public offering and is seeking rescue financing before it runs out of cash as early as next month.
Representatives for Google, WeWork and IWG, the world’s biggest co-working provider, declined to comment.
The deal marks another loss for WeWork as the company struggles to find its footing after the abandoned IPO. The firm has been selling off stakes in investments, planning far-reaching job cuts and reining in expenses. It recently scrapped a project in Seattle.
In the midst of WeWork’s turmoil, the company’s rivals -- such as IWG, Industrious and Convene -- are racing to capture a larger market share, pitching themselves to tenants and landlords as more stable providers of flexible office space.
“You have to separate the issues at WeWork from the co-working business model,” Tamara Lawson, chief financial officer at QuadReal Property Group Ltd., said Wednesday at the Bloomberg Canada Fixed Income Conference in New York.
Lawson said QuadReal doesn’t have any business with WeWork, but the firm does invest in some of its rivals, including Convene.
Google has been expanding in Toronto and was negotiating in June to rent space at an upcoming office development downtown, Bloomberg reported at the time. The city’s downtown office market ranks among the tightest in North America, thanks to growing financial-services and tech companies and a shortage of space.