shopify stock

Shopify backs out of lease for massive new office space in downtown Toronto

The once-thriving Canadian e-commerce giant Shopify has cancelled its plans to open a new main office in one of downtown Toronto's most highly-anticipated forthcoming developments, The Well.

As reported by The Toronto Star on Wednesday evening, the 16-year-old multinational tech company no longer plans to serve as The Well's anchor tenant, and will not be occupying a 254,000-square-foot office being built for them at the under-construction complex as planned.

"We recently made the decision not to move forward with developing a new office space at The Well," said Shopify spokesperson Alex Lyons in a statement.

"Shopify continues to value highly intentional, in-person gatherings, and will continue to do so at our primary Toronto space located at King Portland Centre, with plans to further develop and expand into one central space to accommodate our needs."

It is not clear if Shopify will need to pay any fees to get out of its 15-year-lease at The Well with developers Allied and RioCan. 

Also unknown is whether or not the developers have found a new anchor tenant to replace Shopify with. Requests for comment from blogTO to RioCan and Allied were not immediately answered.

First announced in 2018, the lease would have seen Shopify more than triple the amount of office space it maintains in downtown Toronto. Things have obviously changed quite a bit since 2018 and the space no longer makes sense, according to the company.

Lyons told The Star on Wednesday that the decision not to move into The Well wasn't financially motivated, but rather part of a "shift toward being a remote-first, 'digital by design' company."

"We have a bold vision for the future of work at Shopify, and are no longer a workforce that centres around a physical workplace for day-to-day work," said Lyons.

While Shopify remains the tenth-largest Canadian company by market capitalization, investors appear to be losing faith in what was once seen as a golden goose.

Shopify stock plummeted by a staggering 70 per cent over the past year, according to Bloomberg News, dragging down the entire Canadian stock market after losing $161 billion in market value.

The company turned heads in July by announcing that it would immediately be laying off 10 per cent of its global workforce, which was about 10,000 employees strong at the time.

"When the Covid pandemic set in, almost all retail shifted online because of shelter-in-place orders. Demand for Shopify skyrocketed," said Shopify founder and CEO Tobias Lütke in a release announcing the move. 

"And so, given what we saw... We bet that the channel mix — the share of dollars that travel through ecommerce rather than physical retail — would permanently leap ahead by 5 or even 10 years."

"We couldn't know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match," wrote the Canadian billionaire.

"It's now clear that bet didn't pay off."

Headquartered in Ottawa, Shopify had opened a sprawling nine-floor, 180,000-square-foot office in Toronto before the pandemic, in 2019, after closing its original Toronto office at King and Spadina.

It would appear as though adding another 254,000 square feet of office space into the mix would have been overkill in the new normal.

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