Purveyors of co-working and shared office space have a theory: traditional office real estate is dead. Flexible leasing arrangements, chic interior design and in-office hospitality services killed it. It might just take a while for the fluorescently-lit cubicle farm to die.
“What is making non-traditional office (space) successful is it simply works,” said Jason Winkler, co-founder of local shared office giant Industry Denver. “It’s value-generating. You can be more productive and more creative. I am amazed people are looking at what I call old-school real estate at all.”
The metro area is in the midst of a flexible work space explosion and the blast radius stretches from LoDo to the suburbs. Whether or not that rapid expansion in the market represents a revolution is debatable, to say the least.
A recent CBRE Research sample of the Denver/Boulder commercial real estate market turned up 57 co-working leases totaling 1.3 million square feet of space. That’s a 62.5 percent increase over the 800,000 square feet of co-working space CBRE found in the area in December.
Denver economic development officials don’t see it as a fad or a product of a competitive commercial real estate market. They look at it more as a next step in the evolution of the workplace and believe it has taken root in the Mile High City in particular because of its entrepreneurial and cooperative business community.
“The reason for this expansion, the reason for the growth is people are looking for new ways to bring their ideas and products to the market,” said Jeff Romine, chief economist with the Denver Office of Economic Development. “Firms are desiring and entrepreneurs are desiring to work in a different manner and that’s what this is reflective of. It’s all over the metro area and we embrace that.”
Others are more skeptical. Despite its rapid expansion that last nine months, co-working leases make up just 1.2 percent of the 112.7 million square feet of office space in the Denver/Boulder market, according CBRE Research.
Bill Mosher is senior managing director of the commercial real estate development and investment firm Trammell Crow Co., overseeing the company’s Colorado activities. The company doesn’t develop co-working space, Mosher said, but his impression is that co-working is generally where companies occupy their first bit of real estate before growing and moving into more traditional office spaces.
“My take on it is they are smaller, more startup-oriented and once you get larger, firms tend to go into their own space. So the notion that it is going to fully change commercial real estate doesn’t register with me,” Mosher said.
According to national research performed by CBRE, about one-third of co-working users expected to graduate to leased offices in the future.
The definition of co-working space is a bit amorphous, but one hallmark Romine likes to highlight is a cooperative culture in which business both established and new interact frequently and share ideas and advice. In other words, great incubators for new and growing businesses.
Denver has encouraged the nu-office wave by directly investing in projects such as Zeppelin Development’s Taxi neighborhood and artisan food market The Source, Romine said. The city also is a founding partner in The Commons on Champa co-working space, headquarters of Denver Startup Week.
Jason Winkler has been a beneficiary of city government’s willingness to embrace the concept. Denver provided $1 million loans to to both his Industry Denver and soon-to-open Industry RiNo Station projects, he said. Winkler and his wife, Ellen, got into the shared-office market in 2010 when they opened Battery621 with two partners. At the time, co-working was still a novelty in Denver. Taxi was the only similar idea around, he said. By the time the Winklers opened Industry Denver in a old produce depot on Brighton Boulevard four years later, the idea had gone from curiosity to coveted.
“The understanding of what it meant to be in a space like ours was growing,” Winkler said of his 155,000-square-foot baby. “It doesn’t matter if you’re in tech or software or if you’re in oil and gas and banking. No one wants to work in a cubicle. We’ve been full with a waiting list since we opened, really.”
Industry differs from a lot of smaller scale co-working spaces where companies sometimes operate in the same room as gig economy freelancers who drop in to work at “hot” desks rented by the month, day or even the hour. Industry is a “shared office” provider, Winkler said. All tenants have their own offices plus access to amenities including shared meeting and quiet rooms, an in-house café, regular social events and talks organized by management and, yes, four kegs of beer on tap at any given time. Occupants generally sign up for at least a year but their private space can expand and contract with a company’s needs.
Industry is now home to 78 tenants and Industry RiNo Station, itself larger than 150,000 square feet, is set to welcome its first tenant Nov. 1.
The Winklers are far from the only people adding to the growth stats for co-working and share office space in the metro area.
Denver has recently landed on the radar of some national and international co-working brands.
Last spring, WeWork opened two locations in the downtown area combining to make up 122,000 square feet. The company operates one of the largest networks of co-working spaces in the world with locations in 17 countries. On Dec. 1, Industrious will open a 26,672-square foot space with 91 private offices at 1801 California St. A “premium” co-working brand with locations either open or planned in 22 U.S. cities, Industrious intends to court everyone from small, emerging businesses to Fortune 500 companies seeking to establish regional outposts, company representatives say. Office space for one there will start at $720 per month. A lease will bring with it access to four conference rooms, 11 huddle or quiet spaces and in-office hospitality services like complimentary pastries and coffee.
Industrious CEO Jamie Hodari is naturally a firm believer co-working space represents the death knell of the traditional office. In Hodari’s world, soon companies using their own time to find, rent and furnish an empty office will be as unheard of as companies building their own data management networks from scratch when they could simply contract with experts like Amazon or Google.
“It’s not a niche product,” Hodari said. “It’s much closer to moving from a landline to a cell phone. There are a small set of people who like the sound quality of a land line and the heft and the feel of it. And most people are like, ‘Oh, the phone isn’t attached to the wall anymore? Give me more of that.’”
Hodari posits companies will increasingly be drawn to co-working providers because they specialize in attractive spaces in desirable neighborhoods. He argues that as the internet and global transportation infrastructure has evened out competitive advantages in the business world, it’s become more and more important to attract and retain talented people to succeed. One way to attract talented people is to bring them into an office that reminds them of Google’s headquarters, Hondari said. Building something like that may be far fetched for a single company, but if that company were to band together with dozens of others to pool money and share space, suddenly the cost comes down and stylish work space with catered breakfasts every morning is within reach.
There’s no doubt in Ben Wright’s mind his office at Industry Denver has been a valuable recruiting tool for his fast-growing business. The CEO of Velocity Global, a company that helps facilitate other companies’ expansion into international markets, said he is very selective when hiring new staff, often going through four or five rounds of interviews. When he identifies a candidate he really likes, Wright invites them to corporate headquarters.
“It’s a huge selling point,” Wright said. “We can pitch the ways we are an interesting company and how much fun we are to work for and why we’re special but people always walk in and say “Wow, I’ve never been in a space like this.’”
Velocity Global first leased 170 square feet in Industry in March 2015. By January 2016, the company had grown to seven employees and moved into 750 square feet. By that June, it upgraded to 2,000 square feet. Now the company has 40 staff members in Denver and preparing to make the jump to a 19,000-square-foot space in Industry RiNo station this fall, Wright said. That should accommodate the additional 120 local employees Velocity expects to add by the end of 2018.
Denver’s Romine said he expects co-working to continue growing and expanding beyond its existing hotspots in the Golden Triangle and RiNo neighborhoods. He expects more specialization among spaces as well, such as offices catering to law firms or craft manufacturers.
“To us, they’re our partners in the truest sense of assistance and delivery of business development activities,” Romine said of co-working and shared office space. “We’re there for all of them to help them grow because the reality is they are an extension of us.”
