Co-working spaces, once the transient home of small companies that disappear as soon as venture capitalist backing materializes, is now the permanent base of growing firms that seem allergic to long-term office leases.
“Co-working spaces offer a little bit of flexibility in terms of growth and expansion,” said Jimmy Park, one of the founders of digital marketing agency, Techwood Consulting.
Park’s firm, which first operated out of WeWork’s SoHo location, has been in Servcorp’s One World Trade Center branch for the past year. Since establishing the firm’s New York City outpost, Techwood’s headcount has doubled from ten to 20 employees. They’ve also recently launched Codejockey.com, a start-up that provides on-demand website tech support. Park claims that the complexities of operating two companies on different growth stages make co-working spaces an ideal option.
“One of our companies is an established business. Codejockey.com is a start-up. The co-working space allows us to test a few different business models, scale to a certain type of employee and be able to react fast without having to dedicate space,” he said.
While visions of co-working spaces usually involve stylish furnishings and craft beer dispensers, companies generally sign up for reasons that go deeper than aesthetics. “One of the things that is very limiting, especially in Lower Manhattan, is the requirement of a six-to-12 month security deposit. That security deposit, especially when on the books from a start-up perspective, that’s just a lot of cash that’s being held up,” Park said.
Melanie Gladwell, Servcorp’s senior vice president, said that the security deposit requirement is one of several factors influencing companies to stay in co-working spaces.
“It’s about keeping your risk low,ˮ said Gladwell. “Being in the kind of space that we offer, there’s no long-term commitment and then there’s also no large infrastructure investment tying up your equity in a traditional long-term lease.
“Others want the service so they don’t have to hire additional staff, because the staff is built-in. So they can really just use resources when they need them versus tying their resources and their management in managing a much larger team.”
While co-working spaces provides many benefits, it has its shortcomings. “The buildings just can’t withstand the density. In the space that we were in, the bathrooms were constantly out of service. It was clear that the building wasn’t really prepared for the level of density that it had,” said Will Silverman, the managing director and group head of investment sales at hospitality brokerage Hodges Ward Elliot.
Silverman, who stayed for three months in a co-working space after leaving Savills Studley, doesn’t dispute that growing a business within the walls of a co-working space has its advantages. However, he said that it suits certain companies more than others.
“I think it’s good for smaller, start-up companies that want to have less overhead. It wasn’t terrible for us. We used it while we were locating a more permanent office,” he said.
“These companies have made it a pretty user-friendly experience to remain there as you get bigger. It doesn’t sound to me like a terrible idea for those companies. The services they offer have expanded the base of potential clients to a broader audience than ever would have gone to a co-working space before because it is easier to grow within one of those platforms now than it ever has.”
The growth of companies in co-working spaces coincides with the expanding footprint of their options.
At the center of all this growth is Brooklyn, which has more than one million square feet of co-working space. According to data from the Rudin Center for Transportation, there is also about 500,000 s/f in the pipeline for the borough. Current options include Brooklyn-exclusives such as BrooklynWorks at 159 and the Compound Cowork.