Years ago, the thought of a co-working space seemed futuristic. Now, this shared office environment is the latest trend satisfying thousands of entrepreneurs looking to secure relatively inexpensive desk and office space. In addition to Wi-Fi, conference rooms, and kitchen areas, these rental studios offer new companies the opportunity to meet with others in their field of interest as well as venture capitalists and other established business leaders. With added perks like free coffee, ice cream, and communal spaces, it’s not unusual to find people mingling in the late afternoon over a game of ping pong.
The co-working space industry is growing by leaps and bounds, particularly in New York City. Over the past 6 months, some of the largest leases executed in the Big Apple have been to co-working companies. The biggest player in the co-working universe is WeWork, which launched operations in 2010 and has brought on 20,000 tenants in less than five years. The company has a total of 15 New York City locations and is rapidly expanding throughout the U.S. and around the world. As reported in the NY Post, WeWork is entering the Times Square market with the signing of a lease for all of 1460 Broadway’s, 180,000 square feet of space. Earlier this year, the company also signed a lease for 240,000 square feet at 85 Broad Street.
The venture capitalist community loves WeWork Companies. The Wall Street Journal reported in December 2014 that the company closed a $355 million funding round, valuing the company at about $5 billion. The latest financing was co-led by funds and accounts managed by T. Rowe Price Associates Inc., clients of Wellington Management and Goldman Sachs Group. Investors from prior rounds, including J.P. Morgan Chase & Co., Harvard Management Co. and Benchmark, also participated, according to WeWork. In addition, one of the nation’s savviest investors, Mort Zuckerman, chairman of Boston Properties, is an investor and working with WeWork. The co-working company will be the anchor tenant of the $300 million redevelopment co-owned by Boston Properties. In August 2014, WeWork signed a 90,000 square feet lease at 81 Prospect Street in the Dumbo Heights section of Brooklyn. Dumbo Heights is a development of a joint venture of Kushner Companies, RFR Realty and LIVWRK. According to The Real Deal, WeWork is expected to sign a lease for 77 Sands Street within the Dumbo Heights complex. Most recently, WeWorks signed a 15 year lease for 136,118 square feet comprising all nine floors of 315 West 36th Street.
Last year, the website Alleywatch.com assembled a complete guide to co-working spaces in New York City. In addition to profiling aspects of the physical facilities and types of tenants in occupancy, they reported certain facts regarding the business:
• There are more than 50 co-working spaces in New York City (that number has doubled and does not include traditional shared office space of HQ and Regus Office Centers)
• The average monthly cost of a dedicated desk at a co-working space in Manhattan is $526
• The average monthly cost of a shared desk at a coworking space in Manhattan is $349
• The average monthly cost of a dedicated desk at a co-working space in NYC outside of Manhattan is $420
• The average monthly cost of a shared desk at a co-working space in NYC outside of Manhattan is $229
Co-working is ideal for dropping in, working with your team for a day or two, or meeting with new clients or investors. In order to utilize co-working space, one must become a member at a nominal monthly charge (just like the cost for a health club membership). In a manner similar to a menu at an old time Chinese restaurant (where you select an item from column A and an item from column B), members can choose from a variety of desk and office options that may include:
• Flexible or full-time membership (which provides you access to conference rooms, high speed internet, professional business address, kitchens with free coffee and beer, ping pong and general meeting areas)
• Rent and secure services (conference rooms, private offices, mailbox, library)
• A daily or monthly pass that allows you to rent a conference room, a dedicated desk, an office, or additional desks in an office.
In addition to the private co-working companies, government agencies have been active in growing the co-working office environment. The NYCEDC, the city’s primary engine for economic development, charged with leveraging the City’s assets to drive growth, create jobs, and improve quality of life, is very active in community oriented and shared workplaces. NYCEDC has fostered an incubator and co-working space network that provides low cost space, business services, training, and networking opportunities to startups and small businesses across a variety of sectors. Over 1,000 startup businesses and 1,500 employees have benefited from New York City supported incubators, and these companies have raised more than $180 million in venture funding.
Another active participant and success story within the co-working space movement is AlleyNYC. Founded in 2012, AlleyNYC raised $16 million in funding in February 2015. This funding was led by Vanderwater Capital Holdings, with participation from Entrepreneur Media. The company has grown to nearly 200 members, including 50 early stage companies. With the new financing, AlleyNYC is expanding to a second space with 36,000 square feet at 119-125 West 24th Street. The headquarters of the company is located at 500 Seventh Avenue in the Fashion District, convenient to Penn Station and the Port Authority.
While the term co-working may sound like a term created over the past five years, this concept was applied in New York City in the late 1990’s during the first technology boom. Co-working companies are opening new locations in each and every borough of the City of New York as well as in other parts of the Metropolitan area. With thousands of young millennials moving to the Big Apple, expect this trend to grow and expand.