This article originally appeared in LoopNet, see it here.
When searching for new office space for its Portland, Ore., team, Washington, D.C.-based commercial real estate advisory firm Cresa thought coworking might be a short-term back up option if they couldn’t find the right space for a private office. After touring a number of buildings that didn’t pan out for the move, Cresa’s Portland principals Sean Heaton and Blake St. Onge came across the CENTRL Office in Portland’s Pearl District, a coworking space housed in the historic GE Supply Co. building.
“It turned out to have the best of both worlds in our opinion,” says Heaton. “It has all the advantages of a coworking space in that it has the community, amenities, and the ease of doing business, but the office space itself is still a standalone space with our own break area and privacy. We have the ability to use the amenities and meet everyone. It’s a really good combination for us.”
One of the key draws for Cresa was the flexibility of the coworking model. The company started its Portland branch in an office space downtown near the Morrison bridge, but by the third year of its lease had already outgrown the space, and knew it would only get more crowded with future hires and growth plans.
“It was beneficial that we didn’t have to sign a five-year lease, which was one of the struggles of a more traditional space. We asked—do we take just enough space and hope that we have enough for a few years, or do we take more space than we need and hope we grow into it over time?” explains Heaton.
The team considered other factors associated with locking in to a private office lease, like building out amenity and common spaces. If they assumed future growth and took a space that was too big initially, they’d leave a lot of the space empty.
“Eventually we said, we’d be committing all this money to something we really aren’t utilizing,” says Heaton. “That’s where this coworking space hit the nail on the head. Committing for a year and a half to two years gives us room for growth. If we want to stay and we still have room, it’s easy to extend for relatively short periods of time compared to traditional office space.”
Flex space remains an in-demand office type in the real estate market. For the full year of 2019, leasing by flex operators totaled 12.1 million square feet and is still growing, according to a study from CBRE. While volume is down from previous years, this is largely attributed to WeWork’s significant pullback from the market in the third quarter of 2019, while flex startups CommonGrounds Workplace, Office Evolution and Venture X all increased their leasing activity by more than 100% last year. You can read more about WeWork's impact on the market here.
According to CoStar data, only 0.5% of square feet in the Portland metro is occupied by coworking tenants, while 0.8% of buildings have at least one coworking tenant. New York has the highest share of square feet occupied by coworking tenants at 1.9%, followed by San Francisco (1.7%), Seattle (1.2%), and Los Angeles and Orange County (1.1% each) in the top five.
Beyond flexibility, Cresa’s Portland employees have found that being in a coworking space offers added benefits. The professionally-managed building has an office supply room, drinks and food service, mail delivery and package services, bike parking, showers and locker rooms, and an office concierge, among more. St. Onge finds value in the collaborative nature of the building.
“The Centrl office has a pretty strong community of people here, and that gets the creative juices flowing and makes you think about how you approach things,” he explains. “It’s not just the conversations you’re having, but the culture and feel of the brand they have created here works well for us.”
The built-in amenity space affords Cresa the ability to host meetings and events it would not have otherwise.
“The entire coworking office is like an amenity in itself. We are right off the lobby and have our logo visible and on our door, which encourages people to come into our space, like other Centrl office members and clients,” says Heaton. “We have hosted events and board meetings here which we didn’t do in our previous space because we now have a location that people enjoy coming to.”
Cresa’s office space is an open office plan, but includes two dedicated phone rooms for employees to take calls. Employees have access to break out lounges with extra seating, additional meeting rooms, plus the ability to access any Centrl office while traveling—Centrl also has locations throughout Portland, and in Los Angeles, Dallas, and Sacramento, Calif. Furnished offices are available as an option for members. Private offices in the building begin at $1195 per month.
Heaton notes that moving to a coworking office isn’t necessarily a cost-saving strategy up front, though does have an impact on rent costs over the long term.
“For the time we are signing up for, we don’t have to front a lot of money for furniture systems or tenant improvements for example, so our capital cost is much lower here than it would potentially be somewhere else,” he says. “More importantly, we’re able to size ourselves correctly for the time of our commitment.”
The easy ability to extend lease commitments for short periods of time or change the number of desks it needs when hiring employees also allows Cresa to avoid the need to sublet a long-term lease contract if they need to move quickly. As of January, the company had hired its tenth employee at its Portland branch.
“We advise and guide clients every single day on how to manage their space strategy, and we feel like getting a coworking space in the manner in which we did is walking the talk,” says St. Onge.
While he notes that coworking isn’t a complete solution to the pain points of creating the ideal office space, it is a model that’s likely here to stay.
“I think one of the biggest things office tenants are looking for right now is flexibility. People are starting to realize that coworking isn’t about having a fun office with shuffle board and a foosball table, it’s about having choice,” says St. Onge. “Work styles now are work from home, work from a coffee shop, work from a coworking space—you’re seeing these trends infiltrate corporate America and people are starting to recognize the value of offering choice when you’re competing for talent.”
The Centrl Pearl District office is located at 1355 NW Everett St., a two-star building where Centrl occupies 22,289 square feet of space over the first two floors, according to CoStar.