From The Virginian-Pilot
Craft beer on tap, ping pong tables, gyms, rooftop decks, coffee bars and showers — these are a few of the amenities that coworking spaces use to beckon companies away from the standard cubicle maze.
And if you’re looking for innovative office space, downtown Norfolk is about to have an abundance.
Percolator has three coworking locations. Richmond’s Gather Workplaces is opening two floors of coworking space in the BB&T building in June. Chicago’s Novel Coworking bought City Center and will open two coworking floors. Old Dominion University and Norfolk State University have business incubators and innovation centers downtown. Regus has operated two floors of co-office space in Dominion Tower since 2012. And Norfolk digital creative agency Grow plans to open its Assembly office campus in the fall.
It’s getting just a tad co-crowded downtown.
Coworking spaces typically rent out desks, private offices and office suites for monthly rates. Tenants share amenities such as kitchens, conference rooms and lounge areas. It’s generally cheaper than renting a large unit and taking on administrative and maintenance costs. The coworking concept mostly attracts entrepreneurs, freelancers and remote employees looking for a space to work outside of homes and coffee shops. Even large corporations like Microsoft and Verizon have started to use coworking spaces.
By offering more than 230,000 square feet that will be able to accommodate nearly 1,900 people, are coworking companies betting too much on downtown Norfolk? The companies don’t think so.
Developer Bobby Wright opened his first coworking location, Percolator, in 2017, partly to fill empty space and generate revenue in some of his buildings. He now has four spots, though one will be converted soon to a restaurant.
“It lends credibility to what we’re doing. Secondly, it adds to the critical mass that we already have,” Wright said of the spaces popping up. “The more that happens, the more we can attract more companies to our region and retain companies and grow our talent. Entrepreneurs want to be around entrepreneurs.”
The movement of coworking and innovative office spaces downtown makes the area a go-to spot for startups, large corporations and entrepreneurs, he said.
“I’d rather lose them (tenants) down the street in our neighborhood than lose them to Raleigh or lose them to Baltimore.”
John Dudley, owner of software company Industrial Imagination, has rented space in Percolator since 2017. He was there “in the beginning when it was just crickets,” but after a few months, businesses kept coming in.
Dudley lives two blocks away and finds the connections, convenience, location and ability to expand in the building to be a big perk in the coworking model.
“I see this is something that is growing in Norfolk, and I will be very curious to see how it scales. Just putting the business hat on for a moment, that would be a concern if I were one of these coworking centers — over-saturation of the market,” he said. “I don’t know if that’s going to be the case. I hope that’s not the case.”
Jared Chalk, Norfolk’s interim economic development director, said in an email to The Virginian-Pilot that the downtown office market is “healthy” with a vacancy rate of 8.5% for around 3.2 million square feet of space downtown. The 5-year average is 11.8%.
“I believe that the coworking concepts are capitalizing on national trends of workers and people moving back to downtown where they can capitalize on the amenities that are within walking distance,” he said.
There will be less competition this summer when ODU shifts its innovation center away from coworking and into a business learning center for entrepreneurs. The center has a capacity of 20 people and seven offices. David Perkins, director of the center, said that with the growing coworking environment downtown, it seemed the right time for ODU to step out of the industry and focus on its ultimate goal of education.And with the entrance of Novel, which has more than 30 locations across the country, even more companies might take a look at the city.
“They’re (Novel) going to be putting national dollars towards their advertising, and that’s going to be drawing people to our marketplace,” Wright said. “That puts us on a different radar screen than what maybe Percolator or Gather could do. They already have the network.”
Coworking even received a mention in the Hampton Roads Real Estate Market Reviews and Forecast report for 2019. Krista Costa, senior vice president of Divaris Real Estate, noted in the report’s office real estate analysis that coworking expanded across the region in 2018 and more national coworking space providers are expected to enter the market.
One of those providers, Novel, helps to explain why this is happening.
Bill Bennett, founder of Novel, said the company started looking at buildings in Norfolk in January 2017. The company bought the City Center building at 223 E. City Hall Ave. on May 1. The top two floors will be converted into coworking space, and the bottom floors will remain retail and office tenant space. Renovations will begin in six weeks, with view to opening in four or five months.
“There’s always competition, and we like how we stack up in the landscape,” Bennett said. Novel’s Norfolk location will have self-storage rooms, a roof deck, beer taps, coworking desks, 90 private offices and 20 office suites for up to 50 people.
“We look to expand in Norfolk or the immediate area if that one does well,” he said.
Analysts and people in the industry say Norfolk was an untapped market for coworking because of its growing number of small businesses and entrepreneurs. The success of Percolator is a good indicator, too. Now that WeWork, a giant in the coworking field, and Novel have become established in large cities like Chicago and Los Angeles, smaller cities like Norfolk are drawing attention.
Bennett said Novel has the best location for co-working downtown, but one of his competitors has pretty much the same location.
Just a few blocks away, Gather is in full renovation mode with its 30,000 square feet on the 15th and 16th floors of the BB&T building at 500 East Main St.
The building’s top floor will open on June 6 and the 15th floor will open three weeks later. Savannah Bolin, regional director of Hampton Roads for Gather, said they’re 10% leased, and hope to be 15% to 20% leased before opening. The Richmond company also has plans to open a Newport News location in August.
“There’s a certain population we look for, and we look at companies that aren’t the large cities that the WeWork’s are looking at – like the Chicagos, the New Yorks, the D.C.s – but the cities that have that great population that might be overlooked,” Bolin said. “Norfolk is more of the ‘city’ of Hampton Roads.”
Gather will have showers, phone booth rooms, a wellness room for nursing mothers and a communal kitchen, as well as coworking desks, 153 offices and suites for one to 42 people.
“I think when you’re in a fun, inspiring workplace, you want to get more done. It’s not inspiring when you’re in a cubicle,” Bolin said.
Half of Gather’s customers are of the Generation Z and millennial generations, so the company looks for areas with that population and steady business growth.
“We needed it to be the right time, and I think right now is the right time because Norfolk has grown so much over the last three years.”
Another indicator of the strength of the coworking market: The city didn’t need to offer incentives to Percolator, Gather, Novel or Assembly.
However, Gather received financial assistance for renovations from the building’s property management firm, Cushman & Wakefield | Thalhimer. Wright wouldn’t say whether Percolator’s MacArthur Center location has received any incentives from the mall, but said it has a “very fair lease with them which allows some flexibility.”
Perhaps top of mind in the downtown office scene is Assembly, an ambitious office campus project headed by Drew Ungvarsky, owner of Norfolk’s Grow. The campus at 400 Granby St. will include individual offices that will share common space and amenities. Two retail spaces will be home to a potential coffee shop and restaurant. Assembly plans to buy the building from the city for $3.7 million.
Although city records show the building was assessed at $9.7 million, Ungvarsky said the lower price was a fair market value because of the cost of renovations and updates the historic building requires. Also, city offices will occupy half of the building space for three years at a low rate, he said.
Ungvarksy views coworking and large office campuses like the Assembly project to be overdue in Norfolk.
“Definitely Norfolk, as being a business center, has been under-served. We’re behind the curve on coworking options,” he said. “I think what we’re seeing is the evolution of work space. And it looks different than it looked five years ago, and it will look different five years from now. But this is part of that evolution.”
From The Virginian-Pilot
By Briana Adhikusuma
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