Posted by: BayAreaComRE | January 12, 2011

Co-Working is Brought to Another Level. RocketSpace Opens Doors to 50,000 Square Feet in SOMA!

San Francisco is laying the ground work for a serious growth period. Profound growth. 2011 is being ushered in with a significant move in the co-working industry.

Analogous to the recent funding spree where Klout’s near 10MM in funding was overshadowed by 27.5MM of funding to Square, and yet only to be trumped by GroupOn’s near 1 Billion dollars in Series D funding all in the same day, the co-working spaces are growing at an alarming rate and each one is bigger than its predecessors.

The Hub has doubled in size at The Chronicle Building, SOMA Central now exceeds 38,000 square feet at 153 Townsend, pariSoma just quadrupled in size to more than 10,000 square feet at 169 11th Street and the latest, RocketSpace, occupies 50,000 square feet able to hold 500 members.

If you are unfamiliar with co-working, see the Quora thread here http://www.quora.com/What-is-a-coworking-space.

I discussed the opening of RocketSpace with it’s founder, Duncan Logan.

“Ive been blown away by how much demand there is for the space. We will have 45 people by the end of January and chasing 100 people by the end of February.”

Edith Yeung, the great mind behind BizTechDay, already hosted an event at the new space, SF Entrepreneur China Night.

Is this too big of a space? Is there a bubble in demand? What is driving this bubble? Is there going to be too much space provided?

Without a doubt, there is going to be over-supply. Duncan knows of 4-5 more co-working spaces that are opening in the first quarter of this year. “You better have a strong hold on your mission and a strong brand. You better stand for something very strong. If you just supply space, you will fail.”

RocketSpace is positioning themselves to later stage, post-incubator, seed funded companies.

“We don’t compete with Pier 38, The Hub, or pariSoma which are geared to very early stage companies. They do a great job but price people out at 6 people.”

RocketSpace charges $550 per month for the first desk, all-inclusive, no kitchen fee and no set-up charge. Every desk from there on becomes cheaper. For 30 people, they are charging $380 a person per month.

This industry is already evolving and maturing. Co-working spaces will have to create a niche to compete.

“We are saying no to companies who are not tech and social media. We can grow 100,000 sf in 6 months easily, the demand is growing all over the America. The market will take care of itself.”

In response to the “bubble” talk from people who believe companies are being over-valued and there will be an eventual “pop”, Duncan believes there are key indicators that challenge this theory. “Facebook and companies like it are creating a lot of millionaires and even billionaires. Not just for the employees but also the investors. If just one or two of these go IPO, a lot of people will make a lot of money. And those people will put that money back into startups. The alternatives are just not as appealing.”

Co-working is a trend that’s here to stay. More of our clients are leasing space and sharing it with other companies, and significantly more people see the value in co-working in some capacity.

“Coworking is like causal dress. It just makes a lot of sense.” People see that the benefits outweigh the risks.

“Over 90% of companies employ less than 20 people. Everything in their life has been pay as you go, except for real estate. That’s all we’re displacing in the shared office space market.”

Rocket Space is like the Rackspace of office space! cc: Robert Scoble 🙂

Duncan is no stranger to startups and leasing office space. “I was a derivative trader in London. Then set up a very successful company in 1997 and sold it in 2000. We had a perfect landlord, and we kept growing within the building.” He then joined Message Labs and sold that to Symantec for 700MM in November 2008.

He and his wife were looking for office space and thought about taking extra space to accommodate growth. He approached KickLabs and the idea came out for post-incubator space.” We really started looking into that market. The quality of the tenants is critical. If you are funded by a leading venture capital firm or incubator, then we are really interested in speaking with you.” He is banking on the fact that “smart people will want to be in it and venture capitalists will  want to be around it.”

The co-working industry is more of a mind-set than merely the designated co-working spaces I have mentioned. The co-working industry will not replace traditional office leasing, but rather disrupt it. Companies see the benefit of working together and seek out community in their office space. This is only the start.

Justin Bedecarré is a Real Estate Advisor for tenants at Cushman & Wakefield, one of the leading commercial real estate firms covering the Bay Area. Justin has represented firms from Fortune 100 to startups in media and technology, including Broadcom, Thomson Reuters, Rhapsody, Looksmart, AKQA, Hearst Corporation, and Bank of America to name a few.

He can be reached via email at justin.bedecarre@cushwake.com or on Twitter, Facebook, LinkedIn and Quora. He majored in economics and political science at the University of California, Berkeley.

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Responses

  1. […] “Co-Working is Brought to Another Level. RocketSpace Opens Doors to 50,000 Square Feet in SOMA!” Bay Area Commercial Real Estate Blog 12 Jan. […]

  2. […] “Co-Working is Brought to Another Level. RocketSpace Opens Doors to 50,000 Square Feet in SOMA!” Bay Area Commercial Real Estate Blog12 Jan. […]


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