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Co-working spaces spawn growing businesses

January 20, 2019

Crain’s Detroit Business

Marti Banedetti

As Detroit’s office-sharing, co-working businesses such as WeWork grow, so are the businesses occupying their office space.

Take Bloomscape Inc., an online plant company started last March in WeWork’s first downtown Detroit co-working space. Bloomscape CEO Justin Mast founded the company with one employee in a small WeWork office and now has 11 employees in considerably larger quarters.

WeWork measures its success by how full its office space is but does not disclose the occupancy rates of its properties, said a WeWork spokesperson who asked not to be named. Bloomscape is in WeWork’s first downtown Detroit location in the Merchants Row building on Woodward Avenue and Clifford Street.

WeWork opened that office in 2017, and it includes seven floors. The second location, which opened later in 2017, consists of four floors in the 1001 Woodward office tower overlooking Campus Martius. The entire fourth floor is occupied by Accenture.

A handful of WeWork’s Detroit tenants agreed that they and their fellow businesses appreciate the ability to work separately together and to expand office space as needed.

Today’s co-working spaces such as WeWork are brimming with millennials who want and expect plenty of creature comforts with their workday. Per WeWork’s 2018 Economic Impact report, nearly half of its U.S. members are between the ages of 25 and 34.

The company’s two Detroit locations offer “members” comfy phone booths for private conversations — or a nap; Fruit Water on each of the floors (think pineapple and lemon); couches with pillows and blankets; and nooks for relaxing chats.

What looks like a mini-convenience store along one wall is called the Honesty Market.

Here members can choose from a variety of healthy chips and Kind bars or less healthy Starbursts or Snickers. Members have their form of payment connected to their WeWork mobile app.

Displayed in the company’s elevators are the week’s daily beer offerings (local craft, of course) and activities, such as decorating a pumpkin while enjoying cider and doughnuts (during the Halloween season).

Tenants have their choice of posh-looking glass offices in every configuration to accommodate one person or more than a dozen. If they only need a short stint at the Detroit office or any of WeWork’s offices across the globe, they can rent a “hot desk” — basically a chair at a table — for $280 a month.

Other rates start at $380 a month for a dedicated desk that no one else uses, $560 a month for a one-seat private office, $4,690 a month for a 10-seat office, and rising from there.

WeWork was founded in 2010 in New York City by Adam Neumann and Miguel McKelvey. Its growth trajectory has been rocket-like. Less than a decade later, the company has 400,000 members in more than 400 locations in 26 countries in 99 cities. Its members are entrepreneurs, freelancers and small businesses, but they also serve mid-sized and Fortune 500 companies.

The company made news last week with the announcement that it plans to reorganize into three units — one each focused on co-working space, residential space and educational businesses — and rebranding the parent company as the We Co.

We Co. has spent lavishly to finance its fast growth — to the tune of losing $1.2 billion in the first three quarters of 2018.

Detroit presence

In the Bedrock Detroit-owned, restored buildings, a few of the Wework offices house automotive suppliers, and even Ford Motor Co. has a tiny office occupied by the only gray-haired worker spotted in the building.

“A characteristic of Detroit’s WeWork community is a higher concentration of auto businesses,” said Kyle Steiner, WeWork Detroit community director. “And while the Detroit offices are dog friendly, our members hardly ever bring in dogs. Denver, on the other hand, has a strong dog culture, so its WeWork offices are full of dogs.”

Another difference: Beer is a crowd-pleaser in Detroit. “The Denver lifestyle, for example, prefers Kombucha over beer,” Steiner said.

His job “makes sure the offices have the pulse of the city and through the engagement of the team we can grow in Detroit,” he said. The offices’ activities also help bring fellow entrepreneurs together either for networking or friendship.

Blooming growth

“The flexibility and amenities here make it an easy place to be. I can focus on growing the business,” said Bloomscape’s Mast.

“Bloomscape is indicative of what can happen in these offices,” Steiner added.

Bloomscape has its greenhouse in Grand Rapids, where Mast grew up and several generations of his family were commercial growers. But when it came to locating the company office, Mast wanted to be in “downtown Detroit with all the energy that is there. We also felt that being here would give us access to resources outside of the city.”

Mast makes no bones about enjoying the WeWork amenities — “the micro-brewed coffee, the phone booths, the windows,” he said.

Ryan Landau, Re:purpose founder, started his hiring platform for technology companies a couple of years ago. He was among the first companies to launch in the Detroit WeWork space. He has eight employees: Half are in Michigan and the other half are in other parts of the United States. All work at WeWork “hot desks.”

“It’s not distracting to work in the open. If you need privacy, you reserve a conference room or a telephone booth,” Landau said.

Re:purpose also benefits by networking with other companies in the WeWork office. He has helped some companies find vetted employees and has found positions for those seeking new employment. Landau said the WeWork Detroit location nicely showcases the city to job candidates. Thirty percent come from cities outside Michigan and 70 percent hail from cities in the state. “It’s an exciting time when we pull people (to Detroit) from cities like San Francisco.”

Derek Rafferty of E3 Detroit sits in the WeWork common area on the eighth floor.

E3 Detroit, an entertainment and events company founded by Derek Rafferty, has a tiny but stylish, glass-enclosed WeWork office. He has an assistant down the hall.

He moved into his WeWork office because he wanted out of an industrial park in Canton Township. “There was no interaction with our industry and the venues our bands play in,” he said. E3 Detroit books bands for weddings and other events.

“Our growth could get us to four employees,” Rafferty said. “So, there is no reason to leave the WeWork space based on how our business is structured. And I love the vibe that is going on in Detroit.”

He said networking and talking with other WeWork members about their businesses is useful. “And I’ve made some new friends.”

Devon O’Reilly, manager of entrepreneurship at the Detroit Regional Chamber, is the face for people working in the Planet M Landing Zone, which occupies WeWork’s fourth floor and is specifically designed for mobility startups. It moved into WeWork in October 2017.

“We engage members on other floors and connect through the meet and greets. It’s very collaborative,” O’Reilly said.

Finding distinctiveness

WeWork came later to the co-working genre in Detroit than some of its competitors. Five years ago, Bamboo Detroit was the first co-working space to open downtown, and almost two years ago, it moved into the Julian C. Madison Building on Washington Boulevard.

“We’ve tried to evolve our own brand,” Bamboo Detroit co-founder and CEO Amanda Lewan said, adding that tenants are privy to coffee, tea, snacks, high-speed internet, printing, unlimited access to conference rooms, and other perks comparable to WeWork.

Overall, it keeps its prices lower to be an affordable model for startups, nonprofits and other diverse operations and “to do a good job of being a diverse community. Sixty-five percent of the companies here are women-owned,” Lewan said.

Steiner added that WeWork keeps in touch with other co-working companies such as Bamboo Detroit. “Co-working is a bigger concept than it used to be. Every one (of these businesses) is doing well and believes this industry is growing.”

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