Two years ago, 1776 shifted its business model. How's it going? - Technical.ly DC

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Aug. 28, 2019 3:53 pm

Two years ago, 1776 shifted its business model. How’s it going?

With location changes and closes in the area, we talked with 1776's Lucas McCanna about the prominent incubator's future after moving away from signing leases and toward managed assets.
1776 DC’s new office in McPherson Square.

1776 DC's new office in McPherson Square.

(Courtesy photo)

Full disclosure: This reporter previously worked out of 1776's D.C. location, and Technically Media's Philadelphia-based team currently works out of the Washington Square location.
Prominent incubator and coworking network 1776 has been through a whirlwind of changes in the past year.

Locally, 1776 temporarily closed its D.C. spaceshuttered its Crystal City location for good, and announced plans to open up its first Maryland location in Bethesda this winter. The incubator network also has locations in Philadelphia and New Jersey, and these spaces have been going through their own leasing changes and closures.

“The announcement of the North Bethesda location is another great example of how we are looking at different markets and seeing where we can create a meaningful impact in the local ecosystem by providing nontraditional amenities at the workplace,” Senior Director of Strategy Lucas McCanna told Technical.ly about the new space within the Greencourt Innovation Center.

(Side note: Technical.ly Philly Lead Reporter Paige Gross wrote a great review of working at 1776’s new Cherry Mall location in New Jersey.)

1776 shifted its business model in 2017 after the merger deal between it and Benjamin’s Desk became final. With this merger came a new business model in which 1776 said it is moving away from signing leases and focusing on partnering with asset owners in a management capacity.

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As 1776 DC will make its return sometime in the near future, we wanted to get a few more details about the new space.

We previously reported that 1776 DC will return to the McPherson Square area, blocks away from the White House. McCanna confirmed this (without sharing its specific location) and said the new office is around the same size as the old D.C. campus. The space is bordered by offices with lounges and open seating in the middle of the floor.

Tenants at this location can make use of an attached gym membership and a full-service event space, and the office is equipped with a podcast room and terrace. McCanna said 85% of its tenants from the Crystal City space transferred to the new D.C. location and are now working out of it, though the new space is not open to the public just yet. Customer success startup ChurnZero, one of 1776’s largest local members, transitioned to the D.C. space as well. McCanna said the space can accommodate 175 people.

“Currently, the D.C. space is not fully open to the public. We are currently accommodating our previous tenants first,” McCanna said. “We are sold out of offices and reserved desks and expect to sell out of our flexible options when we open.”

1776’s previous Director of Culinary Sam Johnson has shifted to the D.C. campus manager. Jessica Kaing, who is the regional director of events and programming, will also stay on and help at the D.C. campus, McCanna said.

To get some clarity on specifically how this shift in business model has been impacting the incubator beyond location changes, we spoke with McCanna — who himself is about to transition out of the company to join consulting, software development and digital marketing company CUCollaborate in the District. His last day at 1776 is Friday.

This interview has been edited for length and clarity.

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1776 seems to be going through a lot of location changes because of this business model transition. Was this expected?

Our shift in business model has lead to changes in our portfolio of locations. As rents have started to increase, it has become more apparent that we need to switch over a majority of our locations to managed deals. We have enjoyed every second at the Crystal City space but it was a financial decision to close the space due to higher overhead costs.

Can 1776 tenants expect any more changes to other locations?

I don’t foresee too many changes in the future. There are locations such as our 1776 Rittenhouse location that is on a lease and is performing well and won’t be switched over to the new model.

Based on this business model, where does 1776 see itself in the next three to five years?

In the next two to three years the new model will allow us to expand outside the Northeast Corridor. With each new space comes a new partnership and value added to our tenants. We recognize that workspace trends are changing and that may lead to us opening space in unconventional areas to test the market.

Is 1776 satisfied with the outcome and location changes as a result of this new business model?

We have been very satisfied with the new business model. It has allowed us to decrease our liabilities and expand our network with less risk. There are asset managers across the U.S. that are looking for ways to fill empty space. We now offer a new option that is beneficial to both parties.

Has this business model proven to be more sustainable for 1776 to scale?

Flexible workspace is a competitive industry and we don’t see that trend slowing down. With our focus on providing more amenities to our members such as access to a pool or gym, we are distinguishing ourselves on value and avoiding a price war. Our partnerships with asset managers provides access to new external resources which help us market and operate on a larger scale.

Companies: 1776
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