This editorial article is a part of Technical.ly's Office Trends month.
With each biz development, young companies need to be strategic. Decisions often come down to what can help a company now as well as in the future.
When it comes to where they’re located, it’s no different. Prices are a big consideration in any real estate conversation, but as more offices open around town, Ryan Miller sees another common theme.
“A lot of it’s really coming down to recruiting and retaining talent. The big driver is that these companies are trying to differentiate themselves from the competition,” said the managing director at Savills Studley, a company that represents tenants in commercial real estate deals.
Sometimes that means creating something new.
Often among the subset of the population that’s willing to take on something before others get in, smaller firms are no strangers to being early in a new space, and some of the smaller firms hold the promise of growth that could propel the whole area. The city’s incubators, such as Emerging Technology Centers, Betamore and Spark Baltimore, created tech hubs that didn’t previously exist, and have spawned businesses that moved out and grew up alongside them.
But setting up office space that has an open layout and shared resources isn’t only a tech concern. Now we’re seeing coworking spaces serve as small business forces in areas beyond tech. It’s happening in neighborhoods such as Station North, Pigtown and Hamilton Lauraville.
They’re also a part of the city’s newer development projects. That’s playing out in South Baltimore’s Stadium Square. The Caves Valley Partners–helmed development opened its first building this year amid plans for a development that spans multiple blocks. Offices for smaller, emerging firms are among the mix on the top two-and-a-half floors of the building. That’s where Holland-based Spaces opened its first location in the city amid a wider expansion. The coworking company seeks to provide office space on flexible terms.
“The Stadium Square development is going to completely transform this area over the next few years for the better. Our members get to be a part of that from the beginning and see the vibrant community come to life with the new mixed-use buildings,” said Caitlin Howington, Spaces’ community manager.
The company is opening two locations in Baltimore, with the forthcoming location being inside the Gallery at Harborplace along Baltimore’s bustling Pratt Street. Federal Hill offered a central location in its own right, Howington said.
“Federal Hill and its ease of access to major highways, local transportation, and D.C. has been a huge draw for current and potential members. On top of that, we’re in a brand new building that’s walking distance to M&T Bank Stadium and plenty of great local restaurants, bars, and shops,” she said.
Among the newest names in the city is Harbor Point. There’s been plenty of building. Along side Exelon’s tower, it’s an area where there’s plenty of new development and headline-grabbing deals like WeWork’s announced move into the area in 2020 and the relocation of digital marketing firm Jellyfish at a yet-to-be-constructed building called Wills Wharf.
Of course, new construction also comes with a price. While Baltimore’s average price per square foot of $23.81 in Q3 2018 remains much cheaper than, say, the D.C. average of $60.75 per sq. ft., according to real estate research firm JLL, the area with the highest average price in Baltimore was the new construction-heavy Harbor Point and Harbor East, at $36.57 per square foot.
For individual companies operating outside of coworking or other flexible office spaces, new construction can also bring with them long lease terms of a decade or more as landlords seek to recoup costs and secure stable tenants. That can be a burden for growing companies, JLL Associate Peter Jackson and Research Manager Patrick Latimer said via email.
“Overcommitting to lease terms can ultimately impede a company’s ability to grow, pivot and even suppress future acquisition values,” they said.
So the coworking spaces operating within those buildings can offer another way to locate in a new space while maintaining a more favorable lease options.
“From a real estate perspective, if you can stay in a coworking space or a sublet and optimize that flexibility, we always try to have our clients look to that lens,” said Savills Studley’s Miller.
To be sure, it’s not all new construction. In Fells Point, where the neighborhood’s average price is $33.76/sq. ft., according to JLL, Contrast Security recently completed a move into a new home at Brown’s Wharf. The company is expecting to add more than 20 new employees in the next year, and needed room to grow, said VP of Engineering Steve Feldman.
The location also provided a central point for employees. Many take a water taxi to work from South Baltimore, while others are “running and riding,” Feldman said. The cybersecurity company’s team looked at commutes, as well as creating an environment that would provide walkable options and nearby amenities. The company also oversaw the renovation of the space, providing the opportunity to carve out ample deck space for harbor views and create an open-office environment inside.
With the other founders of the Par Collective, Teddy Davidson has helmed the transition of a pair of buildings to flexible office space that’s available for growing companies under the banner of The CO-OP. With an initial space in Mt. Vernon, the second space opened in late 2017 in Station North. With the latter space, the theme of proximity to transportation was again key, as the space is close to Penn Station and along the Jones Falls Trail bike path. In this case there’s also proximity to the sources of talent.
“From our perspective the combination of the three universities — [University of Baltimore], MICA and Johns Hopkins — really gave us confidence that there would be a sense of investment and a baseline level of activity oriented toward students and the young workers that would potentially be coming out of those schools,” he said. By comparison, Station North has a lower average price of $18.22/sq. ft.
Inside these new spots, the focus is on flexibility. The CO-OP at Maryland Ave. in Station North was converted from a former health center into office space with a variety of configurations, as well as common areas. Davidson said natural light has also been a key point among tenants.
For its part, Spaces’ team showed us offices of a variety of sizes, and said there was room to configure. Ample common space and conference rooms onsite provide more space as well.
“We’re seeing companies focused on creating workplaces that both foster collaboration, and allow for privacy and head-down work,” JLL’s Jackson and Latimer said. “This means more and more features like huddle rooms, phone rooms, informal seating areas, and often a large, centrally-located kitchen that can serve as the hub of activity in an office, providing not just a place to eat or get coffee, but also to host meetings and discussions.
“Founders are often choosing to roll their sleeves up alongside the rest of the team,” they said, “and eschew the private offices, often leaving those spaces, if they exist at all, to HR or other managerial folks in more privacy-sensitive positions.”
Companies are also thinking about what their office communicates to those who visit.
“If you’re a fintech firm focused on creating a better way for people to access and invest their money, you don’t want your employees or your clients walking through a stodgy building lobby to get to your office,” said Jackson and Latimer.
Along with design considerations, providing options on price is also an emerging theme.
“You’ve got to be willing to see things in different terms than have been traditional in a commercial real estate sense,” Par Collective’s Davidson said. That means having conversations about leases for differing time periods — whether it’s month to month, six months, or for a specific period of years.
As more options emerge, Miller said he’s also seeing landlords get creative with the packages they put together.
“We’re still seeing a very strong tenant-friendly market,” he said.
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