Atlanta Gaining Another National Co-Working Player
A new co-working group aimed at more established companies and veteran workers is taking aim at Atlanta with a dozen locations.
New York-based Serendipity Labs has inked a franchise agreement with a host of hospitality executives to launch 17 co-working locations in Atlanta, Charleston and Greenville. That group is led by 3H Group Hotels CEO Hiren Desai, SSM Hospitality CEO Paresh Master and Atlanta-based hotel brokerage firm Hunter Hotel Advisors Vice President Trey Scott.
The partnership will be one of two Serendipity franchisees in Atlanta, where the company expects to open a dozen locations, both franchised and corporate-owned offices, Serendipity founder and CEO John Arenas said. The firm already is in talks to lease space in Buckhead and North Fulton, but Arenas declined to identify the buildings.
Serendipity Labs most recently raised $11M from Dallas developer Craig Hall to help fuel its nationwide growth. The firm is growing through franchises, joint ventures and company-owned locations, with more than 100 sites underway at $1M each, company officials said.
But why Atlanta? After all, the metro area has seen an explosion of co-working operators in recent years, from both big national players — like WeWork, Roam and Industrious — and a smattering of local entrepreneurs.
“You have to be in Atlanta. Atlanta is a transformational city,” Arenas said. “We really should have been there sooner.”
Atlanta's co-working landscape is getting crowded quickly. Other than long-standing players like WeWork, Regus and Industrious, local operators also have made a splash, including Atlanta Tech Village, Switchyards in Downtown Atlanta and Tech Square Labs. Most recently, Gene Kansas Real Estate founder Gene Kansas announced plans to open Constellations, a shared workspace facility along the Atlanta Streetcar route in the Sweet Auburn historic district.
In all, Colliers International recently estimated that more than 1.2M SF in Atlanta is being used by co-working operators.
Despite the existing competition, Arenas said he sees plenty of room in Atlanta for Serendipity Labs, given there appears little to deter the growth in co-working. By the end of 2017, Deskmag estimates nearly 1.2 million people will work in co-working spaces worldwide, with bigger players growing more rapidly in memberships than smaller operators. Average membership per location rose from 49 in 2016 to 74 this year.
On top of that, Arenas said regulatory lease changes in 2019, which will require companies to shift rent as a liability on their balance sheets, is also influencing big companies to rely more on co-working operations that help get smaller, satellite office spaces off their books. Arenas said more than half of the leases in the office industry today are under 5K SF. It is that pool that Serendipity Labs is targeting.
“When those leases renew ... they move into co-working,” he said. "Why would you ever sign a [traditional] lease again if you're under 5K SF?"
Industrious CEO Jamie Hodari said co-working in Atlanta — and the rest of the nation — is far from reaching saturation. Right now, Hodari said he sees just 2% of all U.S. office space being used by co-working operators.
Hodari likened co-working growth to the restaurant industry: there has been a big boom of growth in new restaurants across the U.S. But while the numbers overall are rising, there are operators who fold for various reasons out of the sheer competition.
"There are cities all over the country that are less saturated than Atlanta with co-working, and yet Industrious will be completely full, and we're across the street from a competitor who is 60% leased,” he said.
Like other co-working operators, Serendipity Labs will rely on memberships instead of traditional office leases. Those can range from simply using the location occasionally to hold meetings or presentations to permanent shared spaces or even offices within the location, Arenas said.
“You have people who work there all the time as their primary office, then you have part of the population of members who drops in,” he said.
But unlike other operators, Serendipity Labs is focused more on established companies and independent professionals with a track record, instead of startups and other, riskier small companies, he said.
“About 50% of our members work for an established company,” he said. Another 30% are independent professionals and 20% are startups that are typically spinoffs from other successful companies, Arenas said. There is a basic financial reason for this makeup.
“Startups are fragile," he said. "If all of your members are startups and something happens in the community with venture capital, what happens if you can't get the next round of funding?”
As for Serendipity Labs franchising with a group of hotel executives, Arenas said the two industries are very similar.
“This is a hospitality business even more than it is a real estate business,” he said.
"Given the cyclical nature of the hotel industry, diversifying into an adjacent hospitality industry that addresses a growing market and uses our skill set is a tremendous opportunity. Corporate customers, a sector we know well, now need the flexibility offered by co-working memberships," 3H Group's Desai stated in a Serendipity Labs news release. "And as with their preferred hotels, they demand upscale environments and secure, trusted workplaces so they can feel confident sending employees and clients."