Houston Minority-Owned Coworking Spaces Hit New Highs As Industry Recovers From Covid-19 Lows
Holly Tate, senior vice president at software company Leadr, toured SheSpace, a women-focused Houston coworking office, in a hard hat when it was only a shell, jumping at the chance to become the first member to sign a lease.
Thirteen months later, she occupies a small, walled office alongside other workers and companies, most of them female-owned, in a space outfitted with pink, orange and lime green décor, small conference rooms named after prominent women in history like Ida B. Wells and Frida Kahlo, a sizable lactation room positioned near the front door, and books by Houston women displayed for sale.
"I work remotely, and so having a community of like-minded women, I thought, was really important to me," Tate said. "[I was] just loving the vision and what they were trying to do to create a space for women to be supported. I was all-in on that."
SheSpace doesn’t look like a typical coworking space, let alone a typical office, and founder Stephanie Tsuru did her research on competitors before launching her vision. Her interest lay more in creating a community space for women than copying larger companies like WeWork.
A door at SheSpace leads into a narrow row of offices in late stages of construction. When the new space is finished in about a month, it will increase SheSpace from roughly 6K SF to 7.5K SF, doubling its number of private offices in response to what Tsuru calls exponential membership growth.
Tsuru isn't alone. Several minority-owned coworking companies based in Houston, all interviewed by Bisnow, are in the process of major expansion, having already moved into a larger space or in late stages of new construction to accommodate membership surges. Sesh Coworking, which focuses on female and LGBTQIA+ members, and Black- and women-owned Muze, are also in growth mode. Several are eyeing future jumps into new locations and markets.
Though coworking has suffered along with the rest of the office market throughout the coronavirus pandemic, experts say the industry is on an upswing as tenants drastically rethink space needs after two years of hybrid and remote work kept office suites mostly empty. Though niche spaces for women, people of color and other sometimes marginalized communities aren't new to the industry — women-oriented spaces like The Wing and Hera Hub have been around for more than five years — they are enjoying a resurgence in Houston and elsewhere, operators say. Shared workspace management and consulting firm Workspace Strategies last month called flexible niche office spaces geared to one type of profession or demographic a top industry trend for 2022.
Sesh Coworking saw so much growth it had to move from its 2K SF Montrose space to a 20K SF Midtown office in late 2021. The company started with pop-ups in 2020 and now, in its new, larger space, has added amenities like a photo studio. Muze Office, too, is expanding, nearly doubling from its current 3K SF footprint and tacking on 2K SF.
Operators say the specialized workplaces appeal to many communities reluctant to return to the office due to microaggressions and other discriminatory behavior from management and co-workers. Minority-focused spaces, in theory, help tackle that, Sesh co-founder Meredith Wheeler said.
"Microaggressions is a big thing [we consider]," Wheeler said. "We are always striving to be completely inclusive and welcoming to each person who comes in. We, ourselves and our staff, are always doing trainings, any kind of trainings we can get our hands on, because we're foolish to think as one individual, even when we have the best and most loving of intents, that we always do things perfect."
Sesh's founders say they prioritize LGBTQIA+ individuals and people of color in their own staff and other businesses they partner with. At SheSpace, potential members have to work in the space for several hours before they are allowed to purchase a membership, and though Tsuru has said declining membership to potential members is rare, she has done it if they have exhibited discriminatory behavior.
For Muze Office, a Black- and partially female-owned coworking space in the Medical Center, avoiding exclusionary behavior extends to how it prices its memberships.
Zachary Young, co-founder at Muze, previously did marketing for a separate coworking company before opening his own. He said he was surprised at its fees, concerned that charging members for small, frequent costs like a water bottle would hike up memberships to the point that it would drive people away.
Most of Muze's roughly 100 members are on its virtual plan, which costs $39 per month and allows access to a mailbox, a receptionist and the ability to list Muze as a company's business address. The plan proved especially popular amid Covid-19, and community manager Tricia Grimble said demand is at the point where it is difficult for the company to keep mailboxes open.
Both Muze and Sesh expressed some difficulty with finding partners for a business that targets minority workers. Sesh co-founder and Chief Financial Officer Maggie Segrich said she experienced landlords expressing skepticism there were enough women in the workplace to justify the business.
"We were kind of educating people, breaking people's regular thought patterns. But I think Houston being what it is and being so diverse was able to open its arms and being way more accepting. Whereas if we were to go back to the Midwest, where I'm from, I don't know that it would work out that well," Segrich said.
Muze isn't aware of any other Black-owned Houston coworking companies, though others exist in Texas.
"I wanted to have us be one of the trailblazers for the city, because we have one of the biggest Black and Brown communities in the state, but it's not being represented as far as progressive outlooks on business," Young said. "When I looked into it in 2018, when we came up with the concept, we realized that Houston was so undersaturated with coworking space, the concept was still very new. People didn't understand the value in how great that was for their business; it's a win-win."
The pandemic and its resulting lockdowns had a silver lining, Sesh's Wheeler said, adding the company was able to take feedback and experiment with the office design. In fact, all the coworking owners who spoke to Bisnow said they took a nontraditional approach to their environments to cater to their audience's needs.
At Muze, Young described a "jeans-and-athleisure approach" to fight a stuffy corporate stereotype. It helps reduce tension and judgement, he said. And light and plants were important to the owners at both SheSpace and Sesh, with Sesh ruling out many spaces in its search for real estate because of lack of light alone.
"A windowless box isn't going to work. It really just changes your entire work environment when you have live plants and fresh sunlight streaming on you," Wheeler said. "It affects your mood, it affects your productivity, and that's another thing that our members have often told us that they love so much, is all the sunlight and plants [in our space]."
Sesh also wanted a space where a passerby on the street could look through a window into the space. Wheeler said that a space in a high-rise wouldn't be very accessible, and pricey parking garage passes made them unappealing.
SheSpace is located on the second floor of a shopping center that shares a parking lot with big-box retailers. Tsuru said there was appeal in a space where members could run for a manicure or trip to Target. Both Muze and SheSpace said they promote a family-like, friendly atmosphere.
SheSpace only has three employees, including Tsuru, who serves as the face of the company, as she sits at the front desk and greets people who walk in. Members will approach her and ask if she would like something as they run to grab lunch, which Tsuru shows as an example of the collaboration between businesses that work at a coworking space.
"This is how we work. This is not a show," Tsuru said.
The companies touted the ability for members to collaborate and network with people with similar life experiences. Tsuru agreed that someone could dart down the hall to hire an accountant or ask a marketer for advice.
All three companies opened in 2020, either during or just before the pandemic began. At Sesh, which opened in February 2020, Wheeler described the feeling of believing her business was over as she cleaned up perishables and plants for lockdown.
"It was awful," Segrich said, and Wheeler agreed.
"We're both moms," Wheeler continued. "So, not only were we doing virtual school, but we were also trying to figure out how in the hell were we going to save our business, how are we going to support our community? Because if this is how we feel, how does everybody else feel? They must all feel the same way … if not worse."
Like other office types, coworking and flex office, both locally and nationally, suffered from pandemic-related work-from-home trends. As of Q3 2021, CBRE Global Head of Occupier Research Julie Whelan said U.S. flexible office supply had decreased 9% year-over-year. But, she added, there is good reason to believe 2022 will usher in renewed growth.
“Flexible office providers reported a rebound in sales and occupancy in their locations throughout 2021 — some to pre-Covid levels,” she said. “Specifically, an early return of small and medium-size businesses and an increased demand pipeline from enterprise tenants are supporting the optimistic sentiment.”
Big CRE firms are placing big money on that notion. CBRE itself acquired a 35% interest in Industrious in February of last year, and in March, Newmark Group announced it would buy flexible workspace platform Knotel out of bankruptcy. Cushman & Wakefield announced a $150M partnership with WeWork in late October, just weeks after WeWork went public through a merger with BowX Acquisition Corp.
Despite its recent ups and downs, JLL’s November 2021 Global Flex Space Report indicated 41% of tenants expect to increase their use of flex space as part of a post-pandemic work strategy.
“The continued uncertainty in the office market today is solidifying the future of hybrid work and in turn the permanence of flexible office space as a sustained portfolio strategy,” Whelan said, adding occupiers are seeking strategies to mitigate underused office space as pandemic uncertainty drags on, building in options to quickly expand or contract space needs and enter new markets quickly. “Whether the industry grows to 10%, 20% or 30% of overall inventory, it has a long runway ahead of it.”
Flex space accounts for just under 2% of U.S. office inventory today, but Whelan said the pandemic accelerated mobile work trends already gaining steam. There is likely no going back, with a number of large building owners creating or expanding their own branded flexible office space.
Against that backdrop, Whelan said there is room for small, more niche operators that cater to specific needs, like Muze or SheSpace, though “they would be a derivative of the success of the larger market, not the drivers of the flex market’s success.”
“There is absolutely room for niche players, but they will represent a smaller portion of the market as it continues growing,” CBRE’s Americas Agile Practice Leader Christelle Bron said. “Startup companies launched the flex sector. But now corporate users represent an increasingly larger portion of the market.”
Specialized coworking space is unlikely to be considered at mass scale, mainly because large corporate decision-makers gravitate toward providers who they feel confident will meet their requirements in terms of size, national and international presence, IT security, data privacy and other factors.
In other words, Bron said, “those that can become true RE partners.”
“While smaller independent providers are perfectly capable of meeting quality standards, they will have a harder time competing on size and coverage alone,” she said. “This is similar to what we can already observe in the hotel industry between boutique hotels and global brands."
But as coworking bounces back, all three Houston companies have ideas for expansion. Muze is eyeing either another Houston location or a Las Vegas site, whichever works out first. Sesh wants to make its Midtown location a headquarters for further expansion inside or outside Houston. SheSpace would like to open locations elsewhere in Texas.
"[It's going to be] abundant," Wheeler said with a laugh. "I'm just going to keep saying it. We definitely believe that coworking is here to stay. The pandemic really reinforced the fact that … we don't have to work one way, and people are kind of tired of being told that. You're seeing more people with side hustles and new businesses and really exploring entrepreneurship."