How Douglas Development Turned 3 Former WeWorks Into Its New Coworking Brand
After WeWork closed its three oldest D.C. locations in the midst of the coronavirus pandemic last year, the developer that owns all three buildings decided to use the spaces to launch its own coworking brand.
Douglas Development hired Artur Samofalov to spearhead its new coworking concept in October, the same month WeWork announced it would close the three locations: the Wonder Bread Factory building in Shaw, the Manhattan Laundry building near U Street and at 718 Seventh St. NW in Chinatown.
Last month, Douglas announced the launch of The Mark, a new coworking brand debuting in the three buildings, and it opened the Wonder Bread Factory space July 15. Samofalov, who previously worked with flexible office companies Mixer and Carr Workplaces, gave Bisnow a tour of the Wonder Bread Factory space.
The building at 641 S St. NW in Shaw was constructed in 1913 and previously housed a baking factory for Wonder Bread, which closed in the 1980s. The building then sat vacant for over two decades before Douglas redeveloped it in 2012 into loft-style office space. Douglas, one of D.C.'s largest developers, is known for transforming historic buildings across the city.
WeWork opened in 2014 in a 32K SF space on the third and fourth floors of the building, and the remainder of the 98K SF building was leased to other tenants. Children's National Health System last month announced at a Bisnow event that it plans to occupy the lower two floors of the building and build out medical offices.
The Shaw coworking space was one of seven that WeWork closed in the D.C. area over the past year, as the pandemic upended the coworking sector one year after the company's valuation was tanked by its failed IPO process. One of WeWork's challenges was that it signed a host of long-term leases, while competitors like Industrious have leaned into the less-risky management agreement model.
Douglas Senior Vice President Matthew Jemal declined to comment on how WeWork negotiated its exit from the three D.C. leases, but he said he is confident The Mark can bring the spaces back to full occupancy.
“These three coworking locations were full prior to the pandemic," Jemal said. "The Wonder Bread location in fact had a waitlist for space. We made great improvements to each location and no doubt it will fill up again once people feel comfortable coming back to work."
Leasing for the coworking and flex office industry has rebounded in recent months. Demand for flex office spaces rose 41% between Q1 and Q2 of this year, according to industry tracking firm Upsuite, which measures demand by average views per location.
The Wonder Bread space is currently around 10% occupied after opening July 15, Samofalov said. He said he has seen strong touring activity, including companies that previously occupied the space when WeWork operated it.
While D.C.'s office market is highly competitive with elevated vacancy and a large number of coworking spaces, Samofalov said that The Mark doesn't have much competition in the nearby Shaw area, a largely residential and retail neighborhood.
Regardless, D.C. flex office operators have been forced to lower prices to sign deals: the average price-per-seat fell from $422 per seat per month in Q3 2020 to $283 per seat last quarter, according to Upsuite. Samofalov said The Mark is offering one month of free rent for a company that signs a six-month lease, and two months free for a 12-month commitment.
The space has private offices, dedicated desks and nondedicated touchdown workstations. Once the other locations are open, members of one space will have access to the other two to use their touchdown workstations or book a conference room.
Douglas kept in place the same glass walls and doors that separated the private offices in the WeWork, but it made changes to almost every other element as it shifted the space to its own brand.
The developer brought in all new furniture, including desks, tables, chairs and couches, though it has faced some supply chain issues. It is still waiting for two couches at the Wonder Bread space, and the other two spaces are waiting for more furniture, a wait that could potentially delay their openings.
Samofalov said he hopes the Manhattan Laundry space can open in September, depending on the delivery of the furniture, and the Chinatown space will open later. There — the smallest of the three locations, where WeWork opened its first location outside of Manhattan — Douglas is installing new walls to create private offices in part of the previous common area space, he said.
Douglas also installed new IT systems with higher levels of security that give each company separate network log-ins and passwords. WeWork typically has one shared WiFi network with a common password for a full space.
The developer also installed new flooring, as Samofalov said the previous flooring had an older, "rustic" look. Douglas painted the walls and changed the color scheme to black and gray tones that he said give the space a more "sophisticated look."
Samofalov said The Mark is aiming to make the space feel "a bit more professional," but he doesn't expect many members will be wearing suits and ties. The developer also removed the beer taps that the old coworking operator had, though WeWork had stopped serving beer out of them before it closed.
While it won't have beer on tap, The Mark does plan to bring in drinks for weekly happy hours to help members network. Samofalov said he plans to also bring in catered food from local restaurants on occasion, but he is waiting until the space is at least 30% occupied.
The space has garage door-style windows between its third-floor kitchen and lounge area and the outdoor patio, and Samofalov said he plans to open them when the weather is right or for special events. The indoor-outdoor space is also hosting an outdoor wedding, which Samofalov said is scheduled for September.
Samofalov said he plans to take an active role in creating connections between coworking members. For example, if a lawyer occupies the space, he said he wants to encourage other members to use their services.
"My goal is to try to connect people and facilitate," he said. "It's a great idea, but it's hard to implement, so I'm putting in effort to make sure it works."