No question, incubators and co-working spaces can be great spots for startups early on. But when they begin hiring more people and need more room, they often find it's not easy or cheap to find an ideal office for their unique needs. In and around D.C., though, there are some new options for finding office space beyond the traditional and sometimes opaque method of leasing space. We took a look at two of them—HiRise and Kinglet.
Real estate brokerage firm JLL recently launched HiRise, which basically handles all of the paperwork and other aspects of real estate that slow down and complicate leasing on both sides of the equation. The goal: make it relatively easy for startups to find and lease smaller amounts of space, less than 5,000 square feet, on a flexible schedule.
"Startups that are graduating from a 1776 or an Eastern Foundry need space but they can't sign a long lease—it doesn't look good to investors."
"We saw a huge void in the market," said Andy O’Brien, the a senior vice president at JLL and the co-founder of HiRise. "Startups that are graduating from a 1776 or an Eastern Foundry need space but they can't sign a long lease—it doesn't look good to investors. But they're growing fast and have to find somewhere to go."
To build the platform that would help startups find their next destination, JLL hired Aaron Rinaca, who used to be the head of global real estate at LivingSocial. He oversaw a team of programmers and developers who built the platform, while O'Brien and others at JLL saw to making sure that it checked all the legal and bureaucratic boxes.
Property owners often find it easier and cheaper to sit on vacant space and wait for a major lease to come along than to deal with smaller companies, O'Brien said. But in D.C. there are three times as many businesses taking up less than 5,000 square feet as there are larger tenants with the average at about 4,100 square feet, compared to the standard 8,000 square feet average for an office lease.
"It's tedious and expensive to lease space," O'Brien said. "Simplifying it for landlords is what we're really, really trying hard to do."
O'Brien pointed to the growth of co-working spaces in general as a sign of the need for office space, and not just for tech startups. Small law firms not wanting to go to co-working spaces and government contractors wanting to be near the agency they are working for, but with uncertain timelines, also fit the profile of businesses in need of smaller, more flexible leases.
"It's not just the tech sector, although they'll probably be early adopters," he said.
And because HiRise is part of JLL, it has the connections and access to offer it, O'Brien said, which isn't something that a tech startup wanting to offer similar features can necessarily offer.
"They just don't have the access we do," O'Brien said.
But that doesn't mean HiRise is the only emerging option for D.C. startups looking for office space without the usual rigamarole. Baltimore-based Kinglet has its own online marketplace for office space for D.C. and parts of Virginia, which launched here in March. Kinglet has a focus on smaller businesses too, but approaches the issue from a different angle than HiRise. The spaces it offers comes from smaller landlords and from businesses that have extra space or suites of their own. And the company claims it can simplify the process to take just a day or two instead of months.
"We are working with businesses that are just not ready for (broker) representation yet."
"Most small companies don't understand the complexities of commercial leases and the role of the commercial broker," Kinglet CMO Jeff Jacobson told DC Inno in an interview earlier this year. "In addition, most brokers do not take on the smaller requirements. A broker's time is valuable and they want to maximize it by taking on requirements that will pay them back for their time. Kinglet is not looking to replace the broker, we are working with businesses that are just not ready for representation yet."
Leasing commercial real estate isn't ever likely to be quite as quick or easy as using Airbnb. But the appeal of making the process of finding and leasing space easier is obvious for smaller ventures, especially where space in general is at a premium like in the District.
"These spaces are the next step for companies at WeWork or 1776 or Eastern Foundry," O'Brien said, "but with more flexibility for their growth."
