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IWG’s Spaces Broadens Approach, Bringing Coworking to the Suburbs Amid Its New York City Expansion

Two-Pronged Growth Approach Includes Tennessee, Alabama, Arizona, as Well as Major Cities
October 3, 2018
Spaces plans to make the Chrysler building its `Midtown mothership' after signing a 15-year lease for three floors.



IWG Plc's Spaces, the coworking provider, plans to expand in smaller suburban U.S. markets including Franklin, Tennessee, and Huntsville, Alabama, in coming months to supplement its push into major cities such as New York and Washington, D.C., as it seeks to compete with larger rivals such as WeWork.

In an interview, IWG Vice President of Development Michael Berretta said the company will follow a two-tiered strategy for U.S. growth. Berretta said in the next several months the company will increase its presence in "established entrepreneurial ecosystems" including New York City, Miami, Philadelphia and Washington. But it will also extend into areas surrounding urban markets, with Berretta calling that a "key component" of its strategy.

"Recent reports show that the population growth in big cities is slowing, while population growth is accelerating in the sprawling counties surrounding them," he said. "Leading much of this suburban growth are seasoned employees, many of whom are married and have children. Larger corporations will need to be able to provide working options closer to where these employees live if they want to attract and retain that talent."

IWG's U.S. suburban strategy lets the Luxembourg-based company compete with larger shared office space rivals such as New York-based WeWork, which is focused mainly on larger cities.

He added that plans call for openings in other secondary or smaller communities such as Reston, Virginia, and Scottsdale, Arizona, to address the need for flexible workspaces in more suburban areas.

According to CoStar data, Spaces operates just over 2 million square feet nationally in 48 locations. By the end of the year, the company says it will have 54 locations open across the country. It also operates 91 locations within Europe and Africa.

Of the "rapid expansion" that Spaces is targeting within New York City, the company expects that by the end of the year it will have five locations totaling more than 300,000 square feet of coworking space. A Spaces location opened within Hudson Yards last week.

Spaces’ 15-year lease with landlord Tishman Speyer spans three floors at the Chrysler building. The company is "keen on making the Chrysler building its 'Midtown mothership,'" said Jones Lang LaSalle Executive Managing Director Jim Wenk, who represented Spaces in the 15-year lease.

The agreement follows another 100,000 square feet signed at 787 11th Avenue, an eight-story creative office building on the Far West Side that is owned by investment firms Pershing Square Capital and Georgetown Company.

Over the past month, its Spaces subsidiary has signed long-term leases for a 110,989-square-foot location at the Chrysler Building and for nearly 62,000 square feet at 175 Pearl Street in the popular Brooklyn neighborhood of Dumbo, which stands for Down Under the Manhattan Bridge Overpass. Each location will feature a private entrance for Spaces members.

The Dumbo location, within Normandy Real Estate Partner’s recently repositioned eight-story office building at 175 Pearl Street, is not expected to open until early 2019. Another location in the Flatbush area of Brooklyn is expected to be operational by mid-December.

In selecting markets to pursue next, the company’s first step is "to identify key areas where we anticipate industry growth," Berretta said. "From there, we take a look at what neighborhoods are emerging and fit into our Spaces strategy. We want locations in vibrant areas with great surrounding amenities and easy access to restaurants, entertainment, retail shops and transportation. As far as buildings are concerned, we often look for spaces that can be formatted to fit a variety of office sizes, has plenty of natural light and can be with outfitted with amenities that will encourage collaboration and foster connections."

FOR THE RECORD:

- Jones Lang LaSalle Executive Vice President Kirill Azovtsev worked alongside Wenk to represent Spaces in the Chrysler building transaction, while Tishman Speyer was represented in-house by Managing Director of Leasing Gregory Conen and Senior Director of Leasing Robert Weller.

- For the Dumbo deal, CBRE brokered both sides. Peter Danna, Mark Ravesloot and Scott Sloves acted on behalf of Spaces while Paul Amrich, Jeff Fisher, Neil King, Patrice Meagher and Sacha Zerba acted on behalf of Normandy Real Estate Partners.

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