When WeWork early next year opens its fourth Portland location, near the Lloyd Center mall, it still won’t have the largest coworking presence in the city.

That title goes to Regus, a foreign-owned company with 257,500 square feet of office space in the Portland area, according to Jones Lang LaSalle. WeWork ranks second with 227,000 square feet.

WeWork’s upcoming initial public offering, expected in September, will offer the best gauge yet of how investors value the coworking industry. The coworking giant has rapidly spread across the country and internationally.

But some analysts have raised red flags about WeWork’s financial prospectus, pointing to $17.9 billion in long-term lease obligations and less than $2.5 billion cash on hand. WeWork’s parent company, The We Company, released the prospectus Aug. 14 in preparation for the IPO.

In Portland, flexible space amounts to 1.4 percent of total leasable space, including buildings under construction, according to JLL. That leaves a lot of room for growth, said Jeff Arthur, co-founder of CENTRL Office, a competitor founded in Portland.

“I think there’s still more room,” Arthur said. “There’s a lot of supply. Part of it’s dependent on the overall vacancy in the market.”

Arthur pointed to industry estimates that coworking could total 25 percent of office space a decade from now.

“Depending on the market, that sounds right to me,” he said.

Many employers have adopted more flexible expectations of where employees can work. That can mean working from home, having in-office “hot” or shared desks, moving teams of employees to a coworking space, or all of the above.

“Companies of all shapes and sizes are seeking out a more turnkey office solution than they have in the past,” Arthur said.

WeWork’s breakneck pace of expansion has been reflected in Portland. Most recently, the company signed a lease for 55,395 square feet at American Assets Trust‘s Oregon Square development. The company is expected to take occupancy in the first quarter of next year.

WeWork had the Portland-metro area’s largest office deal of 2018, taking 70,000 square feet in the Power + Light Building. That added to its earlier locations at the U.S. Custom House in the north Park Blocks and the top floor of Pioneer Place downtown.

CENTRL Office has sought cracks in the market, including Lake Oswego and Hood River. The company will have seven locations when the Hood River office opens early next year. It has also established offices in larger cities: the one in Dallas opened recently, joining Los Angeles. Arthur said the San Francisco Bay Area may be an underserved market. Those cities are “markets where we continue to see a lot of demand from corporate America,” he said.

WeWork would be the first coworking company of the tech-economy era to go public. Regus, based in Luxembourg, was founded in 1989 and has been publicly traded since 2000; it has moved into coworking in recent years. Regus did not return a phone call seeking comment.

Arthur said he did not want to comment on WeWork’s financial details ahead of the potential IPO.

“I think it’ll be interesting to see if and when it goes forward, and what the market response will be to it,” he said.

New entrants into the business are focusing on submarkets that may have been overlooked by larger firms. Vida, a coworking space that markets itself as “designed by women, for women” opened July 1 with about 15,000 square feet in the Jantzen Building at Sandy Boulevard and Northeast 19th Avenue. And Knack, a coworking startup that opened in Seattle’s Belltown district recently, markets itself as a resource for all entrepreneurs, but particularly LGBTQ+, women and people of color.

“What we’re seeing happening is coworking spaces are really niche-ing down into being able to offer very curated services to a group that wants those services,” Vida founder Melanie Marconi said. “What WeWork did is set the stage for coworking in general, but they’re too big to offer the specific services we do.”

Vida offers its members drop-in child care and a daily fitness class. Plans are in place for more lunch-and-learn events as well as a health and wellness program.

The Sandy Boulevard location has attracted more than 60 members, including a number of investors who moved in with their businesses, Marconi said. Private offices were first to sell out.

Marconi’s initial round of “friends and family” fundraising raised $101,000. With Vida’s first location up and running, she’s looking to expand with a second round of fundraising, perhaps in January. “We’ll probably go out to proper angels (investors) and bigger pots,” she said.

Marconi mentioned Vancouver, the Southwest Portland suburbs and the Slabtown area of Northwest Portland as possible expansion opportunities.

Like everybody else in the industry, Marconi said she’ll be following WeWork’s offering.

“It’s fascinating to watch, honestly,” she said. “It’s such a monster scale.”

Flexible space in the Portland-metro area

Regus                          257,500 square feet

WeWork                      227,000 square feet

CENTRL Office         102,000 square feet

Spaces                         76,500 square feet

Industrious                  28,500 square feet

Vida                            15,000 square feet

CommonGrounds       14,000 square feet

sources: JLL, 91ĘÓƵ archives

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A coworking startup focused on women entrepreneurs is opening its first location, along Northeast Sandy Boulevard.

The space will open July 1 in the Jantzen Building, 401 N.E. 19th Ave., on the second floor.

Vida is a new entrant in the increasingly crowded coworking field dominated by WeWork, which is preparing for an initial public offering, and Portland-based CENTRL Office. Vida is seeking to set itself apart with a suite of services for working women, including on-site, drop-in child care and dedicated breastfeeding rooms.

Allyson Strowbridge of Ctrl+Shift+Space designed interior updates of the circa-1920 building space.
Vida was founded by Melanie Marconi, a local businesswoman who previously founded events and concierge companies. She plans to add two more Vida locations in the Portland area within the next year, and subsequently in other cities.

Vida raised $101,000 in an initial round of fundraising, according to a news release. The company is located in an opportunity zone, and Marconi is planning to open an opportunity zone fund by Sept. 1, advised by Schwabe, Williamson & Wyatt and Perkins & Co.

About 50 members have joined Vida to date, including Bitch Media, World Pulse, Converge and 1906. The coworking company is looking to attract 150 members.

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On the third floor of Pioneer Place, in downtown Portland, a transformation is taking place that is being replicated across the nation.

WeWork, a co-working company, is taking 34,000 square feet of former retail space in the shopping mall. In Portland and around the nation, retailers are closing stores, and many property owners and brokers are repositioning those vacant spaces for office use.

Particularly in Portland, there has been a seemingly inexhaustible demand for creative-office space that has helped buoy some of these former retail locations.

“There’s an evolution of things, and there’s an opportunity with every vacancy,” said Bob Buchanan, general manager of Pioneer Place.

Yet as major retailers such as Macy’s, J.C. Penney, Sears, Kmart, Radio Shack and American Apparel close stores, retail analysts are wondering where the bottom is, and to what extent conversions to other uses can absorb the slackening retail demand.

“The pressure of the Internet and people buying online, it’s going to take a toll, and it’s happening,” said Thomas Fellman, senior vice president at CBRE‘s Portland office.

The migration from in-person to online sales has been a long time coming. But it has accelerated in the past year and shows no signs of reversing.

E-commerce sales grew to 8.1 percent of total sales in 2016, up from 7.3 percent in 2015, according to the Census Bureau. Online sales last year totaled an estimated $394.9 billion, up 15.1 percent. Overall retail sales grew only 2.9 percent.

Online retailers have snapped up Portland-metro industrial space for shipping operations to better serve the area’s booming population of urban customers.

For Pioneer Place, the third-floor renovation for WeWork was born out of several retail vacancies. Fellman said he approached the mall’s management with the idea of converting the floor into office space.

“We came up with what we thought was a really good floor plate and lots of natural light,” he said. “I just started pursuing who I thought would be great tenants. It’s not for everybody.”

Fellman found a willing partner in WeWork, a co-working chain that is capitalizing on work trends in urban locations. WeWork expanded from its first Portland location at the U.S. Custom House in the Northwest Portland park blocks.

“I had a lot of interest from a variety of different businesses,” Fellman said. “WeWork was the most aggressive out of the chute.”

WeWork has its own entrance to the building from Fifth Avenue.

Many malls and other retail properties are moving to a mix of smaller tenants amid weakness for traditional anchor tenants such as Sears or Macy’s. Pioneer Place already caters to downtown customers with small luxury boutiques such as Louis Vuitton and Tiffany & Co.

Macy’s recently closed its store in the Meier & Frank Building, in downtown Portland, to make way for a creative-office conversion.

That trend is also playing out across the Willamette River at Lloyd Center. A space that was originally built for J.C. Penney when the mall opened in 1960 is being extensively renovated and re-leased in pieces. The first two levels at the east end of the mall will be divided into smaller retail and office uses. A 76,000-square-foot movie theater with 14 screens will occupy the third floor. The mall’s fourth floor will be removed at the east end. The project is being designed by LDA Design Group of Burbank, California.

Providence Health Services is taking 36,500 square feet of office space in the mall. That fits an explosion of creative-office development in central Portland. Projects are under way across the city, from the proposed Press Blocks in Goose Hollow to Overton 15 in the North Pearl District.

“There has been a consistently strong demand for creative office space in our market,” said Patricia Raicht, senior vice president for research at Jones Lang LaSalle. “Anything that’s going to be developed now is going to have some sort of creative office component.”

Demand for creative offices has moved beyond just tech firms, Raicht said. Now other, more conventional companies are interested in amenities and urban locations that command higher rents.

Delivery of new office spaces this year should prove helpful to tenants in the market, Raicht said.

“You’re going to see more options,” she said. “That’s really good news for tenants.”

Portland’s neighborhoods are changing too. Inventory-carrying retailers are giving way to service businesses such as restaurants, hair salons, yoga studios and gyms. Recently, a second location for a self-serve “kombucha speakeasy” on Southeast Belmont Street drew attention from Portland’s alt-weeklies. Customers access the building, and the $4 Soma kombucha, with a credit-card swipe. The company, Symple Foods, started with a location in St. Johns and promises “non-dogmatic spiritual whimsy” along with the fermented beverage.

The same trends are emptying big boxes, Fellman said. At the same time, residents are demanding services be in closer proximity.

“More and more, people are going to be closer to where they live and work and shop,” he said.

Among the inventory-reliant retailers that have left vacancies behind is American Apparel, which was beset by corporate-level controversies. The company closed two Portland locations, in the West End at 1234 S.W. Stark St. and in Southeast Portland at 3412 S.E. Hawthorne Blvd. American Apparel previously shuttered a Bridgeport Village location.

Some Portland property owners have prospered with small retail spaces that cater to boutiques.

“We tend to have smaller retail spaces, which are more attractive for local, independent retailers,” said David Schrott, a partner at A & R Companies, which owns the Stark Street property.

That property won’t be vacant long, Schrott said. The company already has an understanding with a new tenant.

“We never had to put a sign up,” he said.

Schrott said it’s too early to publicly identify the incoming tenant for the 2,400-square-foot store. But some things don’t change much – it’ll be an apparel retailer.

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Entrepreneur Andrew Erickson loves his office at the U.S. Custom House because it not only is inexpensive, but also provides flexibility.

“The physical layout is pretty great because it’s really easy to find distractions in that environment,” he said. “You can change environments to focus on the task at hand.”

The historic building, built in 1901, was remodeled by WeWork last fall. While open office configurations are popular these days, the work spaces in the U.S. Custom House are individualized. But because nearly all of the spaces are glassed in, the building has an open feel. Office spaces can also be expanded or contracted, depending on tenants’ needs.

Erickson is watching his budget, and pays only $270 a month for a “hot desk” – space at a long table with a lamp and Internet access. The setup has benefited his company, Macro Conscious Inc., which he started a year ago to help clients develop and market their websites.

WeWork, based in New York, has more than 30 locations that offer “flexible” rental office space ranging from a “hot desk” to private offices for up to 20 employees.

“We currently have about 300 small businesses and 579 members,” Portland WeWork community manager Lisa Siems said. “We can do custom builds and are very flexible and have a lot of (room) to work with members in different situations.”

With a team of more than 140 designers, engineers and construction managers, WeWork creates all designs in-house. But each facility is designed to be “localized and personal,” said Devin Vermeulen, WeWork’s creative director.

“There’s nothing we love more as designers than getting a building like Custom House that has a lot of rich history and architectural detail that we can build off of,” he said. “Given that our co-founder and chief creative officer Miguel McKelvey was born in Oregon and is a graduate of the University of the Oregon School of Architecture, this was an extra special project for us.”

WeWork spaces are designed to give people “an opportunity to work and interact,” Vermeulen said. That interaction often takes place in the open lounge areas on every floor with foosball and pingpong tables, as well as free cucumber and citrus water, tea, coffee, cider and beer. Other amenities include large and small conference rooms, high-speed Internet, bike storage and showers.

“We made sure there was plenty of open and communal space to create opportunities for collaboration, engagement – and fun,” Vermeulen said.

Another “fun” feature was created when the design team decided to transform several old money vaults, created by the Hermann Safe Co., into tiny spaces that can hold up to four people. Other renovators might have covered the old safes up or used them for storage, Vermeulen said.

“We took a different approach and turned them into small meeting rooms, unique and interesting architectural features that are obvious the second you step into the room,” he said.

Julie Clarke-Bush, owner of startup HighViz Marketing, said business has improved since she moved operations from her dining room to the U.S. Custom House.

“I’ve stopped wearing yoga pants,” she said, which makes her feel more businesslike.

And because the one-person office is glassed in, Clarke-Bush often steps into one of the safes for more privacy.

Clarke-Bush often attends networking events in the open lounge areas, she said.

“There are a lot of freelancer types that kind of have the same story as me,” she said. “Everyone can work online and can work anywhere they want.”

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