A shuttered WeWork location on Capitol Hill is set to come back to life this summer.
Portland-based coworking company Centrl Office plans to open in the Kelly-Springfield Building, where bankrupt WeWork shut down its office-sharing operations last month, according to Centrl and the building’s owners.
Centrl offers a service similar to WeWork’s — coworking space and short-term private offices — with locations in Portland, Los Angeles and Sacramento, Calif.
“Our natural progression was to go to Seattle next, and so we’ve been trying to enter that market for years,” Centrl co-founder Alex Hughes said in an interview.
The company plans to open in July after striking a deal this month with the Kelly-Springfield owners to operate in the building. Hughes declined to share financial details.
Centrl will operate 53,000 square feet of space on three floors of the building after refurnishing the space and adding more meeting rooms. The company offers monthly coworking memberships, offices for rent by the day or month, and reservable meeting rooms.
The company rents to a mix of individual workers, small businesses and companies looking to downsize their office space and secure shorter lease terms. Flexible office space can cost more per square foot than traditional offices, but at the same time allows employers to cut costs by renting larger spaces like conference rooms only when they need them, Hughes said. Centrl’s two L.A. locations are nearly 90% occupied, he said.
The number of individual coworking memberships has bumped up a bit since before the pandemic, “but it hasn’t changed dramatically,” Hughes said. “What has changed dramatically is the meetings.” Desire from workers and companies for meeting space “has grown dramatically over the last couple of years,” he said.
The coworking business bets on companies small and large looking for shorter lease terms and flexible space they can easily scale up or down, in contrast to long-term traditional office leases.
The average office lease in Seattle lasts for five years and a “huge number” of those leases signed in 2019 are coming due this year, James Yalowitz, a vice president at Kidder Mathews who represented Centrl in the deal, said in an email. Most office tenants today are looking for shorter lease terms and flexible space, he said. “Capitol Hill is an underserved office submarket and Centrl Office will quickly become a top choice for tenants looking to find a new, more exciting home.”
But companies like Centrl also compete with a flood of traditional office space that has hit the market since the pandemic ushered in widespread remote work. Roughly a quarter of office space in Seattle is either vacant or available for sublease in what the commercial real estate tracking firm CoStar calls Seattle’s “most pronounced office downturn in more than 40 years.”
“That [coworking] model is tough right now because office space is cheaper” than it was before the pandemic, said Dan Dahl, a Seattle office broker with the commercial real estate firm Colliers who wasn’t involved in the Centrl deal.
Office tenants are looking for space that’s “plug and play and ready” and doesn’t require a lengthy time for physical improvements inside, which could make coworking attractive, Dahl said.
But at the same time, plenty of furnished offices are available for sublease from companies looking to offload space they’re no longer using. And landlords with empty space are “having to get really flexible,” offering shorter lease terms or freshening up and furnishing empty space even before they have a tenant, Dahl said.
Those types of offerings are “basically the same concept as a coworking space,” Dahl said, “so coworking has a lot of competition.”
WeWork opened its Capitol Hill location in the Kelly-Springfield building in early 2020, just before COVID hit, then shuttered the space this year as part of its bankruptcy. The historic building was once home to REI and later to Value Village. Today, its first floor houses a Macklemore-backed indoor golf bar.
