If Commercial Real Estate owners need of an indicator of the relevance and potency of the shared or fractional office concept, they would need to look no further than investor’s confidence in the industry. In doing that, they would see that investors’ confidence in co-working spaces is high and only getting higher.
The most recent example came in the form of the upscale co-working office provider NeueHouse and its latest round of funding. The company recently raised $30 million from outside investors and hired new leadership, reports The Wall Street Journal. The fundraising and the personnel change are both moves the company hopes will provide a spark as shared office space’s popularity continues to rise.
A majority of the new funding came from media titan Barry Diller and his wife Diane von Furstenberg and Hong Kong-based real estate investor Gaw Capital Partners, according to the company. Diller also made an initial $8 million investment in NeueHouse in late 2017. Former private equity and hotel executive Josh Wyatt was named the company’s new chief executive officer.
NeueHouse currently operates co-working buildings in New York City and Los Angeles. It entered the co-working fray in 2013 and sought out the high end of the business. The company features events like advance film screening, guest speakers from the arts and entertainment industries and displays of local artists’ work along with providing flexible office space. Recent examples included a literary event with musician Laurie Anderson and former Vanity Fair editor Graydon Carter in NeueHouse’s New York location.
Currently, NeueHouse’s New York and Los Angeles locations have a combined 1,500 members and extensive waiting lists. The company also planned to open branches in Shanghai, Washington D.C. and other major cities, but those plans never materialized after the previous management team could not close other deals, according to The Wall Street Journal.
The newfound funding allowed NeueHouse to sign contracts for two additional Los Angeles locations, which are scheduled to open in 2019, according to Wyatt. The newly minted CEO stated he’d like to grow NeueHouse similarly to “the best boutique hotels with a focus on design and public spaces and a point of view.” Wyatt also believes major co-working players like WeWork and Knotel are like major hotel operators that grow their brand quickly while offering a standard product.
WeWork, whose current business model is to rent space from building owners and sublease it to businesses, has more than 300 locations worldwide and 300,000 members. The fact that WeWork occupies more office space in Manhattan than any other company is another good indicator to CRE owners that the shared office space demand and desire for flexible leases are only getting greater.
As for NeueHouse, Wyatt envisions growth in mid-size cities like Nashville, TN and Austin, TX instead of cities abroad. The new locations would also be smaller than the New York and Los Angeles offices—roughly 25,000 square feet compared to the 70,000 square feet the spaces on the coasts occupy. The company is also in talks to open sites in Toronto and San Francisco, according to Wyatt. He also told The Wall Street Journal NeueHouse would remain, “the highest price point in the industry.” The $900 per month price tag is significantly higher than WeWork and other large flexible office companies.