Now That Coworking Is Legit, Is There A Second Wave Coming?

Coworking has proven to be more than just a fad, as WeWork turns into a global empire and regional operators expand their fields of influence, but it has lost the scrappy underdog feel that made it appeal to its first members.

“When we started, [our membership] was a lot more startups, and as time went on, we’ve seen nonprofits and companies that just don’t see the need to take their own space,” The Yard founder Morris Levy said. “It definitely expanded; we have financial companies with us, attorneys, accountants — it’s really the full gamut today.”

The idea that some operators have gone corporate is part of what led Christopher Plant to found Kismet, a "21st century community center for people who want to get things done," as Plant put it.

Kismet opened its second location April 1 at 448 North 10th St., a six-story office building owned by Arts & Crafts Holdings in Philadelphia's Spring Arts district. Its first location is in Chestnut Hill, and Plant is working toward a third location in Manayunk. His decision to focus on "tertiary markets" comes from a desire to serve members who may not feel suited to the Center City atmosphere.

"Here, it's easier to maintain the sort of intimacy you don't get from, say, The Yard or MakeOffices," Plant said.

Through his day job as director of commercial real estate for Elfant Wissahickon Realtors, Plant discovered the Spring Arts neighborhood and Arts & Crafts. He helped broker the lease for Love City Brewing, which recently opened just around the corner on Hamilton Street, and in doing so identified an opportunity for Kismet's first expansion.

Plant signed a seven-year lease with an option for a five-year extension for 6K SF on the top floor of 440 North 10th, and has already encountered substantial interest from area workers without offering memberships at discounted rates to the industry standards. He estimates that Kismet will hit its capacity of 110 members within six months.

Besides the location, Kismet distinguishes itself from Philly's other major coworking operators through its programming. Rather than act as an incubator and business card-trading networking center, it has focused more on personal development classes for "soft skills" such as public speaking, as well as connecting members to local accountants and lending sources familiar with small businesses.

Kismet has also shown films to inspire its members to be iconoclasts — 1970s classic "Network" was among the most recent screenings.

Plant does not view the change in major coworking operators' strategy as any sort of betrayal. Rather, he believes that due to their growth, such companies may no longer match the individualist streak some have come to associate with coworking.

"[WeWork and the like] are helping people understand what coworking is, and when those people want to redefine it, they'll come to us," Plant said.

Benjamin's Desk was once the local counterpart to out-of-towners, but since its merger with Washington, D.C.-based 1776, the company — which now goes by 1776 at all locations — has shifted its focus away from pure coworking to startup incubation, "which is something that 1776 had always focused on," co-CEO Jennifer Maher said.

Now, potential members apply to locations and 1776 selects who best matches the criteria of its incubator, like which industry they work in or how viable their business model appears. 1776 also has continued to bring in Fortune 500 companies that wish to open small satellite offices in Philly and/or find new talent and ideas to recruit.

“We had already started that shift with Benjamin’s Desk before the application process started, where people self-selected to join up with us for providing what coworking spaces couldn’t provide,” Maher said.

Maher believes that as the industry matures, more mergers between regional players will take place. It is often the natural way of any industry as it transitions from regional to national and global.

“The mom-and-pop operators are falling by the wayside, unless they’re really niche, in favor of the larger institutional operators,” Maher said.

Though Plant believes there is "strength in numbers" for a coworking operator and its member network, he also is confident that Kismet's position in contrast to larger companies is a benefit, as consolidation can breed uniformity.

"Some of those spaces feel adjunct to a hotel," Plant said.

To create more of an individualistic atmosphere, Plant started his own contracting company, Fritz & Co., to build custom furniture and layouts for Kismet offices. In keeping with the spirit of collaboration that Arts & Crafts seeks to cultivate in Spring Arts, Plant also brought in local art curation firm Revolvd to decorate Kismet's space.

"Walking into this building, being among these members, in this neighborhood, is opposed to Center City, where walking into a big office building is very different," said MSC Retail Managing Director Jacob Cooper, who is also an investor in Kismet.

For the larger operators, that Center City feel is in keeping with the membership it now seeks to attract, whether that be the satellite locations 1776 is facilitating or the enterprise locations that WeWork manages for huge companies like IBM and Amazon. As a result, the demographics in such spaces have undergone a "big shift" in recent years, Maher said.

“Because the stigma has lifted, we’re seeing what I call the boomerang, which are industry experts retiring from their fields who move back into urban markets and still want to be involved, and they have tremendous insight and knowledge to offer other members,” Maher said. "We're seeing the age demographic tick up, and there's a good mix."

By contrast, Kismet seeks to attract the creative class, rather than those seeking to make a big mark in the business or tech communities. Though he doesn't want to "pigeonhole who we support," Plant argues that even with a membership rate in line with WeWork, Kismet connects with those who might feel left behind by an office teeming with industry and those seeking such connections.

"We don't want to be a day pass," Plant said. "People using this space should feel like they have value to us."