Orange County’s rapidly expanding coworking scene has seen a big shake-up, with the longest-running area provider of flexible workspace, TechSpace Inc., acquired by a New York competitor with big national growth plans.
Aliso Viejo-based TechSpace this month said it was being acquired by Industrious, which national reports cite as the country’s third-largest coworking company with 65 national locations, including one in OC at Irvine’s Park Place campus.
TechSpace has seven locations in the U.S. totaling about 300,000 square feet. In OC, it has two spots, its headquarters at 65 Enterprise in the Summit office campus, and Costa Mesa’s recently renovated 3420 Bristol office.
It ranked No. 5 on last year’s Business Journal list of Orange County’s largest coworking space providers, with about 80,000 square feet locally. Industrious was No. 8 with 24,000 square feet at Park Place.
In terms of longevity, TechSpace was likely No. 1 in the country.
The shared-space provider, whose roots date back to 1997, can take claim as being one of the first national firms to offer cutting-edge, amenity-heavy flexible work space to smaller companies.
It’s also one of the few to survive not one but two real estate downturns, a claim not many competitors can make.
“You have to be a good operator; it’s a management-intensive business,” TechSpace Chief Executive Vic Memenas told the Business Journal last year.
Details of the acquisition have not been released. Industrious early last year said it had raised $80 million to help it double in size and grow its roster of corporate clients.
TechSpace is profitable, according to Memenas, who last week said that the company is “very happy with the results” of its deal with Industrious.
Memenas and Chief Financial Officer Joanne Owyang, who have been with the company for 18 and 19 years, respectively, will be leaving following its sale.
Memenas said he will be staying on for a couple of months to help with the transition and then will take some time off.
“I have a couple of irons in the fire, so to speak,” Memenas said. “This fall, hopefully, I’ll be engaged in my next endeavor.”
Memenas said everything will remain the same for TechSpace tenants, but they will gain access to Industrious’ other locations across the country.
In addition to Aliso Viejo and Costa Mesa, TechSpace has locations including Los Angeles, Austin, Houston and Arlington, Va.
OCTANe Backer
Notable area TechSpace tenants include life sciences startup accelerator OCTANe—it occupies about 3,500 square feet at the Aliso Viejo location.
Memenas also serves on OCTANe’s board. His company has long been one of the OC’s go-to landlords for early-stage and startup firms, due to the flexible nature of the leases it offers.
“If you are an entrepreneur, you don’t have the expertise or time for legal matters [in a lease], or have the brokerage experience,” Memenas last year said.
TechSpace and its shared space and coworking peers rent out offices with long-term leases, then sublease it for a month, quarter or year at a time.
A typical customer at TechSpace stays at the location for 2.7 years, Memenas said last year.
OCTANe Chief Executive Bill Carpou said his company has no plans to move when its lease is up at the end of the year, and is looking forward to leveraging the additional Industrious locations to help build out the OCTANe brand nationally.
However, Carpou said if it doesn’t work out, there are other options. The Business Journal previously reported that OCTANe plans to move its Launchpad startup accelerator from TechSpace to the Five Point Gateway office campus in Irvine this year.
“If we had to leave here, we’d probably end up moving the whole organization over there [to Irvine],” he said. “There is a big part of me that would like to have the whole organization either stay here and have a small portion at Five Point, or move everything to Five Point.”
Dot-Com Start
TechSpace got its start as Enfrastructure, and was backed in large part by Scott Blum, co-founder and owner of internet retailer Buy.com Inc.
Enfrastructure, armed with venture capital and ambitious growth plans, initially focused marketing its flexible work space and ready-to-use technology to internet and other dot-com-type startups.
The dot-com bust forced the firm to retrench, and the one-time incubator for technology companies began to evolve into a more traditional landlord role.
In 2002, it bought a similar firm based in New York called TechSpace, and rebranded the firm under the latter’s name. It was run by James “Watty” Watson, one of the area’s better-known real estate execs, for a time; Memenas took over the company in 2011, when Watson focused more of his time on Newport Beach’s CT Realty.
The company’s operations remained solid amid the Great Recession, as a number of execs from other organizations were let go and started their own ventures at TechSpace’s offices.
In 2012, the company began expanding, adding a new location roughly every year. Memenas said that now is the right time to sell, as the coworking market was maturing. Still, he said that doesn’t mean there isn’t room for new coworking startups in the market.
“As this type of product becomes more popular from an end user perspective, the landlord community is embracing it and seeing how these spaces fit into their portfolios,” he said.
Growing List
In addition to TechSpace, Industrious, and other established spaces such as Irvine-based Eureka Hub, new OC coworking locations are opening regularly.
• Newport Beach-based HanaHaus, the second coworking space backed by software company SAP, opened its doors around the start of the month.
• BlankSpaces and women-entrepreneur focused Hera Hub are opening Irvine locations in mid-May.
• Los Angeles-based BizHaus is set to open its first OC location in Costa Mesa in June, commercial real estate giant CBRE’s second Hana location is opening later this year in Irvine, and Greenwich, Conn.-based Work Well Win is opening this month at Tustin Legacy’s Flight.
• WeWork has opened a 60,000-square-foot location at Irvine’s Boardwalk development, one of several spots it has opened or is planning to open in OC.
Last week, the Wall Street Journal reported that WeWork, which has filed confidential plans for an IPO, operates with margins that can exceed 30% when its coworking spaces are well leased.
There may be more consolidation coming, Memenas said.
“Like any industry that’s growing, there will be winners and losers, that remains to be seen. [Consolidation is] something that’s on the minds of other people,” he said.
“This deal will open that up for other people to see if that’s right for their business.”
