100state’s Growth Highlights Increasing Popularity of Coworking

Launching a technology business out of a garage may put it in some esteemed company, but in certain areas at certain times of year—like Wisconsin in November—the founders would probably want to move their workspace inside.

For a startup that’s budget-conscious but would rather not work from a private residence, one option is leasing shared office space. Coworking, which has in recent years been on the rise nationally, also appears to be becoming more popular in the Badger State.

Tom Still, president of the Wisconsin Technology Council, says there are about 60 coworking spaces statewide. Many of them are listed at the end of an article on coworking in Wisconsin Xconomy published in 2014. The list is not exhaustive, however, and does not include co-working spaces that have sprung up more recently, such as Ward 4 (Milwaukee) and Irontek (Beloit, WI).

100state is located in Madison, WI, and claims to be the state’s largest coworking community. Gregory St. Fort, executive director of 100state, says that his organization has nearly 300 members.

“The number one reason someone joins a coworking space is because of community,” St. Fort says, adding that 80 percent of the people who join 100state are referred by an existing member.

In January, 100state will move out of its current offices near the State Capitol to a larger space nearby at 316 W. Washington Ave. The new floor plan is twice the size of the previous one, St. Fort says, and members will have access to more private offices and conference rooms following the move.

The building 100state will call home starting next year also houses several of the city’s most successful startups, including EatStreet and Abodo.

Josh Rikkers is a principal at Cresa Madison, a corporate real estate firm that hosts a coworking space in downtown Madison and has also helped local startups find office space—including EatStreet and Abodo. Rikkers says that next to paying employees, real estate can be one of the biggest costs businesses face. Early-stage companies that are just getting started can save on things like Internet access and printing by working out of shared spaces, he says.

“Most landlords require a three- to five-year lease term,” Rikkers says. “From the flexibility perspective, it can absolutely make sense to utilize coworking space.”

In addition to the potential cost savings, he says that many people like being able to go into an office each day—even if they’re not required to—rather than being holed up by themselves.

There are more than 27 million square feet of shared office space across the country, according to a report compiled by JLL, a Chicago-based brokerage firm. While that only accounts for 0.7 percent of the total U.S. office market, JLL predicts that the shared office sector will continue to grow over the next few years.

Two companies provide more than 80 percent of leased coworking space in the U.S., according to the JLL report: Luxembourg-based Regus and WeWork, based in New York.

Since 2014, WeWork has leased the most new U.S. office space of any company, according to CoStar Group (NASDAQ: CSGP), a real estate-focused organization based in Washington.

WeWork’s rapid growth could slow, however. A document the company compiled in April cut its profit forecast by 78 percent from previous projections amid concerns about spending levels, as Bloomberg reported earlier this year.

Still, it seems likely that many of the estimated 22 million Americans who work in shared office spaces will continue to do so.

One possible reason that coworking has become more popular is that independent contractors, temporary employees and other so-called “contingent” workers make up an increasing share of the nation’s workforce. According to a report from the Government Accountability Office, contingent workers accounted for 40.4 percent of employed workers in 2010, up from 35.3 percent in 2006.

Another potential explanation is that working remotely is more common than ever in particular industries, such as software. As Matt Honan wrote for Gizmodo in 2012, “Web startups are made out of two things: people and code.” While that’s a bit of an oversimplification, it captures the reality that many companies today are less anchored … Next Page »

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Jeff Buchanan is the editor of Xconomy Wisconsin. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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