Marketing Strategies

Colorado co-working company Office Evolution makes big move into Atlanta – Denver Business Journal

With its first Atlanta location on track to open April 1, Colorado-based co-working franchise Office Evolution has ambitious plans for the Georgia city, which is the fifth largest shared office space market in the United Sates.

Office Evolution, founded in 2003 and based in Louisville, targets primarily suburban markets of major metro areas. The company is looking to open 10 metro Atlanta locations in the next five years.

It’s the latest co-working company to arrive in Atlanta, which has seen a surge of activity by companies ranging from market leaders WeWork and Regus to locally owned operations like Alkaloid Networks.

For its first Atlanta area location, Office Evolution chose a site in suburban Alpharetta, in an office park within walking distance of the mixed-use Avalon development, with its many shopping and dining options.

It leased 9,801 square feet for 7.5 years or 91 months. Neither the landlord, Dallas-based Velocis, or Office Evolution would provide the rate. Velocis underwrote its Nov. 30, 2017 purchase of the building at $26-$28 a foot but said at least one expanding tenant was paying in excess of $30.

The Alpharetta location is a prime example of what the company looks for in site location: Ground-floor space in a building near major roads and amenities such as dining, with free on-grade parking, and located in an area with lots of accountants, lawyers, business coaches and other professionals.

The company’s differentiation is targeting the suburbs, founder and CEO Mark Hemmeter said.

“We focus on convenience, ease of access, walking in on the first floor,” he said.

Co-working industry leaders like WeWork and Regus are more like traditional offices; “this is more like a gym,” including high turnover — lots of people coming in and out daily, he said.

Office Evolution, which works with Cushman & Wakefield Inc. to locate real estate, has 35 locations open around the country — including 13 in Colorado either open or under construction — and plans to open another 30 through 2018, expecting to end the year with around 65 locations, Hemmeter said.

In Atlanta, it’s looking for its second, third and fourth locations, primarily in the north and northeastern parts of the metro area, he said. Over time, it could open urban locations such as Buckhead and downtown.

The franchisee is the owner of the business, while Office Evolution supports the franchise with design, construction and site location real estate services; website; sales training; a national call center based in Denver; and office technology support.

For that support, the franchisee pays the franchisor a royalty fee of 7.5 percent of revenue, Hemmeter said. Because it’s a suburban operation, Office Evolution “has to be more efficient,” with centralized technology, billing and call center.

“We have figured out a way to do this with one employee on-site,” he said.

Hemmeter declined to disclose the company’s annual revenue.

Office Evolution charges about $150 per month for open co-working space on a drop-in basis; $299 a month for the professional plan, which gives 24/7 access to the local office as well as all other Office Evolution locations across the country plus a virtual receptionist; and $1,100 a month (billed annually) for private office space, which comes with all of the professional plan amenities, said Andy Bean, Office Evolution area director for Atlanta, and part of a franchisee group that also includes Scott Thompson and Joe Casey. A tiered payment structure ranges from month-to-month up to an annual contract, with better terms for longer commitments.

The Alpharetta location will have 33 offices for permanent members, with the smallest office at 200 square feet, and drop-in space for up to 25.

Bean, who is originally from Wisconsin, came to Atlanta three years ago to work in the insurance industry. But he wanted to be his own boss. When Thompson, whom he had met on the golf course, called him with the Office Evolution franchise opportunity, he took it.

“Co-working is a cool space to be in and this is a big market for it,” he said.

Atlanta is the fifth largest co-working market in the United States behind Manhattan, Los Angeles, Chicago, and San Francisco, according to a Nov. 28, 2017, Cushman & Wakefield blog.

In Atlanta, there was 230,000 square feet of new coworking space in 2017, which represented 18 percent of overall absorption, Cushman & Wakefield Senior Director of Occupier Research Americas David Smith said in an email to Atlanta Business Chronicle. Atlanta is expected to surpass 1 million square feet of co-working space in 2018.

The North Georgia/Alpharetta market has over 175,000 square feet of coworking space, Smith said, with another 35,000-plus square feet to be added in 2018 with the openings of Office Evolution and Serendipity Labs. In 2017, Spaces added 33,000 square feet in the submarket, which represented 23 percent of overall absorption.

Atlanta is the Southeastern leader in co-working space, with more than twice as much space as any other market in the Southeast. The only other cities with at least 200,000 square feet of co-working space are Miami, Charlotte, N.C., Nashville, Tenn., and Fort Lauderdale, Fla., according to Cushman & Wakefield.

“We have awarded 125 locations, we will award another 60 this year. Across the country, 400 to 700 locations is the plan,” Hemmeter said. At a rate of one a week or 50 a year, it might take four to six years to achieve that goal.

The company started with all company-owned stores in 2008 in Denver. National franchising had been put on hold following the recession but got going again in 2012-2013, Hemmeter said. The Atlanta franchisee signed on in early 2017.

Office Evolution typically has three to four franchisees per market. In its franchise disclosure document (FDD), it notifies franchisees they should expect to invest from $217,000 to $749,000 per location, Hemmeter said.

What’s next for Office Evolutions Atlanta?

“We are kind of looking around for our next location. We want to open 10 locations in Atlanta. If we find something we like we are ready to get No. 2 open right away,” he said. “You never know when you can stumble on a good deal.”

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