Meet the newest exploding subsector of the real estate market: the coworking office

Gerald Smith is CEO of Plexpod, a Lenexa-based coworking office founded in 2014. At first glance, the 25,000-square-foot office looks like any modern office you might find in downtown Kansas City: glass-walled conference rooms, small team meeting rooms, a fitness area, a gaming room, an event space.

But take a closer look and you’ll see that those small to mid-size offices peppered throughout the building are homes to entire companies – 53 companies and 150 regular drop-in users, in fact. A vital component to this ecosystem of entrepreneurs and small businesses are other businesses – like a coffee shop and a salon – that serve as additional resources to the resident businesses.

It’s a new take on the coworking trend that’s exploding across the globe. But it’s clear that Smith is doing something different here. Within four months of opening this space in 2014, he reached capacity. And now, he’s got a plan to create the largest coworking office in the world – right here in Kansas City.

The evolution of coworking

The concept originally was born in 2005 by a San Francisco entrepreneur who worked solo but was hungry for community, and thus invited his friends to work alongside him in a local health and wellness shop. Since then, numerous versions of the coworking model have popped up, and now the largest player in the game, New York City-based WeWork, has reached a $16 billion valuation – and it’s only a six-year-old company.

Smith sees coworking communities as an organic, Millennial-driven response to the current state of the market. He says it started in 1993 when desktop publishing became a buzz word, and the remote worker was born. The remote worker didn’t have to work in the office alongside his peers, but instead, worked from home, allowing him or her to focus on other priorities or special needs.

But it’s lonely being an entrepreneur, and the kids can be distracting. So what happened next? The coffee shop blew up. And although we now have a plethora of great coffee shop environments, the remote worker can easily feel uncomfortable – like they shouldn’t be there more than a few hours, or that they should be buying $7 lattes.

“This is a response to that evolution,” Smith said. “Our office is all of that, combined. And it’s all being driven by a new workforce.”

Smith’s former life consisted of running an umbrella company consisting of a handful of marketing, publishing, creative tech firms and data centers – a global publishing company that struggled with scaling to the right size.

“We were trying to right-size that organization, which had had significant losses for years,” he said. “They were trying to create a turnaround, and during that time, we were dealing with a bunch of unused properties.”

Thus was born the idea of a coworking environment for nonprofits. But the deeper he dived into the idea, the more he realized that nonprofits and entrepreneurial ventures had a lot in common.

“I look at that and say no one has the market cornered on entrepreneurship and innovation. Those two key attributes apply to all companies,” he said. “Everyone is striving to attract entrepreneurs and be innovative. So that’s where the idea of this came about to let’s launch Plexpod.”

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Plexpod: Why it works

Smith had done his research and vetted all the other models that existed at the time, looking at the entrepreneurial profile and asking himself: “What does an entrepreneur need access to in order to be successful? What are the things that are convenient, that would spark ideation and creativity?”

Today, Plexpod is one of 11 coworking facilities in the Kansas City metro that are part of the Kansas City Coworking Alliance. It has the essential components like flex desks, dedicated work stations, small team spaces, and large team spaces. But also boasts additional resources in the form of other businesses. For example, now located within Plexpod is a second location for River Market-based Buffalo Mane – a lifestyle component Smith was encouraged to incorporate by Matt Baldwin of Baldwin Denim. It also boasts Brew Gallery, a concept that showcases coffee from the top area coffee shops. It’s a partnership that was driven by another unique Plexpod tenant, Midwest Coffee Traders, the largest bean importer in the Midwest.

“So we created the brand Brew Gallery as representative of a whole,” he said. “So the Brew Gallery concept is not a competing shop, but an extension of all of the coffee brands in Kansas City.”

The truly collaborative approach has created a unique setting within the building, where associates using the building for an off-site meeting will take an hour out of their day to experience a cupping or a tasting or a coffee workshop.

A few strides behind the coffee area is an impressive digital makers lab, where office users are currently filming a commercial for the beef industry. Last week, another group was shooting a web series with the Power Rangers. The entire setup is equipped to handle the full spectrum of video and audio editing.

“We provide basic lighting, audio/video editing – all the post-production needs are in-house and ready to go,” Smith said. “We have a lot of independents. There are a lot of people doing this in their basement. But your corporate commercial customers are not coming to your basement, so this is a space that those people will access.”

Another component sits around the corner – a 300-person event space with LED lighting, smoke machines, moving motorized lights. There, users host corporate events, weddings, proms – even a Sunday morning church service.

So how does he find the right companies to serve as resources to the entrepreneurial community?

“Everything here is intentional,” Smith explains. “We seek it out and are very locally focused.”

Once he has a vision in mind with the type of user he’d like to add to the space, he asks: Who in Kansas City is doing it well that’s local, entrepreneurial, and probably a startup?

“Then when you knock on their door, it’s pretty exciting because they’re looking for growth opportunity,” he said. “They could probably borrow money and go open a another shop somewhere, but Plexpod offers them a more solid opportunity, with a built-in audience.”

His next addition? A woman who teaches chair yoga to associates over the lunch hour.

“We don’t want to be in the yoga business, or the hair cutting business,” he says. “So we look for those resource partners – those with the best vision, commitment, and passion. And the city is rich with these people.”

The main food groups

 

Within the Plexpod space, it’s not just entrepreneurs and resource partners, but Smith has increasingly made an effort of on-boarding educators. The idea is based on the staggering statistic of all small businesses in America, only 16 percent of those businesses’ principles have a college degree.

“If you unpack that, what you see is that these are entrepreneurs, and entrepreneurs often see education as a distraction; It’s like hitting the pause button on life,” he said. “We’ve come up with this concept of taking your company to college.”

The industry, he says, is in a transformative time for the rising creator class.

“If a business owner can go down a hallway and hit the treadmill at 2 p.m., why can’t he work on his education and hit a class?” Smith said.

Another growing food group within the space are corporate innovation teams. A number of large, local corporations have innovation teams that are called to identify cutting edge trends. Those teams are pouring into places like Plexpod.

“For companies like that, places like these can be a talent funnel, a place to ideate with millennials and creative people. I see it as an entry from the top,” he said. “You get this organic thing happening with startup, growth stage entrepreneurs, and then you have corporate America pressing us from the top saying they want to be part of it too.”

While a corporate culture often feels propped up, in Plexpod, the community is organic and authentic because it’s a neutral zone, Smith says, and everyone is working for different companies.

“There is no single group in charge here. There are dominant companies and dominant personalities, but even the Plexpod staff isn’t in charge – we’re here to serve,” he said. “Over the next two decades, as large corporate America starts to look to add more profits to the bottom line, I think there will come a day where companies say, ‘Great to have you working for us. Here is your mobile device and login – now go find a place to work, a corporate culture to be a part of, because we don’t pay for that anymore.”

Smith has seen collaborations arise out of this community that he’s never seen happen elsewhere. Marketing firms within the building will snatch up neighboring freelancers as they need them, allowing them to scale up and down as needed. And sometimes, Smith says, it’s not formal relationships, but rather the principles of two firms sitting together and picking each others brains.

“Everytime I see that, my curiosity gets the best of me, because they’re probably teaming up to go after a new client, or they’re using each others services. That’s what happens here,” he says. “Collaboration is king.”

Westport Commons

A high profile development group consisting of some of the biggest names in Kansas City found its way to Plexpod this year. Kansas City Sustainable Development Partners – made up of David Brain, Bob Berkebile, Butch Rigby, Chip Walsh, and Lou Steele – were searching to find the right coworking component to add to the team’s plan to turn the former Westport Middle School into an innovation campus. But after a few conversations, Plexpod went from occupying a small portion of the building to taking over the entire plan.

“When you see our resourcing model, you’ll see that a company would not want to be in the building and not have access to everything. So how can you take coworking and put it in one corner? So we expanded it to become Plexpod Westport Commons.”

Phase 1 of the plan calls for the renovation of the 160,000-square-foot middle school, while phase 2 calls for the renovation of the former Westport High School – another 200,000-square-foot space. In addition to the array of office offerings and digital maker space that the Lenexa office holds, phase one of Plexpod Westport Commons will also include a one-acre green space managed by CultivateKC, a local group focused on urban agricultural efforts; a 300-car parking garage; a 10,000-square-foot auditorium, an early childhood education center; a culinary institute; fitness rooms; a grocery store; restaurants; and more.

“It was just a time of ideation and thought leadership within the group. We all were bringing things to the table that everyone had always thought possible, but suddenly our group thought ‘Wow, we can really do this,’” he said. “I do scratch my head sometimes when I realize that Bob Berkebile is leading the architecture, and that David has put AMC on the map with all of their locations and his experience with REIT models. You couldn’t ask for a better guy to look into the model and say ‘This will work.’”

Smith said the reason the team will be able to pull off the world’s largest coworking space is because of everything Kansas City has done to set the scene for a thriving entrepreneurial atmosphere.

“Kansas City has taken some bold steps in the past decade to turn itself in the right direction and that’s why we can do this. We’ve had other cities contact us with similar properties in need of renovation that they think would make a perfect Plexpod,” he said. “But if you go look at that city’s commitment to entrepreneurship, it’s just not there. It might just be premature, but I think Kansas City really is on to something and there are some key people that have been very influential in making that happen.”

Growth prospects

Smith’s phone buzzes all day with interest from brokers and developers across the country, from Columbus, Ohio to San Francisco and L.A.

“But my heart isn’t for LA or San Francisco; My heart is for the B-level city, the 18-hour city,” Smith said. “The creator class I’m talking about isn’t just in coastal cities; They’re graduating from high school in Joplin, Springfield, Des Moines, Omaha, Topeka. If Plexpod is going to grow, it’s going to create a model where it can service where the need is strongest.”

In his research, Smith says Kansas City has the need for 500,000 to 600,0000 square feet of coworking space. And while Westport Commons will take a big bite out of that number, Smith is looking strategically at expansion plans, being careful not to size up too slow or too quickly.

As for phase two of the project, which calls for the conversion of the former Westport High School, the development team is still in its due diligence phase but has high hopes. Until then, demolition is underway, and the team plans to officially open the doors to Westport Commons in the fourth quarter of 2016.

The team on the project includes:
Architect: BNIM
GC: Centric Projects
Mechanical Design: Langkford Fendler
Consultants: Rosin Preservation
Construction management consultants: Brain Development, EF Walsh & Associates
Lenders: Missouri Bank, Enterprise Bank, AltCap, Enterprise Bank CDE

For more information on Plexpod, click here. To stay abreast of updates to Westport Commons, click here.

Interested in hearing more from Gerald Smith, including his predictions on how the Millennial and Founders generations are driving the next generation workspace? Join us for a conversation on Millennials in the Workplace, an event we’re hosting June 3, 2016. For more information, click here.