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Coworking space is growing in demand. Is it where offices are heading?

Katie Tabeling
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Robert Herrera, founder ofThe Mill, is ahead of the curve when it comes to imagining space for Delaware's future offices. The Mill, a coworking space in northern Delaware, has more than 300 members. DBT PHOTO BY JIM COARSE/ MOONLOOP PHOTOGRAPHY

Robert Herrera, founder of The Mill, is ahead of the curve when it comes to imagining space for Delaware’s future
offices. The Mill, a coworking space in northern Delaware, has more than 300 members. DBT PHOTO BY JIM COARSE/MOONLOOP PHOTOGRAPHY

Right outside the door of The Mill, a coworking space on the fourth floor of the Nemours building in downtown Wilmington, there is a small selection of patent models on loan from the Hagley Museum. Machines like ones that improve making toy torpedoes, produced in 1875, have parchment tied with a red string — hinting at the bureaucratic “red tape” inventors dealt with when working on getting their design to market.

“One of the things I really like thinking about is that, no matter who you were at that time, you could get your ideas protected in this country,” said Rob Herrera, looking across at the collection of machines.

If necessity is the mother of invention, then Herrera’s The Mill may be filling a big need in Delaware in the years ahead. Founded in 2016 in the shadow of the since-failed DuPont-Dow merger, The Mill was one of the first co-working spaces in the state out of the Nemours building. 

In the six years since, millions of dollars have been spent upgrading the facility, as well as a second location in the Baynard building on Silverside Road in Wilmington’s suburbs. Looking ahead, Herrera has eyes set on renovating the Nemours building, as well as adding an outdoor terrace. 

“I believe there’s a groundswell here for this kind of space,” Herrera told the Delaware Business Times. “You’re starting to see that collaboration is the new space; you don’t have to offer one space for one thing to do. The coworking model was successful in FinTech, and it’s evolving ever since.”

The Mill has more than 300 community members in all, each in different positions in their life cycles. And the appetite continues to grow, as companies continue to navigate the business world after COVID-19 rocked how — and where — companies work.

“We’re seeing a mix of clients looking for 10 or 12-year leases, but also some who are the ‘wait and see’ type and sign two-year leases,” said Wills Elliman, senior managing director of the Wilmington office of Newmark, a major commercial real estate brokerage. “But others are looking to spend money on spaces with nice event areas and conference rooms.

A Newmark October 2022 report assesses that companies are opting for a “virtual first” approach, but the demand for offices is not completely disappearing.  Instead, companies are considering flexibility in terms of where their employees can work. That means opening regional offices to cater to select markets, or allowing staff to choose which office, if it’s a company with a large real estate footprint.

“It will not go back to how it was [before the pandemic].” Elliman added. “I think the time of a space where people are coming in five days a week is done. Now, you need to have spaces to entice people, and make them come in.”

Hand in hand

Incubators, which provide services like mentorship, technical and sometimes financial assistance, help guide business ideas in the early days. Co-working spaces typically offer a work space (be it a desk or sometimes a private office) for a reasonable price. While one is often confused for the other, there is one area they sometimes walk hand in hand: building a community.

Take the Emerging Enterprise Center (EEC) at the offices of the New Castle County Chamber of Commerce. It’s 5,000 square feet with two conference rooms, with 10 offices and a planned storefront renovation for retail startup ventures. The EEC offers six-month contracts, but NCCC Economic Development Director Alysee Bortolotto highlights the partnerships with SCORE, the Small Business Development Center, the Small Business Administration, the Navigator Program and more. Before COVID, the space was hosting many networking and educational events for rising businesses.

The EEC at the Shipyard Building was closed most of 2020, but reopened for work in mid-2022 on a more regular basis.

“We bring in all kinds of content experts and resource partners so they can learn about the resources available to them,” Bortolotto said. “It’s important to have that peer-to-peer learning, especially for a vulnerable community, to help with anywhere from bookkeeping to marketing. I always say starting a business is like walking through a dark room and constantly stubbing your toe. We’re just trying to shed light on the process.”

For coworking spaces like the CSC Station at the Riverfront, these spaces also serve as ground zero for rising companies. With another 300 members, CSC Vice President Scott Malfitano estimates that about 60% are startup companies attracted to low prices, flexible rooms and a quick walk to downtown Wilmington. Well-established names like Leadership Delaware hold meetings in the same space where Verry Capital is working, growing day by day. The CSC Station’s biggest success story, CompassRed, has moved out after it was acquired in mid-2022.

“We see a lot of companies start up with each other, and it’s becoming clear you have to build the community,” Malfitano said. “The outlook on these kinds of spaces is very strong. Companies are starting to reinvent themselves to do different things or people are willing to try something new, and they’re looking for a different attitude from an environment to do that in.” 

 

Sussex County opened its first dedicated coworking space in summer 2020, with a 6,800-square-foot space that overlooks the beach. Summer use has been high, but overcoming the winter downturn may be the biggest challenge.<br />PHOTO COURTESY OF COWORK REHO

Sussex County opened its first dedicated coworking space in summer 2020, with a 6,800-square-foot space that overlooks the beach. Summer use has been high, but overcoming the winter downturn may be the biggest challenge.
PHOTO COURTESY OF COWORK REHO

Office of the future

Firms like Newmark are seeing more demand for technology to hold comprehensive virtual meetings in conference centers, as employees are more interested in a hybrid format than they were before 2020. Flexibility in terms of prices, from day passes to six-month leases are in high demand at both the EEC and the CSC Station. But coworking spaces also have an incentive to start thinking of amenities more creatively.

At The Mill, tea, coffee and beer are offered complimentary to members. Walking through the front door, visitors and workers first see a long table made from American chestnut, found in Kennett Square, Pa. A nook by the window has comfortable sofas and a jukebox is surrounded by vibrant paintings of superheroes and scenic shots, though Herrera says the goal is to change out the artwork.

“I love that part of the office, where something’s different every day. If you have your own office and it’s the same every day, it can get exhausting,” he said.

The Mill’s success stories range from names that splashed across headlines, like Ally Financial, to other established names in the state like Trellis Marketing and Zip Code Wilmington, and more. In Herrera’s view, where Delaware shines is the state’s cost-of-living compared to other metropolitan areas, especially when it comes to financial services technology, or fintech, companies.

“It’s all about the burn rate, what you can spend money on and for. If you can save money and base your operations here or Hockessin, it can be hard to touch that compared to Los Angeles. It’s why we’re seeing companies like Zip Code succeed,” he said. “We have so much back office talent here, and that can’t be replicated overnight.”

The coworking model may be an economy of scale, best served in cities compared to rural and suburban areas, Elliman said. Compared to one office where an employee is expected to drive a half hour to 45 minutes per day, it’s more likely to work in places where that commute is 10 minutes.

Down in Rehoboth Beach, CoWork Reho opened this past summer on the first floor of the Henlopen Hotel & Condos and is gearing up to test that theory. The coworking space has been getting inquiries from accountants and mortgage companies looking for a satellite office. CoWork Reho Chief Operating Officer Hayley Jackson said they have full occupancy with studios, capped out at 15 members. However, the seasonal nature of the beach, no matter how spectacular the view, is hard to overcome when you’re in winter, she said.

“I think that’s our biggest hurdle right now. We’re pricing with the real estate market right now, and changing the pricing to go with off-season has helped fill the spaces, because we were getting requests for discounts,” Jackson said. “We have picked up full-time members with a six or 12-month commitment, as opposed to a two to three months or a day pass. I think when people see that we’re right on the beach and staring at the ocean from your office is going to be the draw. It’s just getting the word out.”

Meanwhile, Herrera and The Mill are getting ready to make the biggest test of coworking spaces in rural areas of Delaware. The Mill will anchor redevelopment of the Nylon Capital Shopping Mall in Seaford, with $5.1 million in state and city funding to help it. It will be the venture’s first Sussex County location, and in the western, more rural area of the county.

Herrera, a developer and architect veteran of coworking pioneer WeWork, is up to the challenge to make it work; though it will have help with retail, health care and education offices.

“I built a suburban coworking space, and we gave it a pergola which gave it a social club vibe. The community embraced it. Even if you don’t have an office space, you come and be in that space,” he said. “I can see The Mill [in Seaford] not just being a place to rent an office, but even if your office is somewhere else, you want to be a part of that community. That’s the only way to build a coworking space in suburban areas – you have to double down on the community culture that exists and make people want to be a part of it.”

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