The American Underground, which two years ago expanded its network of startup spaces to Fayetteville Street in downtown Raleigh, is remaking that site to accommodate a single tenant.
The decision announced Wednesday to lease the space to The Iron Yard – which has a network of software code schools – means that the 25 startups that currently occupy the 5,300-square-foot Raleigh space will have to relocate by the end of October. Startups in the American Underground spaces in Raleigh and Durham have flexible, month-to-month leases, which is one of the attractions for emerging companies whose futures can be uncertain.
Iron Yard also leases space from the Underground at the American Tobacco Campus in Durham, where it simultaneously is expanding from 4,000 square feet to 6,000 square feet, said Adam Klein, chief strategist for the Underground.
“I’m of the belief that talent is going to be the most important thing the Triangle has going forward – for large and small companies alike,” Klein said. “It is hard to be telling the teams that we’re going to be transitioning them out of the space and helping them find other space, but at the same time we see this tremendous opportunity to have more technical talent developed in downtown Raleigh and downtown Durham. That’s what is going to keep the Triangle at the forefront.”
Klein said there’s space available for the Raleigh startups at the Underground locations in Durham and that he and his staff also will help the companies find space elsewhere in Raleigh if they prefer. The Underground has two sites in Durham and is expanding to a third.
“Our team is going to be reaching out to property owners around town, HQ Raleigh and others, to see what is available,” he said.
Like the Underground, HQ Raleigh also offers co-working spaces and small offices with flexible leases for startups. HQ Raleigh has two sites in downtown Raleigh and is expanding to a third.
In addition, Klein said, the Underground startups in Raleigh will receive a discount on their rent for October and free co-working space at the Underground in Durham for the months of November and December.
Shawn Williams, the president and chief operating officer of Raleigh tenant Spring Metrics, which has three full-time employees plus contractors, said the news of the switchover was unexpected. Still, he’s okay with it.
Williams said Spring Metrics, a marketing technology company that caters to hotels and resorts, wants to remain in downtown Raleigh. “What that means exactly,” he added, “we’re still working through that.”
Williams also views turning over the space to Iron Yard as “a great use of the facility” given how hard it is to find good software developers. “It’s going to help educate more people and put more talent in the workforce, which is eventually going to help us,” he said.
Dusan Babich, co-founder and CEO of Raleigh tenant Device Magic, said he has been looking for new space to accommodate his growing business, which has developed a mobile app that companies can use to replace paperwork.
“We’ve been bursting at the seams anyway,” he said. “I’m not really that affected or phased by it.”
The Underground is remaking the Raleigh space even though, according to Klein, it has been leased to capacity by startups.
“All the offices were leased,” he said. “We had a good number of co-workers.”
After the startups vacate the Raleigh space, the Underground will undertake two months of renovation before Iron Yard takes occupancy in January.
Even after Iron Yard occupies the downtown Raleigh site, Undeground tenants in Durham will continue to have access to the front portion of the space. There they can get coffee, take a meeting in a conference room or work in a co-working area, Klein said.
“We’re going to keep that as part of the American Underground footprint,” Klein said.
Klein said the American Underground isn’t ceding the Raleigh startup market to HQ Raleigh.
“I think another [startup] space in Raleigh in the future is still an option, and one we are considering,” he said.