Business

With WeWork encroaching, American Underground expands beyond real estate

The American Underground, co-working hub in downtown Durham, recently folded the Big Top networking platform into its own business. It’s part of an effort to diversify its offerings away from just real estate.
The American Underground, co-working hub in downtown Durham, recently folded the Big Top networking platform into its own business. It’s part of an effort to diversify its offerings away from just real estate. N&O File Photo

With co-working giant WeWork on an expansion spree in downtown Durham, the Bull City’s original co-working space the American Underground is tweaking its business model “beyond the confines of real estate.”

The Capitol Broadcasting-owned co-working hub is finally integrating, Big Top, the networking platform for Triangle tech jobs, that it bought in 2017. The two companies had been operating separately but now American Underground plans to use Big Top to create a new subscription service for connecting companies and workers across the state.

American Underground said in a release that “this is a necessary next step you’ll see other hubs around the country trying, and one that clearly differentiates us from other regional co-working spaces that exist completely within the bounds of a traditional real estate play.”

Now, every company renting space at American Underground (around 234 companies) will automatically become a part of the Big Top network — which is a platform for Triangle startups to post jobs. But the broader goal is also to take American Underground beyond real estate by providing a service that is available to more companies and individuals than just those that are currently renting a desk or an office at one of its buildings, said Molly Demarest, general manager of American Underground.

“If you think about the history of American Underground, it started because of a need for real estate,” Demarest said, noting there was a lack of work space for startups at the beginning of the decade. “The idea was if you could build density, companies would grow faster.”

But now finding talent to work at all of the startups that have started in the Triangle is the No. 1 issue, she said. Demarest said that on average 10 people per day are filling out a profile on Big Top looking for a job — many of them transplants from other parts of the country or state.

The move also gives the company a chance to diversify its offerings to consumers beyond rentable space. Demarest said that going forward American Underground will have three different tiers for users: a free tier, a premium digital membership tier and then an all-encompassing tier that includes real estate.

The free connection would be for individuals just looking to stay connected and have a profile on Big Top, while the premium membership would give individuals and companies access to all of the American Underground’s programming and services without the need to rent space there. Pricing for that hasn’t been decided yet, Demarest said.

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The Major the Bull statue at CCB Plaza is flanked by Unscripted Hotel and One City Center, home to co-working space WeWork. Dawn Baumgartner Vaughan dvaughan@heraldsun.com

The transition for American Underground comes as WeWork, one of the largest providers of flexible office space in the country, announced that it would be leasing three floors and more than 80,000 square feet of space at one of the Durham Innovation District buildings being built by Boston-based developer Longfellow Real Estate Partners. That means the company will now be operating in downtown Durham’s two newest buildings, having already taken over space in the 27-story One City Center.

It’s an aggressive push by WeWork, which will now have nearly double the amount of space in Durham (146,000 square feet) than in its larger neighboring city Raleigh (85,000 square feet). Spaces, another co-working company, will be opening at some point in the under-construction Van Alen building in downtown Durham as well.

American Underground has around 125,000 square feet of space across three buildings in downtown Durham.

A spokeswoman for WeWork said that Durham fits all of the demographics it looks for in places it expands. “Whenever we open a new location, we look for areas with thriving, entrepreneurial communities where WeWork can contribute to a larger, innovative ecosystem,” Alyssa Botts, WeWork’s senior public affairs manager for the Southeast, said in an email.

Durham innovation district buildings
The two Durham Innovation District buildings, shown under construction on Morris Street in downtown, are scheduled to be completed this summer. Zachery Eanes The Herald-Sun

Co-working spaces have grown in popularity in recent years with small companies that don’t want to spend a lot or commit to long building leases, as well with for freelance workers who don’t have a permanent office.

Rentable space at WeWork’s One City Center location can get you anything from a dedicated desk for $375 per month, a two-person private office for $1,000 a month or even a 20-seat room for $4,000 per month, according to the company’s website. A reserved space at American Underground begins at $329 a month, according to its website.

The co-working industry has been one of the biggest drivers in office space in the Triangle in the past year. According to real estate services firm JLL, co-working companies, such as WeWork and Spaces, accounted for the majority of pre-leasing deals across the Triangle. Of the 550,000 square feet of pre-leasing deals signed last year, co-working companies made up 33.2 percent of the activity, JLL reported.

With so many new co-working companies entering the market, Ashley Rogers, senior research analyst for JLL, said that the programming these companies offer will become more important as they each try and differentiate themselves from each other.

“Around the world, there are over 7,500 co-working and flexible space operators, which speaks to the fragmented nature of the co-working industry, but also to the variety of models that exist,” Rogers said. “American Underground and HQ Raleigh are more geared towards startups and the incubator experience ... (while) for WeWork and Regus, corporate accounts are a key segment as well as smaller companies.”

And for its part, American Underground has continually expanded its programming in recent years. From hosting events like the Google Exchange for Black Founders and the Black Wall Street Homecoming to providing a coding school and an incubator for startup consumer-product companies.

“We consistently respond to the needs of teams,” Demarest said. “We have to stay ahead of these companies to meet their needs.”

Whether co-working companies are expanding too quickly in the Triangle remains to be seen. So far, it appears there’s still plenty of demand to go around for a plethora of flexible space providers in the Triangle, said Rogers.

“Locally, it’s still early in the flexible office cycle, but the demand for co-working space appears to be keeping up with supply so far,” she said.

Zachery Eanes is the Innovate Raleigh reporter for The News & Observer and The Herald-Sun. He covers technology, startups and main street businesses, biotechnology, and education issues related to those areas.
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