Back in 2014, or even a little earlier, real estate broker Alex Hughes and developer Jeff Arthur were seeing an uptick in demand from small businesses looking to expand in Portland and out-of-towners who wanted to test the Rose City waters without making a huge real estate commitment. In short, there was a need for more flexible office space in Portland: space for freelancers to punch in, space for startups to get off the ground and space where like-minded folks might just end up crossing paths and working together on something new.
From that, CENTRL Office was born. Hughes and Arthur, backed in part by some local real estate investors, opened 21,000-square-feet of co-working space in the former General Electric Building at 1355 N.W. Everett St. The original plan, according to Hughes, was that the Pearl District outpost was going to be the only one.
But plans don’t always unfold as intended. For CENTRL, demand for its space persisted and opportunities for new locations grew. Two years after opening in the Pearl and signing up about 250 members, CENTRL jumped the river and opened a 22,000-square-foot office at the Burnside Bridgehead that serves another 250 members. Last summer, it announced a third Portland location, expected to open this month in the new West End office building at the corner of Southwest 12th Avenue and Southwest Morrison Street. CENTRL will also open a new location in Hood River this summer, and just last week it revealed plans for a Los Angeles office set to open this fall.
“It was just going to be the one location,” Hughes said. “Then we had the opportunity to expand at the Bridgehead, which was an amazing opportunity. Then this one (in the West End), and all of a sudden it’s like, wow, we actually have a real company now.”
CENTRL’s not done yet, either. According to Arthur, the company is close to landing deals for a location in San Francisco and one or even two in Dallas. And should the right opportunity arise, Portland itself may get another CENTRL location as well.
“We are opportunity-driven,” he said, “and very focused on partnering with the right groups in the right locations who share similar values and embrace what CENTRL can do for their buildings and neighborhoods.”
Co-working was nothing new to Portland when CENTRL launched in 2014. Small startups like TenPod had been in the game for years, and even one of the biggest players in the country, Regus, had long had a significant presence in Portland, even if it hadn’t always played up the co-working aspects of its offerings.
But the real co-working craze, the one that’s made WeWork into a $20 billion behemoth, came to Portland a little later than other metropolitan areas across the country. That’s likely because of Portland’s lingering status as a secondary city, albeit a popular one. According to JLL, only about .7 percent of Portland’s office space inventory is co-working, the lowest percentage among sizeable West Coast markets. Seattle’s is about 1.1 percent, while San Francisco is at 2 percent.
“I suspect that co-working has been a pretty high-growth industry for some of these big guys,” said Paige Morgan, managing director of capital markets for JLL’s Portland office. “They focused on the more major markets first. That’s why Portland is a little bit behind.”
Even so, co-working space has been gaining ground in Portland. In 2014, according to JLL, there were about 202,000 square feet of occupied co-working space in the city; by 2017 it was up to 460,000 square feet, and this year that could rise to 629,000 square feet based on co-working tenants who are looking in the market. Industrious, a New York co-working company, leased 28,300 square feet downtown this month, and word on the street is that San Diego’s CommonGrounds is looking for a space of its own.
Hughes said CENTRL’s local ties and moderate size — all three Portland locations are right around 20,000 square feet — have given it a solid foothold here even as the WeWorks of the world have descended.
“Portland’s a tough town, it’s tough to be from out of town here,” said Hughes, a native Portlander who was a principal broker with Debbie Thomas Real Estate for 15 years, including during the boom that brought the Pearl District to life. “Real estate is still a very localized business, so I think we are able to be more maneuverable within the local market. We are imbedded in the real estate community, and that helps us deliver a product that does well here.”
The variety of offerings in the co-working and office space scene in general also allows a small company like CENTRL to compete with someone like WeWork.
“Not everyone wants a loud space with hip-hop music and beer,” Hughes said. “Some want a sterile, quiet environment. So just like the hotel industry, there’s a lot of room for multiple operators and sizes and amenities.”
CENTRL is banking on that perspective as it stretches out from its home stomping ground and into new markets. The Hood River space isn’t a huge stretch for CENTRL, but Los Angeles is at another level. Arthur said all of the growth and transition taking place in downtown L.A., including in the Little Tokyo neighborhood, make the area a good fit for the company.
What Arthur called a “strong group of capital partners who continue to believe in CENTRL and our ability to execute the workplace of the future” won’t hurt the company’s chances for success in new markets, either. Nor will the outlook for the future of co-working space.
“My sense is it definitely has legs,” said JLL’s Morgan.
In fact, JLL anticipates that co-working space could encompass up to 30 percent of the office market by 2030, especially if workplace trends continue in the direction they’re heading. More companies these days are looking for flexibility with their real estate, especially those who hire part-time or project-based workers for a limited time. If that plays out, CENTRL will find itself in a sweet spot.
“Absolutely it’s here to stay,” Hughes said. “If you look at how businesses are working these days, they need to be incredibly dynamic. This is going to be a big part of how people do business.”
The Company: CENTRL Office
Senior executives: Co-founders Alex Hughes, Jeff Arthur
Business: Co-working space
Locations: Three in Portland; one in Hood river (summer 2018) and one in Los Angeles (fall 2018)