wework_20170227
Billy Penn

Philly offers free rent to lure suburban companies into the city

But there’s a big catch that seems to help one co-working space.

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Update, 1:00 p.m. 

Tomorrow the City of Philadelphia will announce a new initiative offering free rent to up to 25 companies located out of the city that move employees to co-working spaces here, Billy Penn has learned. The reimbursement offer will cover up to $30,000 in rent for as many as 25 companies for one year. To be eligible a company must relocate at least 20 employees to desks in the city.

The goal is to entice suburban companies to create a presence in Philly. The program’s brochure, which comes from the Department of Commerce, asks, “Are your workers residing in Philadelphia suffering long commutes and other work/life balance challenges?…Philadelphia wants to help your company discover the extraordinary benefit of an office in the city.”

There’s no definition given on the brochure for what constitutes an eligible office but a sample registration form for the program contains the question, “Which co-working space(s) will you occupy?” The brochure also refers to companies “hesitant to make a long-term commitment” that would be required for traditional office space and features a picture of the Pipeline Philly co-working space near 15th and Market streets.

The news would appear to be a boon for Philadelphia’s co-working industry.

But there’s a catch.

The program requires each company’s 20-plus employees to be stationed at 20 physical “seats,” Billy Penn has learned. A company would either need to split up its 20 people across multiple co-working locations or fit 20 people into one space. Many of the city’s co-working offerings couldn’t handle 20 people from one company, given space constraints.

Alex Hillman, CEO of co-working space Indy Hall, said he had not heard of the city’s plan until told by Billy Penn Friday but doubted the impact it could have on co-working spaces, given most are not equipped to handle companies of 20-plus people. Benjamin’s Desk, another popular co-working space, offers private offices for companies of up to eight people, according to its website. Venturef0rth advertises dedicated office space for one to 12 people. Make Philly offers 11-person offices in its space, but its city lead, Danika Ervin, said it could find ways to accommodate groups of 20 or more from one company. Indy Hall caps companies at three people.

“Not only couldn’t we [fit 20],” Hillman said, “but we’d tell them to go get their own damn office.”

One notable exception is WeWork. WeWork, which has spaces in New York, Boston, San Francisco and elsewhere, began operating in Philly last year and has four locations: at the Piazza in Northern Liberties, at 1601 Market, at 15th and Walnut and at 1900 Market, which is slated to open in March. The location at 19th and Market, according to WeWork’s website, offers private offices that can fit one to 70 people and a majority of their offices accommodate at least 20. 1901 Market’s size of 55,000 square feet — as well as 1601 Market’s 40,000 square feet — dwarf most other co-working spaces in the city.

Last week, Billy Penn has learned, WeWork hosted city officials, including staffers from the Department of Commerce and City Council, at the soon-to-open 1901 Market location. WeWork’s leaders said at the meeting they had about 500 members across their four spaces, which take up about 150,000 square feet combined. They told the gathered officials it was taking them longer to attract clientele here than at their other East Coast locations, saying Philadelphia was “unique.” WeWork also has plans to allocate up to $1 million it will offer prospective clients to cover half of employees’ wage taxes.

In response to a specific interview request about the city’s deal and WeWork’s incentive to suburban companies, a spokesperson offered no answers. Responding to an interview request after this article was first published, Department of Commerce spokesperson Lauren Cox said, “it was never the intention to focus it on one co-working space or co-working spaces in general.”

She said the city would also encourage companies to seek nontraditional leases in more typical office settings and that the city had received feedback from multiple co-working spaces as it worked on the project. Some of the feedback was about the difficulties of housing 20 employees from a single company. As such, Cox said, the city will encourage companies to split their employees among multiple spaces and make it more clear they’re allowed to do so in the program’s finalized brochure.

“We’re hoping these co-working spaces that are smaller can benefit,” she said.