Fresh funds, acquisition by Industrious give coworking a lift

NEW YORK (Reuters) - Industrious, the second-biggest U.S. coworking firm by number of locations, said on Tuesday it acquired a search website for spare office space and raised $25 million in fresh funds as investors bet the shared-office industry grows and goes mainstream.

The announcement comes a week after industry leader WeWork Cos Inc raised $300 million from Japan’s SoftBank Group Corp, pushing money raised by the coworking behemoth to about $2 billion. The SoftBank funds are the first installment of what media reports suggest will be a multi-billion dollar funding round.

Demand for coworking sites is on the rise and investors are taking notice as the pace of capital raising in the shared work space sector quickens, said Jamie Hodari, co-founder and chief executive of Industrious, based in Brooklyn, New York.

The firm raised $37 million in September, and is likely to raise more capital in October, Hodari said in an interview.

Private equity firm Riverwood Capital led this round and the previous round of investments.

Terms of Industrious’ acquisition of PivotDesk, which allows companies to advertise their excess space, were not disclosed.

A year ago it was hard to get a meeting with investors but now someone from private equity or venture capital reaches out almost daily to inquire about the industry, Hodari said.

“Every company in this space is either finishing a round or in the beginning stages of another round” of fundraising, he said. “We’re on the cusp of the dollar amounts getting much larger in our industry.”

Hodari is aware of eight companies, which he declined to name, that are seeking to raise between $20 million to $40 million each.

Industrious operates 12 locations across 11 U.S. cities and expects to increase its footprint to 33 sites in 25 cities by year’s end, he said.

Technology, cultural changes and connectivity have combined to unlock the workplace from the traditional office, according to Adaptive Office Resources (AOR) in Rancho Santa Fe, California.

The ease of working off-site will reduce in the next decade the need for a traditional office to about 55 percent of space dedicated to office usage from more than 95 percent in the 2000s, the commercial real estate consultancy predicts.

Driving this change is demand for offices that can grow or shrink as corporate needs evolve.

“You have a supply side that continues to try to promote a product that for the most part is becoming more archaic and obsolete,” said Jeffrey Langdon, managing director of AOR.

Commercial real estate has been slow to innovate and is in denial of an industry-wide shift in a generational turnover in the office that few outside of coworking have addressed, Langdon said.

Reporting by Herbert Lash; Editing by Bernard Orr