Knotel Inc., a New York-based flexible office space provider and rival of WeWork Companies Inc, is making its way to L.A. The company has signed its first L.A. lease in Santa Monica.
Knotel signed a lease for 12,338 square feet at 429 Santa Monica Blvd. Terms of the lease were not disclosed.
Knotel already has U.S. locations in New York and San Francisco.
Cresa’s Ray Howden represented Knotel in the lease. Savills Studley’s Robert Cavaiola and Shay Bolton represented the sublandlord, Inventure Capital Corporation. Douglas Emmett owns the building.
Knotel, which was founded in 2016, is valued at $500 million, research firm Pitchbook estimated in 2018.
The company provides flexible pricing, terms and spaces for clients, but don’t confuse it with co-working.
“We don’t do co-working at all,” co-founder and chief executive Amol Sarva said. “If you’re two people and need a spot we would refer you to a co-working company. What we do is for large companies like Netflix or Microsoft. They are full of teams that are a couple hundred people each and need office space.”
Sarva also founded mobile phone provider Virgin Mobile USA and tech company Peek.
Knotel offers clients a traditional office environment but doesn’t force people into long-term leases. Knotel also offers tenants the flexibility to grow their space quickly. Knotel signs leases with landlords and then leases to tenants, giving them the ability to scale up or down quickly if need be.
“We make office flexible,” Sarva said. “Businesses need office and for some reason there was never a way to do it flexibly. Co-working is not office.”
Currently, the company has more than 2.5 million square feet of office space across more than 110 locations.
Sarva anticipates the Knotel model being popular in a city like L.A. where having a handful of mid-sized offices in different areas instead of one large compound can help manage commutes. Teams that serve different functions also have the option of occupying different spaces that are designed specifically for them.
“Everywhere that office works, Knotel works really well too,” he said.
A company can deal with Knotel to get a variety of spaces instead of having to go through multiple operators. Knotel uses brokers to help lease its space.
The company closed a $60 million round of funding in 2018 led by Northwest Venture Partners. In total, it has raised $160 million.
Notable clients include Netflix and Starbucks. Sarva said Knotel was able to get a Netflix group into a building in New York City in 10 days. The fast time is beneficial for companies experiencing rapid growth.
“That happens a lot to businesses. Something is coming up: some big account, some new product and they need to deal with a problem. They don’t have a year to look,” Sarva said.
Sarva said there will be dozens of Knotel locations in the next few months. Beverly Hills, Santa Monica and Culver City are among the areas Knotel is targeting.
And in the event of a recession, Sarva said the model would be beneficial.
“This business is designed for that,” Sarva said. “When companies need to adjust their expenses when a crisis hits, they’re not going to be signing big new leases with owners.”
Commercial real estate reporter Hannah Madans can be reached at email@example.com. Follow her on Twitter @HannahMadans