Codi’s Downtown San Francisco headquarters look and feel like a typical startup office, from the open concept floor plan and video-call-enabled conference room to the snacks and sparkling water in the kitchen.
But it also functions as a proof of concept for what CEO and co-founder Christelle Rohaut believes is the future of how commercial real estate will function in a remote work world.
The 19-person startup uses the office four days a week for its business activities. On Thursdays, however, a PR agency takes over in a timeshare model that Rohaut said has gotten increasingly popular for Codi users. Currently, around 30% of the Codi’s customers take the space on a temporary basis versus 70% who lease full time.
“We can have different companies coming in on different days, which helps generate revenue, bring life back into spaces and really aligns more with how companies work today,” Rohaut said.
By and large there, is very little interaction between Codi and its office-mate outside of friendly exchanges of baked goods. The startup provides lockers to secure personal items.
What is Codi?
Codi operates a marketplace platform that lists commercial properties it renovates and prepares for leasing. It also functions as an office manager that deals with furniture, cleaning services and utilities, in addition to creature comforts like snacks and coffee.
Instead of the five- or 10-year terms common in commercial leases, Codi offers deals as short as six months, with prorated rents based on how much of the office is required—similar to renting an Airbnb or vacation home, but for office space. Customized options like standing desks, monitors and whiteboards are available for an additional fee.
“There’s been a lot of talk about how the demand for offices has dropped. That’s true, but I think there’s still high demand for specific types of offices which are turnkey and flexible,” Rouhat said.
San Francisco’s commercial real estate industry is facing a vacancy crisis that was kicked off by the pandemic-induced shift to remote work. The return of office workers to San Francisco has lagged behind most other major cities in the U.S., and the vacancy rates are hovering around 25%, its highest point ever.
Codi’s model relies on revenue sharing with landlords, who benefit from reduced vacancy times and lower expenses for renovations. Rents consist of an all-in price that includes base rent, utilities, office management services and weekly cleaning.
“Our pitch to them is: It’s better to get a company now to use the space who really loves it even if it's for a short time,” Rouhat said, adding there’s still some healthy skepticism in the industry. “More than ever companies need flexibility, ease and speed, but we need to partner with landlords who are open with it.”
Currently, Codi lists around 130 spaces in 50 buildings across the Bay Area and New York City. The firm recently raised a $16 million Series A round led by Andreessen Horowitz. Somewhat fittingly, the venture capital firm announced its own transition to a “cloud-based” model earlier this year.
Codi was founded in 2019, born out of Rohaut’s urban planning studies at UC Berkeley and her interest in the circular economy, the idea that existing resources should be shared, reused and recycled in an effort to combat environmental impacts and waste.
The initial concept was something like an “Airbnb for the office” that allowed remote workers to rent space inside of private homes. But then came the pandemic and a major pivot as underutilized space transitioned from residential to commercial.
In a bid to differentiate Codi from competitors like WeWork and Industrious, Rohaut said many prospective clients are “seeking to graduate from the coworking experience with their own private office.” The company’s bread-and-butter are offices between 1,000-5,000 square feet, meant to accommodate fast-growing companies that may need to regularly evaluate their space needs.
Elliot O'Connor, co-founder and CEO of Frontier, a startup that connects companies with freelance AI talent, used Codi to find a flexible office space he rents three days a week.
O'Connor found himself essentially stuck in a Vancouver Airbnb during the pandemic because of travel restrictions. When he was finally able to move to San Francisco months later, he found himself again isolated in his apartment as he was trying to get the company off the ground and started to look for ways to get his team together in person.
At first, he kicked the tires on a traditional lease, but the complicated network of stakeholders and the leg work necessary to find a space proved to be overwhelming. Codi provided a simplified process with more unique options in neighborhoods outside of Downtown. Rather than the six months it can take to typically sign a lease and occupy a space, Codi said its move in time is around four weeks.
O'Connor now rents a ground floor office space in the Marina on Mondays, Wednesdays and Thursdays for a handful of local employees at a cost of around $1,500 a month. Instead of being locked into a yearslong lease at the former art studio-turned-office space, he has the option to renew quarterly.
“It’s very relaxed and residential,” O'Connor said. “One really big appeal of their model is that they’re making nontraditional commercial real estate more available and they’re much less cookie-cutter than WeWork.”
Commercial real estate is notoriously known for being a slow-moving and old-fashioned business, but Rohaut thinks the pandemic has already fundamentally changed what tenants are looking for. Now, she said, it’s time for the industry to respond.
“Five years from now, Codi or a similar model will become the norm,” Rohaut said. “My hope for the future is that we really get to that transition and real estate is completely freed up from its archaic long-term office leasing model.”
Kevin Truong can be reached at [email protected]