Big Time Restaurants are Transforming Into Co-Working Spaces

By Nellie Bowles / Posted on July 9, 2018

The bar at the Elite Cafe here was packed, but not a drink was being poured. The champagne stand sat empty and warm. The tap was covered in plastic wrap.

Instead, the restaurant was flooded with the low din of typing. That’s because the Elite Cafe, from 8:30 a.m. to 5 p.m. every weekday, is not exactly a restaurant anymore and certainly not a bar. It is a co-working space.

Everything is now a co-working space, one of those shared offices that are popular among freelancers, small companies and other workers who want a change of scenery. Coffee shops are co-working spaces. Gyms are co-working spaces. Social clubs are co-working spaces. And now restaurants — but only before dinnertime.

The company that laid the extension cords and power strips across Elite Cafe’s copper tables is called Spacious. Since it was started two years ago, Spacious has converted 25 upscale restaurants in New York and San Francisco into weekday work spaces. Membership, which allows entry into any location, is $99 a month for a year, or $129 by the month. With $9 million in venture capital it received in May, Spacious plans to expand this year to up to 100 spaces.

A restaurant makes for the perfect conversion, the Spacious team argues. Bars become standing desks. Booths become conference rooms. The lighting tends to be nicer, less harsh and fluorescent, than an office, and the music makes for a nice ambience.

Originally, the founders of Spacious thought they would have to sell restaurateurs on the idea. Instead, restaurants, struggling to pay rent and wages and frustrated with disappointing lunch traffic, are coming to them, eager to strike deals for a slice of the membership dues. Only 5 percent have made the cut to become Spacious spaces, said the company, which is unprofitable.

Spacious is part of a broader debate over how to use spaces in cities as people increasingly buy items online instead of in stores and as labor costs make restaurants an even more challenging proposition. A membership model is the future for bricks-and-mortar spots, according to the Spacious team, and restaurants are the easiest first step.

“Actively consuming isn’t what we want to do with the space in our neighborhoods anymore,” said Chris Smothers, 30, a Spacious co-founder and its chief technology officer. “Retail spaces are designed for you to come in, make a transaction and get out, and that’s why you feel weird in a coffee shop all day, because all of these spaces are designed for you to leave.”

The zoning implications of what Spacious is doing are unclear. Can a restaurant just become an office during the day?

“Somebody would have to make the case that we are an office — and I think that’s a pretty heavy burden of proof,” said Preston Pesek, 39, a co-founder and the chief executive of Spacious, who previously worked in commercial real estate investing. “What really is the definition of an office? A business conversation can happen anywhere. A phone is a computer.”

He is hoping some linguistic adjustments help. “We’re trying not to use the word co-working because of some of the zoning issues,” Mr. Pesek said. “We prefer the term drop-in work space.”

Andrew Rudansky, a spokesman for New York City’s Department of Buildings, said the use of restaurants as co-working spaces was permitted as long as the businesses primarily operated as restaurants. The department would investigate any complaints that they were no longer mainly eating and drinking establishments, he said.

San Francisco’s Planning Department did not return requests for comment.

The first Spacious, in 2016, was the hip bistro DBGB Kitchen and Bar in New York, which closed last year. The restaurant’s management had set the tables for dinner each night before closing, and all day the tables had sat fully ready. Members of the Spacious team asked to be trained in how to lay the tables — they would do it themselves after their co-working clients were done.

“We set 180 place settings a day,” Mr. Smothers said.

Spacious’s founding team originally met in New York through a shared interest in yoga.

“I’m into raja yoga, and Preston’s into ashtanga, and a friend said, ‘You guys are both into real estate,’” Mr. Smothers said.

They met their chief operating officer, Jaclyn Pascocello, who was a general manager at the Hillstone Restaurant Group, after she heard about the project through mutual friends while on a yoga retreat in Puerto Rico. Their first plan was to use hotel rooms while the occupants were out for the day. They designed convertible furniture to hide the hotel bed and made plans for a concept building.

Then they realized there was a simpler space to manage: restaurants.

Ms. Pascocello, 30, argues that the trick to making a better co-working space is to run it as if it were a restaurant.

“We take guest notes,” she said. “The goal is to know everyone’s name, know what they’re working on, know if they’re sensitive to noise, how they like coffee, the milk options.”

Restaurateurs said that as many of their colleagues faced financial struggles, there was less stigma around sharing their space. They give Spacious a set of keys, and the start-up opens it in the morning, brews coffee and has its own staff host at the door.

Justin Sievers, 34, the managing partner of Bar Primi in Lower Manhattan, saw Spacious operating at a restaurant nearby. With lunch traffic low, he said, he decided to be “inventive” and reached out to the start-up to make Bar Primi a co-working space during the day.

“It’s not what we want our space to be, and there is a little bit of this negative connotation of ‘O.K., we’re a restaurant, but we have to now sell out a little bit of our dining room for all these laptops?’” Mr. Sievers said. Now he is less worried about how it looks.

“Laptops used to send the message that we’re failing as a restaurant,” he said. “But that’s changing.”

Some Spacious locations have become almost neighborhood living rooms. Samantha Moretti, managing partner at the Milling Room on New York’s Upper West Side, was surprised to find people knitting and holding after-school homework sessions when she went in before opening for dinner.

On a recent afternoon, Mr. Smothers and Ms. Pascocello visited Crave Fishbar in Midtown East, which is a Spacious space during the day. Crave’s host that day was Dave Wilson, 25, who was a bartender before managing this brood of pop-up office workers.

“They’re more low maintenance,” he said of his new customers.

Around 4 p.m., restaurant staff arrive to set up the dining room. A text goes out announcing last call for coffee and that the power cords are being pulled up.

There’s no branding aside from a sandwich board on the sidewalk. One-third of the members join Spacious after just wandering by one. The founders want the space to look like the restaurant and for no two spaces to have anything in common except one thing.

“The coffee is always to the left of the water,” Ms. Pascocello said. “If you walk in and it’s to the right, we’ve failed.”

Back at the Elite Cafe in San Francisco, the workday was in full swing.

“In cafes, you can’t have a computer and sit there for eight hours,” said Tanya Cheng, 39, who works in e-commerce and had a laptop, a keyboard, a mouse and a tablet set up.

She works in Spacious spaces every day and said they had changed her relationship to the restaurants.

“When I go to dinner, I avoid these places now,” Ms. Cheng said, with a laugh. “It’s work for me.”

Jeff Bernstein, a venture and capital markets adviser, said the setup was more inherently social than a co-working office. At least once a week, he stays after the workday and has drinks with someone from the space.

“You can get immersed in your stuff, or you can notice somebody doing something interesting three stools away and you can chat with them,” he said. “Because you’re at a bar.”

In a nearby booth were Justin Morgan, 38, an information technology director at the cannabis company Sparc, who sat across from his partner, James Landau, 40, a product manager. Both said they liked that Spacious was not a traditional co-working space, like a WeWork, which costs significantly more and has perks including beer, table tennis, evening socials and (for a little extra) summer camp.

“Have you ever worked from home five days a week straight?” Mr. Morgan asked. “It’s terrible.”

An older man in a suit came into Elite Cafe and asked to be seated. The host told him that it was closed for diners right now and was a co-working space. He looked at the full restaurant, a little confused, and turned around.

A minute later, a young couple entered with a stroller and shopping bags and requested the menu. There was no lunch, the host explained again. Just co-working.

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