Most CEOs excel at being a visionary for their company, hiring the best talent, and running their day-to-day business. Then why, when looking for new office space for their employees, must they (or someone on their team) spend hours a week meeting with brokers, touring properties, designing build-outs, working through lease negotiations, and essentially having a second job as a commercial real estate expert? Further, why must they plan for how much space they need and employees they will have five years out to match the long leases they sign when they are really only planning a year ahead?
Enter Knotel, the premier global provider of agile workplaces for companies. Founded in 2015, Knotel’s vision is to create agile spaces that liberate companies to innovate and scale, with a mission to build a world-class platform that transforms how real estate is experienced.
Today, we are thrilled to announce that Norwest is leading Knotel’s $60 million investment.
Explosive Growth in the Flexible Office Space Market
As with any industry, both consumers and enterprises are increasingly demanding more convenience, flexibility, transparency, and efficiency. The commercial real estate market is massive and highly fragmented, with over $1.2 trillion in annual spend that is ripe for this kind of disruption. Although flexible space currently accounts for less than five percent of current U.S. office inventory, research projects this sector will experience tremendous growth, and could rise to thirty percent by 2025.
Knotel Creates Value for Both Companies and Landlords
Knotel provides speed, flexibility, and value without sacrificing customization through its “headquarters-as-a-service” (Agile HQ) platform. The company offers turnkey office space solutions with 12 to 18 month leases, which are significantly shorter than the typical five to eight year leases. The shorter lease allows for flexibility in the size of space companies are acquiring, the avoidance of cash burn for deposits and the long-term liability of traditional leases, and the ability to outsource the time-consuming parts of signing a new lease. Knotel serves established and growing companies, including The Body Shop, Microsoft, Starbucks, Omnicom, and Hotel Tonight.
Knotel also creates value on the other side for landlords. Landlords love the sustained demand and higher occupancy, modern build-outs designed by Knotel, the value added to the underlying building with high-growth marquee tenants, potential for increased revenue, and ability to diversify their portfolio. Landlords see the value being created and the growing trend of flexible office space, and are actively partnering with the company. Knotel also continues to collaborate with brokers on both sides of the marketplace.
Partnering with an Exceptional Team
At Norwest, we are passionate about investing in visionary entrepreneurs who have built exceptional teams, and we are excited to partner with co-founder and CEO, Amol Sarva, and his team. We are impressed with Knotel’s mission to transform the real estate market, significant traction, focused customer set, ability to innovate aggressively both on the underlying product as well as the business model, and cost-effectiveness. The company plans to use this new funding to increase their footprint in current markets including New York, San Francisco, London, and Berlin, as well as expand to other locations around the world.
We at Norwest continue to deepen our involvement in the real estate sector by investing in companies that provide a seamless, convenient, and flexible experience to both consumers and enterprises. Through leading Opendoor’s Series D fundraise (disrupting residential real estate), Common’s Series C fundraise (disrupting multi-family residential through co-living), and now Knotel’s fundraise (disrupting commercial real estate), we remain excited about the market opportunity in this space.
Congratulations to Amol and the Knotel team – we look forward to joining you on this journey!