The Hatching of Kinglet: Our Story
4th September 2014
By: Jeff Jacobson
Alex and I met in 2004 when we were hired as Developers by a regional real estate company. We quickly realized that we had a common passion for real estate and uniformly liked to challenge the status quo. Real estate development seems pretty straight forward, but we didn’t see it that way. Alex and I always thought a few moves ahead. What will the next trend be? Why is that property being overlooked by others? Is there a better way to approach a development site?
Our experience, creativity, and strong friendship (fueled by backcountry ski trips in British Columbia) led to the 2011 launch of our own real estate company, Solstice Partners. In 2012, after landing some significant projects, it was time to move our headquarters to downtown Baltimore.
We needed only about 800 square feet, after all, it was just the two of us. As real estate “guys” we assumed it would be easy. You know what they say about assuming? We found the traditional process to be painful and terribly inefficient. How could it be? We knew all the properties, landlords and most of the commercial brokers.
The answer was simple. The real estate brokerage community focuses most of their time on larger tenants and vacancies, and rightfully so. It takes similar effort to execute a lease for 1,500 square feet as it does for 40,000 square feet. So, most brokers are not spending their time to understand the availability of smaller spaces. The same holds true for the landlord community. They are more worried about losing their 40,000 square foot lease at renewal than their 1,500 square foot lease.
Our First Space
We actually found our first space in Baltimore while visiting a local company to discuss one of our development projects. They had a dozen or so empty offices and we asked if they were interested in renting two offices on a month-to-month basis. They were, and we stayed for a year while we purchased and renovated our headquarters.
Our curiosity was peaked. What did other small companies do? We asked around. Craigslist and driving neighborhoods hunting “for lease” signs seemed to be the dominant answers. The system was clearly broken, especially considering the explosion of small business creation. Last year 476,000 new companies were formed EVERY month in the United States. In addition, nearly 90% of leases in the United States are for spaces that are below 10K square feet.
Philosophically, there is also a large gap in motivation between supply (landlords) and small business (demand). Property owners and their agents want to sign tenants to the longest term lease, at the highest rent possible, and for the most amount of space. Makes sense. Maximizing these three variables leads to maximum value for underwriting and credit worthiness.
But is this good for small business? Rarely. Most small businesses don’t know what their company will look like in a year or even next month. Small business needs to adapt to both external and internal change. In a perfect world, they would not have to commit to a long term lease and could physically grow and contract as needed.
All of us have witnessed the quick adoption of technology in residential real estate. Zillow, Trulia, Redfin, Realtor.com, Apartments.com, etc. Buyers and sellers can go from clueless to market savvy with just minutes of searching.
Commercial real estate technology was in the stone age compared to residential. So what did we do? We set out to solve the problem of information and create a marketplace to connect small business with landlords and businesses with vacant space. But that was just the start. Even if we connect small businesses searching for space with the supply, we had not solved the problem of the transactional inefficiency.
As developers and property owners, we constantly experience the expenses and delays with the traditional leasing process. Negotiations, lawyers, fees, redlines, credit checks - they all take time (and money). Have you ever read a commercial lease? You might need a glossary to understand the details…CAM charges, NNN, Gross Rents, estoppels, etc.
Physical space needs have also changed drastically over the last 10 years. With the ability to work remotely and store files digitally, there is less and less need for large offices. The average private office continues to shrink and is down to about 120 square feet (down from 250 square feet just a decade ago).
We took our experience as real estate developers, property owners and small business principals looking for space and created an online platform called Kinglet. In turn, we have elevated the office search experience, drastically reduced the transaction time from months to hours and created an incredibly flexible tool for both Hosts and Guests. This is just the first chapter of our story. Our vision will continue to evolve, will be driven by the need to continue improving our customer’s experience, and will change the way the world thinks about space.
We will continue to challenge the status quo and invite you to join us on our journey!