Sonar, an Atlanta-based CRM startup, grew at a pace most early-stage startups dream about.
The team was a grand total of two people in January of 2020. That number was 15 by the end of the year. Following a $12 million Series A in early 2021, the Sonar team is now 65 strong with plans to be upwards of 100 at the end of 2022.
While team members are spread across the country, a good number are concentrated in Atlanta. Naturally, they needed more space.
“We had a few too many people sitting in 1900 square feet,” Sonar founder and CEO Brad Smith told Hypeptamus when asked about their first office in the Grant Park neighborhood.
But not all office space is created equal, Smith quickly learned. Yes, they needed space. But they also needed flexibility.
Sonar ended up in Armour Yards, an Atlanta spot well-known as the home to Sweetwater Brewery. What made it the right spot for the scaling team? They were able to customize the terms and sublease out a part of the new 15,000 square foot office until their headcount expanded enough to justify paying for the entire space.
That flexibility isn’t typical for a commercial real estate agreement. So the Sonar team had to work with a commercial real estate company that thinks about space a bit differently. They ended up relying on Southsource to find the right space.
What Startup Want
Working with startups and high-growth teams like Sonar is Southsource’s bread and butter. And it gives the team an interesting perspective on what Atlanta startups need when it comes to real estate.
“The language of office” is changing, said Lawrence “LG” Gellerstedt, President of Southsource, a company that bills itself as a “new generation” of commercial real estate firms.
So what exactly is part of this new lexicon?
Gone are the days of trudging to a four-story commercial office park on the outskirts of town or dealing with giant parking garages. Today’s employees are willing to travel a bit farther a few days during the workweek, so long as it passes what Gellerstedt describes as the ‘wallet theory.’
“The places where office is guaranteed to be successful are places people are choosing to spend their individual dollars today,” he told Hypepotamus.
That has opened up the neighborhood-level, second-generation developments and redevelopments like The Jane in Grant Park, Westside Provisions, The Larkin, and The Atlanta Dairies; all places offering restaurants, happy hour spots, alongside more convenient surface-level parking and entrances.
Selecting a new office used to be just about mapping out space based on a team’s headcount today versus headcount in a year, said Gellerstedt. “Now, we’ve gone from headcount-based to activity-based. An e-commerce company walks and talks differently than a B2B SaaS [company] or a team that is very heavy on the dev side.”
Startups also are taking into consideration how extroverted or introverted teams are, what flex space they might need, and what general team meetings look like.
Teams like Sonar picked a space they knew could be used for hybrid work but also as a great landing pad when team members from across the country fly in.
Clearly the definition of “convenience” has changed. So too has the very definition of what an office is.
Atlanta itself has added 12.2 million more square feet of office space over the last five years, bringing the total office space to 178 million square feet. But what you will find inside those offices looks very different than what you would have seen in the past.
“What [startups] demand today is what everybody else will want three to five years from now.” And many startups in the area grew up in the “co-working generation.” As they outgrow the hot desk lifestyle, they want to maintain the same amenities provided at the likes of a WeWork or an Industrious.
Flexibility and new amenities aren’t something that fits in with the traditional model of commercial real estate, adds Gellerstedt. The “old school” model incentivizes brokers to increase the total commitment of time and space on each lease.
That is something Southsource is looking to change.
“Fundamentally, real estate is an asset class that is created to be a safe environment. It’s basically one step away from a bond.” explained Gellerstedt. “Real estate brings with it the most institutional of capital…and because of that, the rules of commercial real estate are very strict. There’s a ton of money and people and big institutions invested in keeping it relatively close to the same because that’s what they know. That’s what their investor base knows. And they’re really not looking for massive returns and risks like the VC world. They’re not looking to innovate.”
While working with high-growth startups and scaling agencies, Southsource is changing the narrative about what commercial real estate is all about for tenants and landlords alike.
That means sometimes pointing towards smaller or shorter-term solutions to best fit the realities of each startup.
“If we can point someone towards co-working or a sublease or something short term — even though it makes less money in the moment — we know we will keep that relationship and do right by the client in the long run.”
Meet The Southsource Team
Gellerstedt, a fourth-generation Atlantan and veteran in the commercial real estate space, has had a front-row seat to the changing nature of the office. He led Cushman & Wakefield’s tenant team in Atlanta and was a vice president at WeWork before deciding to open Southsource in 2020.
Joining him are vice presidents John Neal Scott, Phil Costabile, and Amy Stinson. Richard Smith supports the landlord rep practice, with Alec Clifford and Bessie Winston working on the tenant rep side.
The team pushes out a wealth of information to its content library, which includes interviews and profiles of those building up the Atlanta startup ecosystem.
For the Southsource team, it is all about deciphering the language of commercial real estate and making it accessible to the next generation of startups and investors in the city.
“Commercial real estate needs a consumer brand. It needs something that’s approachable and authentic and fun and easy,” added Gellerstedt. “A lot of brokerages sell off of institutional stability…which at its worst is about FUD: fear, uncertainty, and doubt. Some brokers put stuff out that’s complicated and sounds institutional and makes [someone] think ‘I’m scared. I need this broker.’ We want to be able to break that down. This is something you can do. You can handle. You can invest in it. You can own it, you can lease it. And it can be fun and enjoyable. It doesn’t have to be scary.”