Today we are joined by two architects based in Austin, Texas.

Tim Derrington is the principal of Derrington Building Studio, a firm focused on community and domestic architecture.

Jared Haas is the principal of Unbox Studio, a collaborative modern design studio.

Several years ago they came together to form the Eastside Collective, a co-working space for architects and design-focused businesses.

The found the space, took out financing, and built out the space with their own blood, sweat and tears – you'll hear more about that on this episode.

In today's episode they talk about how the Eastside Collective came about, including the challenges along the way and how much time, effort and money it took to pull this project off.

Resources for today’s show:

Eastside Collective
Derrington Building Studio
Unbox Studio

Interview Transcript and Members Only Resources:

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Tim Derrington: We have a good time. I mean, we throw parties, we try to have a fun office environment and just make most of the kind of quality of life [inaudible 00:00:13].

Enoch Sears: Business of Architecture, episode 194. Hello, I'm Enoch Sears and this is the podcast for architects where you'll discover tips, strategies and secrets for running a profitable and impactful architecture practice. I'd like to invite you to discover how to double your architecture firm income and create your dream practice of freedom and impact by downloading my free four part architecture firm profit map. As a podcast listener you can get instant access by going to freearchitectgift.com.

Today's podcast is sponsored by AIA Advantage Partner BQE Software, the makers of ArchiOffice. ArchiOffice is the only office and project management software designed specifically for architects. It helps you manage people and projects while you focus on designing great architecture. So, whether you're working remotely or on-site, ArchiOffice allows you to monitor the status of your projects and tasks and send out invoices in an accurate and timely manner. Get your fully functional 15 day trial of ArchiOffice by going to businessofarchitecture.com/demo.

Today we're joined by two architects based in Austin, Texas. Tim Derrington is the Principle of Derrington Building Studio, a firm focused on community and domestic architecture. Jared Haas is the Principle of Un.Box Studio, a collaborative, modern design studio. Now several years ago, they and a couple of other colleagues came together to form the East Side Collective. It's a co-working space for architects and design-focused businesses, located on Austin's East Side.

Now, they found the space, they took out financing and built out the space with their own blood, sweat and tears and you'll get to hear that whole story in this episode. In addition you'll also hear how the East Side Collective came about, including all the challenges along the way and exactly how much time, effort and money it actually took to pull this project off.

Now, let's get down to business.

Tim and Jared, welcome to Business of Architecture.

Tim Derrington: Thanks Enoch. It's good to be here.

Jared Haas: Appreciate you having us.

Enoch Sears: So tell us what is the East Side Collective.

Jared Haas: Basically we're a curated space for designers and builders over here in Austin, Texas, located on the East Side of Austin.

Tim Derrington: Yeah, it's just a co-working space meant to foster the kind of dynamic that would be necessary for any kind of office, a small office especially. And everybody tends to work well together and benefit from being around each other.

Enoch Sears: And how did this come together?

Jared Haas: Well, I don't know there's a really short way to answer that.

Enoch Sears: It's okay, we've got a little bit of time.

Jared Haas: All right. Well it was kind of an organic process. We started off, prior to the recession, a lot of us branched off on our own around the same time and we just kind of shared an office space downtown. Our first office space was probably about 400 square feet. We moved out of that into another space and it was a little bit larger. And it was really simple at the time. We just shared rent. Shared utilities. And I think we just wanted to step it up a notch and get our own space. Right around the same time the landlord ended up selling that building, so we decided to get a five year lease on a space and build it out ourselves.

I think we were looking for kind of a warehouse space. Something kind of cool, hip, trendy, upcoming area. East Side was definitely the spot. We targeted it, we ended up finding this old Pepsi warehouse building that was just about to go under renovations and we kind of got first pick of the space that we wanted. So it worked out really well. This is about a two year process. We've been kind of running the business in here for about a year and a half or so. And a lot of business has just been put up around us and things are changing and it's incredibly dynamic and a lot of people coming in here now. A lot of events. Just a lot of things going on at the same time.

Tim Derrington: And if I could add to that, this is … East Side Collective is really the brainchild of Jared here. He is the one who kind of spearheaded the idea and had the vision. I came in as a practitioner like most everybody else in the space. Early on became good friends with Jared and Javier Martin, the other member, I guess managing member. When we started there was just kind of all of us hanging out in the same space and then just no contracts, no agreement. It was just, hey you're going to pay, right? And then once a month we'd just pay whatever we needed to pay and that was that.

But when we came into this space we're in now, we realized we needed to step it up. We needed to form an LLC and really make it a legal and legit thing. So that was the transition and this is kind of the product of that.

Jared Haas: Yeah and I guess on to that it was, it really started off with pretty much Javier and I, Tim mentioned it was me, it was really Javier and I kind of we were the original ones officing together with a couple other architects and people just kind of came and went. And by the time Tim got to us we kind of put our heads together and said let's do something bigger than what we're doing right now. And speaking of which, Tim went on his end right around the same time that I did. We're pretty much brothers from a different mother. We physically even look alike, apparently. One of us is better looking than the other one.

Tim Derrington: Appreciate that.

Jared Haas: Yeah. But our lifestyles are the same. We kind of worked for very similar firms at the same time. Went out on our own at the same time. We're about the same age. And when we got together at the office together we said let's, even though we'll keep our firms separate, but we can share resources and let's build a space together.

Tim Derrington: Yeah. So I mean we can talk on this for quite a while, but don't want to get too misdirected. So, where else would you like to take this? Because I mean, we've got so much we can say about it.

Enoch Sears: Yeah. Sure. Well it's interesting what you guys have done to come together and actually create your own co-working space, right? And you haven't limited it to just your group, but now you're actively recruiting other companies to come in to this space as well and creating this little hub. So let's just talk about it from a financial perspective. How many members are in the LLC from a financial standpoint?

Tim Derrington: The three of us, the three managing members of the LLC, we started it I guess two, two and a half, three years ago, something like that. And all three of us have a 33 1/3 percent membership. We own equally. All decisions are made equally. It's really just a legal way of kind of quantifying the friendship and trust we have with each other to start with.

It doesn't mean that's where it's going to stop and it doesn't have room to evolve or anything like that, but it was just started as an attempt to legitimize that friendship so that we would have one, some protection moving forward in case anything ever happened. Not necessarily between us, but if something happened in the space or whatever it might have been, we needed a legal entity for that sort of protection. And simply to make the lease. We had to sign the lease and not one of us wanted to necessarily sign it as an individual it was just a good thing to do. It was prudent, obviously. It's just taken on its own life since then.

Jared Haas: And rather than create subleases, which we weren't allowed to do for our standard lease, we created memberships and to make it simple, we just kind of have a flat rate for anyone who wants a desk. Whether that's a company or an individual. We just have a bunch of desks available and you pay your flat rate and that includes all shared costs.

Tim Derrington: So yeah, we came together initially as an attempt to reduce overhead. It was purely a fiscal decision. How can we all get together and just make this cheaper? So that was the founding reason, but the culture that's developed from this, from having a bunch of young and ambitious people in the same space together, learning from each other, teaching each other and just feeding on each others' energy has created a culture that you wouldn't get if you didn't have so many people around you coming and going, doing interesting things all the time. It's really quite nice.

Jared Haas: Yeah and I guess on top of that, the most architects that go out on their own or architects that are practicing are generally one or two person firm entities. And you can't really have much of a culture with one or two people. So a lot of people join us, typically after they go out on their own, they work from home for the first six months to a year, start to realize that some of the benefits that they're missing. One, resources, two having conference room or area, three, just interactions with people.

So then they might shop around different co-working spaces and we're more geared towards architects, people in the industry and that's kind of how we end up with like-minded people. And thus a culture as well.

Enoch Sears: How much initial capital was required to get this space and build it out and make everything happen?

Jared Haas: That's a great question.

Tim Derrington: That's a very good question.

Jared Haas: Yeah it was a very shoestring budget. We were given basically a shell of a building. And what I mean by that is we have some [demisen 00:24:00] walls, we have floor, we have a ceiling and we have some windows and HVAC.

Tim Derrington: Yeah it was the perfect example of what a white box finish out is.

Jared Haas: Yeah, definitely. And so we came back and we had to build out a mezzanine, desk spaces, partition out some of the rooms, et cetera, et cetera. All in an agreed $24,000 budget which we got on a loan. So that mean primarily Tim and I in here with a lot of hammering and nailing and a lot of nights and weekends. A lot of while we're trying to run and start off our architecture practices.

So yeah and that's the other thing. We kind of moved in here a little bit prematurely. Our last lease we were month to month and we kind of expected … And they were trying to sell the building at the same time. So we expected to build out the space while we were working at the other space. They ended up selling the building pretty quickly and we were forced to move in here while it was under construction.

So we moved in, us and several other entities. One being Javier who is a structural engineer. We had a contractor, we had a construction lawyer. We had to work out of this office while we were doing the construction. It was a rough year. It was tough.

Tim Derrington: Yeah, it was. I guess to respond to your question, we got into the space with less than $30,000 starting. So we got the loan and we put down our deposit, first month rent and came in here, white boxed. Built the desks over the course of a couple weekends, put all of our stuff in here and then spent the next few months finishing out our kitchenette, finishing out our mezzanine, siding our mezzanine. Just all of that stuff and it was literally working on a construction site for six months without having a contractor to yell at. We were the contractor.

Enoch Sears: Where did you guys find an architect to help you with the plans?

Tim Derrington: A good question. This guy here. He drew all that stuff up.

Jared Haas: Yeah it was kind of a bit of a collaborative process as well. We had architects, we had designers, we had a structural engineer and at the time we had a contractor. The contractor got a little bit busy and ended up getting his own office. So we were left high and dry to do the construction ourselves. So it's a little gritty in terms of construction, but the overall design, aesthetic and idea is there. We've pretty much got everything that we wanted and we're pretty happy with the outcome.

Enoch Sears: And what is the [crosstalk 00:12:42]. Go ahead, Tim?

Tim Derrington: I was just going to say we couldn't be more happy with the investment in terms of capital being so low and the quality of what we got out of it. We're thrilled.

Jared Haas: And we definitely stretched that loan for sure.

Tim Derrington: Oh yeah.

Enoch Sears: When you say stretched it, was it because you were doing so much of the work yourself? Why do you say that you stretched it?

Jared Haas: Yeah there was a lot of self-performing. A lot of cost is in labor, so we were relatively free. Some of the things that we couldn't do, we hired out. We got some friendly favors, primarily for the framing for some of the sheet rocking. So yeah, I think … Well, actually, backing up, we had priced it out initially, the original design, to a contractor and they estimated it was about $70,000 to $80,000 worth of work. So, we tangibly stretched that thing out pretty well.

Enoch Sears: Yeah. What does it take to get a loan, like you guys did?

Jared Haas: Ask a bank and they'll give you money apparently.

Tim Derrington: A little bit more than that. So the East Side Collective when it was formed had no credit history, it was brand new, but we went to a bank. So, DBS, my company, banks with a local bank here in town called Frost. And Jared as well he might have prior to that, I'm not sure. But basically all of us leveraged our relationship with that bank with our existing companies to, I guess, gain the trust of our banker and my assumption was the loan was fairly low-risk given that it was such a low amount, that they were willing to roll the dice on us.

Jared Haas: I believe, did we, I think did all three of us personally guarantee it? Guarantee the loan? So that made it a little bit easier. It wasn't a really, it wasn't a high amount. $24,000 for a space. And not to give a shameless plug, but dealing with Frost bank, they're a local bank. They're really embedded into the community. They just opened up an office right down the street from us. They really saw our vision and really went to work with us. It all just came together really well that way.

Tim Derrington: Yeah. Actually quite a bit of good things to say about them. They've extended support to the architectural community here in Austin and Central Texas, so really grateful for that.

Jared Haas: Yeah and they continue to support us. They help support some of our parties and yeah, it's a lot about having relationships with people, including banks.

Enoch Sears: Yeah, I had an account with Frost bank when I was in Texas and they were a good bank. No doubt about it. I loved their online portal, it was pretty awesome. But hey, that's a whole nother subject. I guess I'll just tell them to send a sponsorship check for the episode.

So you guys did it with $24,000. What is your monthly lease fee? How much are you guys paying per month?

Tim Derrington: That's a great question. It varies because our lease, for one reason or another, the lease can vary between somewhere around $1,500 a month to $4,000. And then on top of that all of the general expenses of simply operating this business tend to add another $4,000 on top of it. So, somewhere between $6,000 and $8,000 is what we seem to be on the hook for.

Jared Haas: I think Tim's trying to give a short answer to the fact that our lease was miscalculated recently. There's … Earlier when I mentioned that we found the space, it was an old Pepsi bottling facility. There's still a lot of construction going on, a lot of spaces moving in. And I think our landlord kind of got away with some of the, or didn't realize, miscalculated some of the square footages and things like that. So it's fluctuated a little bit in the past year.

Enoch Sears: So the fluctuation, is that just due to a recalculation on the part of the landlord or is there some other arrangement that's happening now that's causing it to fluctuate?

Jared Haas: Yeah, it was just a landlord miscalculation. So I think generally speaking we'll be paying about $4,000 a month I think.

Tim Derrington: For the lease itself. Then about another four thousand give or take for miscellaneous expenses in the space. Miscellaneous expenses being the cost of the office admin. We have a full time office admin who basically regulates all the things that need to happen for an office, from buying supplies to checking on the lease to just all the things it takes to run a space, which is a topic in and of itself. The insurance that we have to keep on hand, just whatever.

Jared Haas: Security, the loan …

Tim Derrington: All those things, wrapped up together about the cost.

Enoch Sears: How much square feet do you guys have right there?

Jared Haas: It's about 1,500 square feet, plus we have about 500 square foot of mezzanine, so about 2,000 total.

Enoch Sears: And what's the maximum occupancy of the space if you had all the desks filled, how many people could fit in there?

Tim Derrington: 15?

Jared Haas: Yeah, it's somewhere between 15 and 20 comfortably. Of course, not everyone's ever here at the same time, so we usually have about between five and 10 people here at any given time.

Enoch Sears: Cool and tell me how much people are paying, what's the membership structure that you guys are offering right now?

Jared Haas: So we basically have two different types of desks available. And we have a little downstairs office space as well that we're leasing out. But we're generally asking about $450 for the desks and then our corner desks which have a return for architects, they're $500.00 and again that's to rent that includes everything.

Tim Derrington: It's a flat fee, it includes paper for printing, just anything you come in here … electricity, wi-fi, printing, we have a kitchenette you can use, a conference room. It's almost like going to work. Everything you'd expect to have at the office that your boss would provide, we basically provide the same thing. That's a good way to kind of think about it.

Jared Haas: I think the idea was, so most other co-working spaces, there's a lot of them popping up here in Austin, especially in our area. We're out on the East Side. They offer different rates for different things. They have dedicated desks, non-dedicated desks. Some of them will charge for a conference room per hour. We just wanted to keep it simple. We made all our desk sizes all about the same when we designed it. So that way everyone kind of, everyone just shares and occupies an equal amount of space.

Enoch Sears: And competitively, how does that membership fee compare with the other people around, the other co-working spaces?

Tim Derrington: That's a really good question, because it's not really apples to apples. Because we caters specifically towards kind of the designers and builders who tend to need to occupy space more or less permanently. You don't just bring your laptop, set up and then leave. You need screens. Typically we like to have big screens. We need to have a place to put our stuff that we can leave. Almost like an architecture studio back in college.

So our dedicated desks are even a little bit different than the dedicated desks you'd find in other places, but on the balance we tend to be about the same amount as another co-working space where they've dedicated desks, though it's not quite the same.

Jared Haas: Yeah and I think the most interesting aspect of that is we actually have an official co-working space right across from us. I can actually even turn the monitor and show you because it's right there in our shared courtyard. But it really worked out to our benefit. It's like Tim said, it's apples and oranges. They do offer dedicated desks. They offer office space. They're about twice the size of us. They offer different drop-in hourly rates. So they have all the different options that we don't have and for people that really aren't in the industry sometimes we just direct them over there because that might be the best fit for them.

Enoch Sears: Okay. So just doing the math, you guys have space for about 20 desks you say and you're charging anywhere from $450 to $500. So you're about at break even. You're probably a little bit under that. So what it does, what I'm getting at here is it seems like this isn't necessarily a big money making venture for you, but it is like you said, it's zeroing out your overhead. Is that kind of the goal here?

Jared Haas: Absolutely, yeah. The idea was just to keep our rent down as much as possible and have a space that we're all happy to bring clients in and showcase and also have a culture and have modern people around us. It wasn't necessarily a for-profit concept.

Tim Derrington: Right and that's important given that this is an architecture podcast, it's important to note that one of the realizations that we had relatively early on was that if this was going to be a business in and of itself, it would require a lot of dedication that would take our focus away from our firms which was what we're primarily dedicated to as individuals.

So, we made the decision pretty early on to just say, all right, this could be something, but we don't want to put our energy towards that, so we'll just make it a rent share opportunity for all of us and capitalize on the fact that we don't pay as much as we probably should on the balance, all of us. And we have a good time. We throw parties. We try to have a run office environment and just make the most of the kind of quality of life more so than the quantity.

Enoch Sears: And that is a wrap. Thank you for listening today. If you're looking for more time, freedom, impact and income as an architect, get instant access to my free four part architect profit map by visiting freearchitectgift.com.

Today's podcast is sponsored by AIA Advantage Partner BQE Software, the makers of ArchiOffice. ArchiOffice is the only office and project management software designed specifically for architects. It helps you manage people and projects while you focus on designing great architecture.

So whether you're working remotely or on-site, ArchiOffice allows you to monitor the status of your projects and tasks and send out invoices in an accurate and timely manner. Get your fully functional 15 day trial of ArchiOffice by going to businessofarchitecture.com/demo.

The views expressed on this show by my guests do not represent those of the host and I make no representation, promise, guarantee, pledge, warranty, contract, bond or commitment except to help you conquer the world.

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