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2 BR w/great views & whiteboard wall: Cambridge startups find that apartments in Kendall Square can be cheaper than offices

Posted by Scott Kirsner  April 30, 2012 05:08 PM

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Just how expensive has Kendall Square office space become?

So expensive that some startups are finding it easier and cheaper to rent a luxury apartment in the neighborhood than compete for commercial space alongside Amazon, Staples, Google, and a zillion small biotechs.

I went to visit Yesware last week at Archstone Kendall Square to see what it looks like when an eight-person company moves into a two-bedroom apartment. Yesware helps salespeople manage their e-mail communications with prospective customers; the company raised $1 million last year from Google Ventures and Foundry Group.

yesware-bellows.jpgWhen I visited, the lobby and halls of the building were completely empty. Chief executive Matthew Bellows greeted me at the door of their fourth floor apartment. "No one else is around during the day," he explained, "and we blow out of here at 6 or 7 PM, when all of the other people come home from work." Bellows (pictured at left in the kitchen) said he'd been "totally up front about what we were using the space for" with the building's leasing office.

Bellows said that the company is up to eight employees, but two or three contractors or interns sometimes show up to work, too. (When I visited, I counted a half-dozen employees working in what would've ordinarily been the living room.) Thanks to walls of windows facing east, the apartment gets better natural light than most offices.

All of the furniture, Bellows explained, had come from IKEA: "We rented a U-Haul, drove down there, and then we hired a Task Rabbit guy to put it together." Everything else came from Amazon, including computers, monitors, an LCD projector, and some nifty adhesive material that turned the wall of one bedroom into a whiteboard. That bedroom, with the whiteboard wall, had become a conference room. The other was still a bedroom (pictured at right); co-founder Cashman Andrus lives in Brazil, but he sleeps there when he's in town.

yesware-br.jpgThe rent is $3500, Bellows said, which beat out the company's other options, once it outgrew free space at the nearby Dogpatch Labs facility. (Rent there is underwritten by the venture capital firm Polaris Venture Partners.) "Everything else we looked at in Kendall and East Cambridge was at least $5000 a month, and it required a three- to five-year lease," Bellows said. "With those, the danger for a startup is that you could be renting too much space, or too little. It's hard to project what's going to happen." The apartment at Archstone is month-to-month, he explained. It didn't require any investment in a build-out, and about the only service they pay for beyond electricity is a $150/month "business class" Internet connection from Comcast. (Employees use Skype and their mobile phones for phone calls.)

At least three other startups have rented space at Archstone, but all of them have plans to move out to various Boston neighborhoods soon. (Two of them, Yesware and Objective Logistics, will remain neighbors: they found space in the same Leather District building.) Bellows said Yesware will move out in June. "Our rent will increase a bit, to $20 a square foot, but we'll have 5000 square feet, which gives us room to grow," he said. As for renting in Kendall or East Cambridge, Bellows said, "Startups are going to flee. For any startup, paying $40 or $50 a square foot is a waste of money."

yeswareconf.jpgAnother tech entrepreneur renting an apartment in Central Square for his company said he was paying $20 per square foot, for a 2000-square foot unit. (This entrepreneur asked me not to mention his name or the name of his company, as his landlord wasn't aware of the situation.) Everything else he looked at in Central and Kendall was more expensive, and in many cases too much space for his company. "We looked at some co-working options," he writes via e-mail, "but at about $500 per table, it worked out to be almost the same price for one quarter the space. Also, we felt a co-working space would not let us develop our own culture."

A man who answered the phone in the leasing office at Archstone told me that the building's management was fine if tenants chose to maintain home offices in their apartments, "and there's nothing stopping someone from having 10 people come to their apartments." He didn't want to divulge his name, and told me there was no one else who was authorized to talk to the media.

Brian Murphy, an assistant city manager for Cambridge, told me that "it's difficult to regulate what's going on in a private residence," but that "zoning enforcement is largely complaint-driven. Unless the activity is bothering neighbors, the Inspectional Services department would not be involved" in trying to crack down on startups shacking up in apartments or houses.

Murphy, who oversees community planning for the city of Cambridge, said that it's clear that Kendall Square needs more office space to help bring rents down — and avoid having companies moving into apartment buildings. "We love to have these companies here," he said, noting that major companies like Hewlett-Packard got started in garages. "We want to make sure we do everything we can to make sure the innovation economy flourishes in Kendall as best it can."

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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