Someday worth billions, but now, they need a desk

In the 20th-century workplace, Duncan Logan might be considered an abusive landlord. He rents working spaces without doors or walls between tenants. Instead, his renters work at long tables, and sometimes those tables are shared with other companies.

Yearn for privacy? "Headphones are the new cubicle," he said.

In today's tech world, though, if Logan did have a door it might be knocked down by clamoring startups. What RocketSpace, the office rental company he started in San Francisco in a building on its last legs in late 2010, does provide is lots of high-speed Internet access, proximity to well-regarded young companies, amenities like free beer and occasional chats with the likes of Steven A. Ballmer of Microsoft, Dick Costolo of Twitter and venture capitalist Vinod Khosla.

That, it seems, more than makes up for the lack of privacy. Besides, in an era of oversharing on social media sites, who needs privacy when you can have collaboration?

"I was here until 10:30 the other night, and so was the guy at that company, and them over there," said Michael Perry, indicating two tables close to his own at RocketSpace. His four-person startup, Kit, is trying to use online data so brands can find their most vocal supporters on places like Facebook.

"When I was working alone, I thought I had a billion-dollar idea," he said. "Here, everybody thinks they have a billion-dollar idea, and they're hammering away. That's inspiring."

Rents are up and vacancies are scarce in San Francisco as the tech boom has traveled north of Silicon Valley. And novel, flexible office plans have come with it.

According to the real estate service CBRE, technology now accounts for 75 percent of new office demand in San Francisco, compared with the historical norm of perhaps 30 percent. The city seems like a place where almost any space could rent. Some startups are setting up in the Tenderloin district, long considered one of the city's worst neighborhoods.

Even in the hot San Francisco market, however, RocketSpace appears to be making a 20 percent premium to current office rental prices, based on its 580 desks, leased by some 130 companies. Logan, who leases space inside two buildings near the old Pacific Stock Exchange, charges $700 to $800 a month for a "desk," or table space.

Unlike temporary offices like Sandbox Suites or WeWork, which rent desk space to freelancers and others, or the so-called incubator spaces that take equity for their startups getting off the ground, RocketSpace expects companies to increase staff under its roof, and to pay cash. Once a startup gets to about 30 people, it is time to move out.

Logan, 41, works hard at making sure renters have credibility by checking their backers and work histories. He cultivates relationships with venture capitalists and has researchers looking for the next hot thing. There are lots of free Jolly Rancher candies and boxes of coconut water, but renting here takes money, well-known backers and a personal track record at hot firms.

"From the start, we've vetted which companies would be here," he said.

If he reaches his goal of filling a thousand desks by the end of the year, Logan should get more than double the typical per-square-foot rate associated with fancier offices. His costs, besides the tables, Wi-Fi and free beer, include the odd translucent panel between spaces, padded chairs with backs so high and straight that they can be pushed together to enclose a meeting of four people, and an automatic espresso maker in the common kitchen.

Companies that have passed through RocketSpace, either as local startups or initial satellite offices, include such tech darlings as Zappos, Uber, Spotify and Kabam, an online gaming company.

"It was amazing - lots of tables, so you can't tell where one company began or ended, a receptionist who didn't know who you were, people talking in whispers because everyone is working so closely together," said Steve Swasey, the head of communications at Kabam. "It's just how our office looks now, even the wires hanging from the ceiling."

That record is how Logan persuades executives to come and talk. Big companies, desperate to figure out strategies for their mobile and cloud businesses, also visit frequently, and sometimes do deals with the startups.

RocketSpace's success shows how even architecture is changed by the tech boom. With the crowded tables, exposed data cables, candy and headphones, "RocketSpace is mimicking the environment a lot of tech companies want when they are successful," said Colin Yasukochi, an analyst with CBRE. "Everything is supposed to look like it moves fast and changes easily. Maybe they'll put the tables on rollers someday."

RocketSpace itself is something of a recovery from Logan's disastrous effort to have a startup of his own. Originally a financial trader, he was part of a successful online messaging and security company in England called MessageLabs before coming to San Francisco in 2008 to set up an online real estate service. It failed in less than two years.

In 2010, with local real estate still depressed, he found a building scheduled to be knocked down in 2012, which meant its owner couldn't write long-term leases. The owner agreed to give RocketSpace office space in exchange for a share of the profits. Another company gave him tables on 90 days' credit. The only large initial expense was for telecommunications fiber; fast Internet connections are a must.

As an experiment, he built a fake website and put an ad on Craigslist offering temporary space. It drew eight responses overnight. By adding the phrase "tech companies only" he got 15 responses. Eventually he had 30 desks and about 50 applicants.

Looking to add services and revenue, RocketSpace recently added an in-house school, where students can learn software languages. A student who excels, the idea goes, might get hired by one of the hot startups, and Logan will refund part of the tuition. He makes it up with a commission from the hiring company. But first, the student has to qualify to be at RocketU, as the school is called, either by showing the right degree or passing an online course.

Being around so many startups may have given Logan bigger dreams of his own.

"San Francisco is just one of the clusters of technology and innovation that are forming now," he said. "There is New York, Toronto, the Silicon Roundabout in Northeast London. I'd be very disappointed if we weren't starting in one of them by the end of the year."

© 2013, The New York Times News Service