Through his coworking business Creative States, Ukrainian entrepreneur Ilia Kenigshtein, 48, is rethinking the concept of tech-centered spaces that have recently dominated the market.
Instead of glass office cubicles for aspiring techies and young startups, Kenigshtein opened a chain of premium-class coworking spaces in downtown Kyiv for all kinds of businesses that can pay the price.
Kenigshtein’s Creative States coworkings look jazzy and posh, reminiscent of America’s Great Gatsby era of the late 1920s with their sumptuous colors, lavish ornamentation and Art Deco furniture.
Creative States’ style is not just a whim of its founder — it is a strategic move aiming to encourage businesses, including well-established ones, to work there, Kenigshtein said.
Since 2018, when Kenigshtein opened his first coworking in Kyiv’s business center Senator, many big-name companies from around the world have become its residents, including Japanese tech giant Viber, popular mobile bank Monobank, the European Business Association and international job marketplace Upwork.
While hanging out in a lobby of a Creative States coworking, one can encounter tech entrepreneurs, chief executives of big enterprises and government officials.
“Everyone is equal here,” Kenigshtein said in an interview with the Kyiv Post held at the newly-opened Creative State coworking at the former Arsenal factory in Kyiv on March 5.
Right now, four Creative States coworkings take up nearly 12,000 square meters in Kyiv and Dnipro, a city of almost 1 million people 480 kilometers southeast of Kyiv. Apart from Arsenal, Kenigshtein built offices in Kyiv’s elite business centers Senator and Gulliver and business center Kudashevsky in Dnipro.
Creative States is already one of the most expensive and one of the largest coworkings in Kyiv after Belgian coworking IWG (formerly Regus) that takes up nearly 17,800 square meters and Creative Quarter with 12,700 square meters.
Kenigshtein said that he plans to grow further — to expand his business to the European Union, open two new locations in Kyiv and launch franchises in other Ukrainian cities. In the future, coworkings will replace traditional offices and Creative States will be a part of this revolution, he said.
Transforming market
Coworkings are cheaper and more flexible than traditional offices, fueling greater demand.
In 2014, Kyiv had less than 10,000 square meters of coworking spaces, but now it has over 91,000 square meters — nearly 4.5% of all commercial real estate. The same trend is happening in Paris, Amsterdam and Berlin, according to real estate analyst CBRE.
Coworkings provide businesses with cleaning services, internet connections, and kitchen and bathroom amenities — things that typically burden companies that want to open their own offices.
Kenigshtein said that, after moving to Creative States, many chief executives seem to have more free time that they can spend working rather than “serving their offices.” In coworkings, businesses only pay for the space they need and can scale the team at their own pace, while in rented offices they are restricted by long-term leases.
The pricing in Creative States is higher than in other popular coworkings like Platforma, Kooperative or Hub 4.0. It charges its residents $430 a month for renting a private office and $250 for a hot desk.
Kenigshtein said that his price is justified because Creative States has high standards. “We’re like a five-star hotel but for businesses,” he said.
Companies that reside in Creative States seem to like it.
“Creative States, to my mind, is a piece of art,” said Oleg Gorokhovskyi, cofounder of neobank Monobank. “I can’t find anything to complain about.”
“It is a place where professionals can meet one another, a place that inspires,” Tatiyana Karelskaya, head of human resources at the European Business Association, said in the association’s promo video about their new office in Creative States.
Having been acclaimed by such successful businesses, Kenigshtein is ready to expand it to Western Europe and the U.S., where he’s sure he can outrun giants like U. S. Knotel or WeWork.
Work with investors
To open a coworking, the company first has to lease the space, renovate it and then rent it out. It is a business model used by nearly all coworkings, including Kenigshtein’s.
But to turn a leased place into a luxurious coworking, one has to put in a lot of money — up to $2 million. Kenigshtein needs trusted investors.
To transform Kyiv’s Arsenal factory, for example, Kenigshtein attracted money from tycoon and founder of construction company UDP Vasyl Khmelnytsky and local developer Oleksiy Baranov, who built the shopping mall Smart Plaza in Kyiv. In business center Senator, Kenigshtein works with its owner Oleksandr Spektor and in Gulliver — with the heads of construction company Denza, Eduard Polekhin, and Pavlo Podtopta.
All of Kenigshtein’s coworkings are profitable, he said. Even Creative State of Arsenal, which opened in June, broke even during the pandemic.
The company invested up to $600 per square meter of each coworking in Kyiv, Kenigshtein said, meaning that opening a space in Senator cost the company nearly $1 million. In Arsenal, it cost over $2 million.
Kenigshtein said that investors will break even and start seeing returns in three-four years.
At first, landlords were wary of coworkings “inhabited by hippies and techies” but today more business centers jump on the opportunity to open one in their buildings. For them, it’s a good deal. Apart from paying rent, coworkings make these business centers more popular.
Business centers are still the most popular locations for coworkings, according to CBRE. But Kenigshtein said that he likes to invest in separate venues like Arsenal, because it’s easier to reconstruct them.
Kenigshtein wants to launch a franchise and open Creative States branches in other big cities like Kharkiv.
Facing competition
Keeping things under control in Creative States is essential to Kenigshtein because he knows how it feels to be kicked out of his own business.
In 2016, Kenigshtein and his partner Roman Khmil, former director of Ukrainian tech company GlobalLogic, opened their first coworking in Kyiv. Called Creative Quarters, it had the same voguish style as Creative States and consisted of 2,800 square meters in business center Gulliver.
In 2018, Kenigshtein was ousted from Creative Quarters, which, two years after the launch, was valued at $7 million.
Khmil said that Kenigshtein didn’t invest in the company and, when it was hard for partners to find common ground on several issues, investors fired him. Kenigshtein said the company was stolen from him.
Although Creative Quarters and Creative States each have one of their coworkings in Gulliver, they have different entrances and the founders don’t see each other.
After losing Creative Quarters, Kenigshtein is now trying to build a company that is “bigger and better.”
“I’m sure that infrastructure changes the mindset,” Kenigshtein said. “Therefore, my dream is to change the concept of work through the buildings I create.”
