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A real estate giant turns on to tech incubators

In a sparse space in Crystal City, Va., the cement walls are blank, but for one covered in graffiti, where visitors and employees sign their names and the names of their companies. The wall is common corporate ground, and so is the office.

"What we're doing is kind of doing it top down from here. We're saying, 'Hey let's dangle all of this money in front of these high growth companies and let's make them a compelling offer of where they can live, work and play,'" said Paul Singh, a venture capitalist and founder and CEO of Disruption Corporation.

A graffiti wall that is common corporate space at a tech incubator in Crystal City, Va.
Diana Olick | CNBC
A graffiti wall that is common corporate space at a tech incubator in Crystal City, Va.

Singh has invested in hundreds of new companies in 35 countries. In April, Singh launched the $50 million Crystal Tech Fund, which invests in early stage technology companies and provides them with a collaborative work space.

"The gap now is in the middle. Where you have some revenue, whether it's a million bucks in revenue, seven or 10 people working for you. It's hard to raise the money you need at that gap, but it's also hard to find office space," Singh said. "Where do you actually put them? Because you're too big for the co-working spaces and you're too small to sign a lease with anybody."

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Enter Vornado, one of the nation's largest real estate investment trusts, with over 8 million square feet of commercial space in the Crystal City area.

"This whole area has great bones," said Vornado's Mitchell Schear, president of the company's Washington, D.C., division. A stone's throw from the nation's capital and in engine-roar distance of Reagan National Airport, Crystal City needs only the employees to fill its modern spaces, Schear said.

"What we mean by that is the creative types, the younger types, what we call in this area the stem types: science, technology, engineering, and math," said Schear. "With government being less active than it has been in the past, what we think is that Crystal City presents an opportunity for the future office users."

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Not only is Vornado leasing to these new tech companies, the REIT is investing in them, partnering with Singh and others to populate a new ecosystem of employees who will not just work but, if all goes according to plan, live in Crystal City as well. Vornado is partnering with WeWork, a so-called start-up incubator, to transform a nearby office building into 250 apartments, many of them 800-square-foot "micro-units."

"(It is) communal-style living, so that there'll be a shared kitchen. There'll be shared spaces, and we think that that's something this demographic will be looking for, for sure," said Schear.

A sketch of an apartment project for WeWork
Source: Vonado via WeWork
A sketch of an apartment project for WeWork

Most of the companies fueled by the Crystal Tech fund are run by millennials, such as Patrick Smith of Power Supply Inc., a start-up that is working to create a network of chefs who make healthy meals that can be sold through gyms, yoga studios and senior centers.

"There is a lot of goodness in being in the mix here with all these companies, and I think that we can learn a lot from each other," said Smith. "There are a lot of informal conversations that happen between all of us; I can grab Paul (Singh) and ask his opinion of something. I can talk to one of the other companies. There's a lot of synergies among all of us," he added, sitting with four co-workers at a table covered equally with laptops and take-out coffee cups.

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Singh makes it clear, he did not intend to drag companies to Crystal City by offering them investor capital. That was never the plan.

"The thought was this: Where is there a blank canvas with which we can not only solve what these companies need next year, by giving them apartments across the street or whatever, but what they need in 10 years? Maybe this could become the way that all cities in the United States think about tech—as sort of a little ribbon throughout themselves."

—By CNBC's Diana Olick

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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