Menlo Innovations, led by CEO Rich Sheridan (center), signed a 10-year lease for nearly 17,000 square feet of space in the bottom floor of The Offices at Liberty Square. McKinley CEO Albert Berriz (right) and Vice President Thomas Gritter said the space, which is known as Tally Hall and once housed Borders, will be nearly full when Menlo moves in.

Angela J. Cesere | AnnArbor.com

In a deal with Ann Arbor-based real estate firm McKinley Inc., Menlo is set to move into 16,900 square feet of space on the bottom floor of the former Tally Hall building, which is now called The Offices at Liberty Square.

It’s a particularly significant move for Menlo, which has received extensive publicity for its uniquely wide open, flexible office space and atypical work culture. But it’s also “indicative of the growth of Menlo,” CEO and founder Rich Sheridan said.

Menlo, which celebrated its 10th anniversary earlier this year, has about 25 full-time employees in addition to a regular list of contractors who work for the company as business fluctuates. Today, Menlo has about 40 staff members, Sheridan said.

Menlo Innovations plans to move into this space at The Offices at Liberty Square.

Angela J. Cesere | AnnArbor.com

Menlo Innovations will share a glass wall with the 3,200-square-foot TechArb, an incubator for student-led companies at the University of Michigan.

Angela Cesere | AnnArbor.com

“I don’t think it’s unrealistic to say we can double the size of our team within a year,” Sheridan said.

Sheridan said Menlo has achieved a record sales level in 2011, and he’s making a bet that the company’s growth would accelerate with a new, larger office space. He declined to offer details about new software development contracts the company has secured but said Menlo has experienced an influx in business.

Still, he suggested that some prospective clients have avoided signing deals with Menlo because the company’s not quite big enough. More space means more room to grow.

“For us, there’s a business imperative here,” he said.

McKinley CEO Albert Berriz said Menlo’s relocation to The Offices at Liberty Square completes the entrepreneurial hub he’s been envisioning in the complex, which also houses the University’s of Michigan’s student-led business incubator TechArb.

“I don’t think there’s anyone who typifies the entrepreneurial spirit in Ann Arbor more than Rich,” Berriz said. “He could have his business anywhere. A lot of people talk about creating jobs. He’s creating jobs.”

Menlo expects to move into its new office space around April, following the completion of extensive upgrades by McKinley, which has already significantly renovated Tally Hall’s interior.

Neal Warling of Jones Lang LaSalle represented McKinley in the negotiations, and Diane Weisberg of Newmark Knight Frank represented Menlo.

The office space, dotted with imposing 2.5-story white columns that support the Liberty Square parking structure, once housed the headquarters of bookstore chain Borders.

The lease deal fills up most of the vacant space at The Offices at Liberty Square, which will have a few smaller suites left to lease, said Thomas Gritter, McKinley’s vice president and managing director of commercial real estate.

Menlo currently occupies more than 4,000 square feet at its fourth-floor office at a historic office building on Fourth Avenue in Kerrytown, although the company has access to about 6,000 square feet there. Sheridan said the company’s lease for space in that building is expiring.

Sheridan said Menlo would simply shift its culture of an open, collaborative workspace to the new building. Much like its current space, Menlo software developers won’t have assigned desks, computers or offices, although conference room space will be available.

"Cubicles kill,” Sheridan wrote, provocatively, in a blog post that drew attention in 2009. “They kill morale, communication, productivity, creativity, teamwork, camaraderie, energy, spirit and results. They suck the joy out of work.”

In many cases, Menlo developers work side by side at the same computer, generating ideas and developing technology for projects like Accuri Cytometers’ high-tech medical device. New Jersey-based Becton, Dickinson and Co., which acquired Accuri for $205 million in early 2011, continues to be one of Menlo’s largest clients.

One of the biggest changes for Menlo is that the company will dedicate permanent space at the new office to host training exercises and classes for outsiders, an activity that already accounts for about 5 percent of its revenue, Sheridan said.

Menlo, separated only be a glass wall, will be situated directly adjacent to TechArb, a 3,200-square-foot incubator for student startups. Sheridan, who said he envisions Menlo possibly starting its own business accelerator at some point, said Menlo welcomed the arrangement.

“There’s a trend I see developing in this community of entrepreneurship flowing through the university and Ann Arbor SPARK to other entrepreneurial places like Menlo,” Sheridan said.

Since the new space, which straddles Washington and Liberty streets, is not visible from the outdoors, one of Menlo’s priorities is creating a connection to the outside world.

So the company plans to install a two-way video screen and camera on Liberty Street, where passersby will be able to wave to Menlo software developers and watch them work. Downstairs, Menlo developers will be able to see them and wave back through a connected screen and camera.

“This will be the Menlo Software Factory,” Sheridan said.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.