A new, flexible tenant is setting up shop in the nation’s shopping centers, as well as in urban downtowns.
With some 43% of employed Americans now saying they spend at least some time working remotely, flexible spaces are on the rise and seeking new, unconventional locations to root their operations. And malls are in the mix.
To understand if co-working spaces can backfill empty retail space successfully and profitably, JLL conducted its first-ever study that examined 75 co-working spaces that take up more than one million square feet of retail space. The highest concentration of co-working spaces in retail is either in malls (21.3%) or urban locations (20%), where available space needs to be revitalized with novel, unique offerings.
“The current retail market is pushing landlords to find new ways to invigorate their space with alternative tenants, including co-working spaces,” said Holly Rome, director of Retail Leasing, JLL. “Setting up a co-working space in a retail property provides workers a fun, yet functional space with great accessibility, ample parking, and value-add amenities like personal services, shopping, and food options. On the flip-side these tenants bring in daily traffic and have a stable master lease that’s typically five to 10 years.”
Since 2010, the flexible space sector has grown at an average annual rate of 23%, compared to just 1% average annual occupancy growth of the broader U.S. office market. JLL is forecasting a dramatic shift in office space during the next decade as tenant demand for more flexible space options forces building owners to adapt.
“We expect this to drive a convergence of office, retail, and hospitality uses into one seamless, integrated tenant experience,” said Scott Homa, director of U.S. office research for JLL.
James Cook, director of retail research for JLL, noted that the wide range of needs has created four distinct co-working spaces that JLL thinks will increase in retail, each tailored with different amenities. These include:
1. Retail Launchpads The costliest co-working space at $404 on average per person per month is Retail Launchpads, which is where nascent brands and innovative tech companies can gain access to target shoppers. It’s not just a place to work – it’s a place to play, too.
Cowork at the Mall, a new retail incubator opening in Chicago’s Water Tower Place will be a mashup of customized pop-ups, showcasing, co-working and events. What makes this model so unique is its ability to infuse the retail space with makers, innovators, and high-tech brands interacting with consumers and offering interactive experiences. These launchpads draw crowds and wallets, making the mall a destination, according to JLL.
2. Business Boosters These co-working spaces are growth vehicles for entrepreneurs and freelancers, coming in at $255 on average per person, per month. The perks include offering special business development tools including capital, consulting services, creative support, specialty equipment, classes, and mentors. They are typically located in higher income areas, and are a good choice to backfill vacant space in mid-level neighborhood centers.
CTRL Collective in California targets innovators at every stage of their business lifecycle and prioritizes collaboration between its members. Their workspace environments are designed to suit the needs of teams of 1-100.
3. Creative Coalitions These spaces offer community and workspaces for artists, makers, and creatives, drawing in millennials by combining community events and retail in their space. More than 75% of these spaces are in urban locations with walkable neighborhoods.
Spaceus in Boston’s Roslindale Station combines co-working and showrooming with its workspace, exhibits and events. The pop-up will be in the space through September and then move to a new location.
4. Telework Hubs Telework hubs are the most common, comprehensive co-working location. They are a mix of office workers, entrepreneurs, and creatives, and represent nearly 80% of the spaces that JLL studied. This kind of co-working format will likely backfill vacant space in mid-level retail centers, taking on average 30,000+ square feet.
Union Cowork in La Jolla, Calif., is a neighborhood centric co-working company that is committed to incorporating local or new retail in its space. Weather it’s a coffee house or showroom for a furniture store – these co-working spaces double as storefronts.