REAL ESTATE

JLL: Co-working spaces in malls on the rise

BY Marianne Wilson

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.

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Hot markets: Miami
REAL ESTATE

Hot markets: Miami

BY Al Urbanski

It’s hot in Miami, really hot. Job growth in the city has been on an uptrend for 10 years. In-migration trends fuel a growing population hungry for retail; the retail vacancy rate has dropped steadily over the past two years. Big projects abound. Swire’s billion-dollar Brickell City Centre — which turned an industrial downtown district into a luxury neighborhood — opened two years ago. Now under construction is Miami Worldcenter, a 10-block mixed-use project that will add 450,000 sq. ft. of retail adjacent to the central business district.

“Miami has always been under-retailed for the population,” said Drew Kristol, senior director of Marcus & Millichap’s national retail group. “Whether downtown or in recently up-zoned high street districts like Wynwood, there’s a lot of density.”

Retail vacancies, he said, have always been sparser in Dade County versus other Florida counties, even after the 2008 economic downturn. Affluent residents continue to stream into the city, gentrifying nabes like Wynwood, the Design District, and the Latin Quarter on U.S. 1. An already low vacancy rate of about 5.6% in 2016, as a result, has slid to 4.1% this year.

There’s no dearth of retailers vying for the available space. Target, Walmart, and Dick’s Sporting Goods have all been expanding in Miami. The state’s largest grocer, Publix, has been active in providing sustenance to nascent neighborhoods with new stores.

Miami promises to be an expansion destination for many other retail chains in the near future. Some 2 million sq. ft. of retail GLA is under construction, led by the Worldcenter retail complex, which is being developed by The Forbes Company and Taubman.

“Worldcenter will create an entirely new venue,” Kristol observed. “Downtown Miami has never been renovated. It’s reminiscent of the Garment District in New York City, a lot of little electronics and luggage stores.”

At first it was edgy retailers and new restaurant concepts that took advantage of opportunities in the developing pockets of Miami, but now national chains are taking notice of America’s southernmost big city and more are likely to come on stream.

Triple Five, the owner-operator of Mall of America, will soon liven up the retail conversation. In May, Miami-Dade County commissioners approved its biggest project ever: a $4 billion-dollar, 6 million-sq.-ft. American Dream Miami retail theme park.


Miami by the numbers

 

2 million sq. ft.
retail GLA to be completed in 2018

4.1%
vacancy rate

$35.82
average asking rent

1.9%
increase in asking, down from 5.3% in 2017

107,862
population increase from 2013-2017

Source: Marcus & Millichap

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Al Urbanksi
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On the Level: Experienced outtakes

The most enjoyable aspect of my job is talking with developers who have been in retail real estate for decades. They’ve seen it all and built it all.

BY Al Urbanski

The most enjoyable aspect of my job is getting to talk with developers who have been in retail real estate for decades. They’ve seen it all and built it all. Risk is as familiar to them as the family dog. I spoke with several of them in putting together this year’s Top 10 Retail Center Experiences list. Yet, with space at a premium, I had to leave out some of the best stuff. So, I turn my column over to them and the pearls left on the cutting room floor.


Butch Knerr
Irvine Co. Retail properties

I had the privilege of working with David Simon for many years. So thoughtful. So creative. But [Irvine Co. founder] Donald Bren is an equally amazing man. One of the things that makes Irvine unique is that we think of ourselves as one integrated company. We make it special for people who rent from us. If you live in one of our 10,000 apartment units, you can have dinner delivered from any one of our restaurants for less than $5. We have free shuttles for everyone to get from anywhere to anywhere — offices, residential, or retail. That’s one of the reasons we get 17 million people a year at Irvine Spectrum Center.


Deborah Butler
Butler Enterprises

We were always in experiential retail. When we came to Gainesville, it was a desert. We had the first grocery store and we did anything to get people to come. We had the donkey that jumped into the pool. We had the mechanical elephant. We baked a 1,200-lb. cake to make the Guinness Book of World Records. That’s how it’s always been. That’s how I was raised.


Bob Stark
Stark Enterprises

What makes a place like Soho so exciting? It’s all these people doing different things in the same space. At Crocker Park, we have a ratio of 5-to-1 non-retail to retail. All these people come down into the same spot for some different reason. Then lace into that all of the amenities we provide — like the food kiosks we brought in from Italy — so many things we have here that have become part of the culture. Crocker Park is a submarket, it dictates its own comps and rental structure. It’s a thing unto itself.


Joe Coradino
PREIT

When we bought [Plymouth Meeting Mall], it was pretty clear to us that with King of Prussia Mall and Willow Grove flanking it, the traditional retail approach was not going to work. What’s the old saying? Necessity is the mother of invention? In this case, necessity was the mother of creativity. We began to think about how we could change it from a traditional mall. About a year ago, we got the Macy’s back and now we have about half a dozen new tenants taking that space — all dining, health, and fitness. We were able to use that to catapult Plymouth Meeting into becoming something very different than a suburban mall.


David Ruddick
Westfield

There’s so much more to [the Century City renovation] than tenant curation. When you look at the collaboration with the Los Angeles County Museum of Art that lets us select and display pieces on a long-term basis, it creates an aura of authenticity around Century City. It’s not a project that will be easy to replicate. It’s authentic for the community and the culture it serves. The beauty of new platforms like this in retail centers is it gives you a wider outreach. A new shopper is coming in wanting to be part of that energy.

 

That’s the stuff that PowerPoint presentations are made of. So, the only thing I can add to this is to wish you all a summer of wonderful experiences.

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