Coworking spaces to fill closed stores
The traditional 9-to-5, five-day work week, routine is slowly morphing into work-life integration. Approximately 43 percent of employed Americans now say they spend at least some time working remotely and there’s no signs of that slowing. As a result, flexible space is on the rise and seeking new, unconventional locations to root their operations. At the same time, retailers are consolidating their stores leaving prime spots available in retail locations.
To understand if coworking spaces can backfill empty retail space successfully and profitably, JLL conducted its first-ever study that examined 75 coworking spaces that take up more than one million square feet of retail space. The highest concentration of coworking 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 coworking spaces,” according to Holly Rome, Director of Retail Leasing, JLL. “Setting up a coworking 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.”
JLL predicts that coworking space in retail will grow at a rate of 25 percent annually through 2023 and reach approximately 3.4 million square feet, a small fraction of the current 60 million square feet of coworking space in conventional office buildings across the U.S. The average retail-based coworking location space is 16,400 square feet, which is slightly larger than a typical mall tenant. However, not all coworking spaces are the same.
“Coworking is no longer a start-up only culture. Most flexible space today actually provides dedicated and private areas to larger companies that need to scale their workforce up or down,” said James Cook, Director of Retail Research for JLL. “This wide range of needs has created four distinct coworking spaces that we think will increase in retail, each tailored with different amenities.”
1. Retail Launchpads:
The costliest coworking space at $404 on average per person per month is Retail Launchpads. This kind of space 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, coworking 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.
2. Business Boosters
These coworking 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. It dubs itself the “super collider for the visions of conscientious creators.” 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 percent of these spaces are in urban locations with walkable neighborhoods. Spaceus in Boston’s Roslindale Station combines coworking and showrooming with its workspace, exhibits and events. This 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 coworking location. They are a mix of office workers, entrepreneurs, and creatives, and represent nearly 80 percent of the spaces that JLL studied. This kind of coworking format will likely backfill vacant space in mid-level retail centers, taking on average 30,000+ square feet. Union Cowork in La Jolla is a neighborhood centric coworking 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 coworking spaces double as storefronts.
Since 2010, the flexible space sector has grown at an average annual rate of 23 percent, compared to just one percent average annual occupancy growth of the broader U.S. office market. “We’re forecasting a dramatic shift in office space in 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,” concluded Scott Homa, Director of U.S. Office Research for JLL.