Could co-working offices save malls?

As shopping centers struggle nationwide, flexible office and retail space could prove the answer, a new JLL study says


TRD NATIONAL /
Aug.August 10, 2018 12:00 PM

(Credit: iStock)

A new kind of co-working space is seeking to capitalize on two current market trends: the increasing number of freelance and remote-location workers, and the loss of tenants in the retail sector.

The idea? To combine vacant retail space with co-working offices.

Commercial real estate firm JLL conducted a nationwide study of 75 co-working offices occupying more than 1 million square feet of former retail space. The study found such new, specialty co-working spaces not only help backfill vacant retail space, but also provide added benefits to workers, consumers and retailers.

“The current retail market is pushing landlords to find new ways to invigorate their space with alternative tenants, including co-working spaces,” Holly Rome, director of retail leasing for JLL, said in the study.

Rome said retail properties offer workers amenities like ample parking and nearby shopping and dining options.

“On the flip-side these tenants bring in daily traffic and have a stable master lease that’s typically five to 10 years,” Rome said.

More retail property owners are turning toward office tenants to fill spaces left when big chains close and move out, squeezed in large part by the continued expansion of e-commerce. In Los Angeles, Hudson Pacific Properties and Macerich have plans to convert 500,000 square feet at the Westside Pavilion mall into an office park.

And just this week Macerich announced a partnership with co-working company Industrious to turn unused retail space into flexible offices. The first Industrious-managed co-working space inside a Macerich mall is set to open in Scottsdale, Arizona, in January 2019.

The JLL study found 21 percent of retail-based co-working spaces nationwide are in malls, and one in Chicago is proving there’s a new way forward.

Cowork at the Mall is a co-working space in Water Tower Place that combines office space, meeting and event space with retail areas for brands and start-ups. The 15,000-square-foot space will open in th fall, according to JLL.

Such a tenant can not only invigorate a mall — it could help rethink the flailing mall space altogether, according to the report, by turning the mall into a gathering place where “sales happen organically.”

These kinds of co-working spaces are largely concentrated in high-foot traffic areas with relatively high local average incomes, like Water Tower Place’s Gold Coast. That doesn’t do much for the suburban retail market, which is suffering from the closure of big boxes and the struggle to fill malls.

But there is a new kind of co-working space that could help these markets, the report said..

“Telework Hubs” are the most common type of co-working operation taking up former retail spaces, like the Union Cowork locations in La Jolla and San Diego, California, cited in the report. They are all-encompassing co-working spaces that target corporate workers, entrepreneurs and creatives, and that sublease space to small retailers like coffee shops.

They are also the most likely to backfill spaces left vacant when Toys “R” Us went out of business, the report said.

These new co-working and flexible retail spaces could not only transform the retail sector, but the office market as well. Since 2010, the flexible space sector has grown at an average yearly rate of 23 percent, compared to just 1 percent for the broader office market, according to the report.

In Chicago, the amount of co-working space has tripled in just four years.

“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,” Scott Homa of JLL said in the report. “We expect this to drive a convergence of office, retail, and hospitality uses into one seamless, integrated tenant experience.”


Related Articles

arrow_forward_ios
Amazon CEO Jeff Bezos and 315 S. Hicks Road in Palatine (Credit: Getty Images, Google Maps)

Amazon nails down another 650K sf worth of Illinois warehouses

Founder and CEO of Level Ex Sam Glassenberg and 180 North LaSalle St. (Credit: Google Maps)

Medical gaming company inks sublease deal in the Loop

Ald. Andre Vasquez (40th) and 5500 N. Wolcott Ave. (Credit: Google Maps)

Ald. Vasquez says Temple Steel campus won’t give way to luxury housing

A rendering of the Target warehouse at 3501 S. Pulaski Road and Target CEO Brian Cornell (Credit: Hilco Redevelopment, Target)

Target takes aim at massive warehouse in Little Village

From left: CEO and founder of CA Ventures Thomas Scott, CEOs of WeWork Sebastian Gunningham and Artie Minson, and a rendering of the building

WeWork has troubles, but it also has a new location in River North

The Bolingbrook property along route 53 and Amazon CEO Jeff Bezos (Credit: Google Maps, Getty Images)

Amazon pays $51M for site of former Chicagoland amusement park

Jeff Bezos and the Old Wrigley gum factory at 3535 S. Ashland Avenue (Credit: Getty Images and Google Maps)

Chew on this: Former Wrigley gum factory pitched as potential Amazon warehouse

Chicago Area Vacancy Rate Continues Decline

Chicago-area retail isn’t out of the woods yet

arrow_forward_ios
Loading...