Coworking spaces may be the answer to retailers' foot traffic problem
As the number of remote workers in various industries grows — 43% percent of employed Americans work that way at least some of the time — flexible coworking spaces will grow to 30% of all office stock by 2030, according to a report emailed to Retail Dive from commercial real estate firm JLL, which conducted a study of 75 co-working spaces taking up more than a million square feet of retail space offering workspace, office amenities, exhibits and events.
Targeting areas with above-average household incomes, the highest concentration of co-working spaces in retail is in malls (21.3%) and street-front properties (20%), while 54.7% are in the suburbs. The average household income within a 3-mile radius of coworking retail spaces is about $100,000, according to the report.
JLL identified four key types of retail coworking spaces: Retail Launchpads (retail incubators with demo spaces), Telework Hubs (comprehensive telecommuting hubs), Business Boosters (growth vehicles for entrepreneurs) and Creative Coalitions (artist/maker workspaces).
A few decades ago, the market responded to retailers' once-insatiable appetite for more stores, but the industry is now on a diet, and developers are grappling with a lot of empty stores.
It's a correction long in coming. But, along with entertainment and food services, commercial real estate developers are finding that America's emerging remote workforce is offering them a lifeline.
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, according to JLL's report. "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," JLL Director of U.S. Office Research Scott Homa said in a statement.
The list is already growing fast. JLL noted examples that include Cowork at the Mall opening in Chicago’s Water Tower Place, Union Cowork in La Jolla, California, CTRL Collective in Los Angeles and Pasadena, California, and elsewhere, and Spaceus in Boston’s Roslindale Station. In April, Brookfield Residential-owned real estate firm OliverMcMillan announced that luxury co-working company No. 18 will set up its first U.S. location at the upscale open-air shopping center The Shops Buckhead Atlanta this fall.
The phenomenon has the added benefit of coming to the rescue of the retailers that remain in those corridors, whether at the mall or downtown, JLL also said, adding that coworking presents a viable solution to increase foot traffic. The workers flocking to such spaces want to be able to eat or shop nearby, so the walkability of the neighborhood is important for site selection. One third of locations JLL looked at were ranked as a "walker’s paradise," indicating that daily errands don’t require a car, researchers said.
Workspace companies themselves are aligning with retail. WeWork last month unveiled WeMRKT, a retail space dedicated to selling products made by WeWork members, including healthy snacks, office necessities and branded apparel. Last October, the company made a deal to buy Hudson’s Bay Fifth Avenue property Lord & Taylor flagship store for $850 million, with plans to keep retail sales going on the upper floors. And in 2016, Staples announced a partnership with office-space sharing startup Workbar to set up co-working spaces in three suburban Boston area stores.
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