CHICAGO–The retail and co-working industries may very well see more deals such as the one Macerich inked with Industrious to bring its co-working platform to select malls in Macerich's portfolio. A new report by JLL finds that co-working space in retail properties will grow at a rate of 25% annually through 2023 reaching approximately 3.4 million square feet.
This stat JLL developed from what it says is the first ever survey of the inventory of existing and proposed co-working locations in retail properties across the US. The 75 locations it identified constituted over one million square feet of retail space.
The Synergies
Much of the study makes the case of why co-working is destined to meld with retail, or perhaps that is vice versa. Retail is still struggling to absorb empty space in power malls and neighborhood centers across the US. At the same time, they are maneuvering to change the mix of tenants to different use cases. Co-working providers, for their part, are increasingly integrating retail space as a perk for members, JLL noted, as it provides an additional revenue stream and elevates worker satisfaction. This relatively new model also works well in both urban and suburban areas — although the walkability of the co-working site is very important. But JLL found that slightly more than half, or 54.7% of co-working spaces in its research are in suburban locations.
Nor are these retail co-working sites uniform in their presentation or business cases. JLL identified four major categories into which this emerging use fall into. It writes:
This co-working and retail mix is a burgeoning trend of multifunctional mixed-use spaces. This opens up opportunities for local, niche or startup concepts that do not have capital for their own location to flourish as part of a shared retail space.
Four Types
JLL grouped the types of co-working spaces that will move into retail into four types: retail launchpads, telework hubs, business boosters and creative coalitions.
Launch pads specifically target retail startups, making them unique to this genre. They have retail incubation and demo space where new brands and innovative tech companies can gain access to target shoppers. One example is Cowork at the Mall at Chicago's Water Tower Place, which is occupying 15,000 square feet and will open this Fall. The space will be a mashup of coworking space, event space and merchandising space for retail and tech brands, JLL says.
More common are the telework hubs, representing 78% of JLL's case studies. They are telecommuting locations that are home to corporate office workers, entrepreneurs and creatives. An example of this is Union Cowork's North Place location in San Diego, which ties a retail storefront with its coworking space.
Business boosters offer development tools including capital, consulting services, creative support, speciality equipment and classes. An example of this model is CTRL Collective in Pasadena, CA, which is situated in a 22,000-square foot building and which targets entrepreneurs and innovators at each stage of the business lifecycle.
Creative coalitions offer community and workspaces for artists, makers and creatives and often will supply specialty equipment like 3D printers, welders and dark rooms. Spaceus in Boston follows this model, providing local artists with workspace, business development events and classes. It ran a pop up in Boston's Faneuil Hall Marketplace and will have another pop up at Roslindale Station through September.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
