HBC to Convert Empty Department Stores into Flex Offices

Hudson Bay Co., owner and operator of department stores in the US and Canada including Saks Fifth Avenue and the Hudson’s Bay chain, is partnering with private-equity firm Ares Management to acquire a $500M majority stake in Convene, which specializes in furnished and flexible office space. 

Convene, which debuted in New York City in 2009 as a manager of event space, meeting space and catering for office buildings, has emerged as a player in co-working spaces that offer amenities.

HBC said it plans to install more Convene operations in office towers. The company, which owns all of the space vacated by bankrupt Lord & Taylor outlets, also said it will convert most of its empty stores into furnished flex office space, according to a report in The Wall Street Journal.

HBC CEO Richard Baker said HBC initially will provide 20 properties from its holdings to open new Convene locations in former retail space. Baker said Convene also plans to add another 20 flex-office spaces in conventional office buildings, retail and apartment properties, according to the WSJ report.

In addition to furnishing, Convene adds perks including catering, wellness facilities and virtual-conference software to the flex space in its locations.

As more and more companies embrace hybrid work as a compromise between remote work and return-to-office strategies, demand is increasing for furnished office space under short-term leases.

Last year, HBC began its own program—which it called SaksWork—to convert some of its space into co-working flex office sites. The HBC program was managed by co-working pioneer WeWork.

HBC said its existing program to develop co-working space will adopt the Convene name; Convene CEO Ryan Simonetti will lead a new management team of the combined programs.

The combined portfolio of flex space currently has 26 locations, including 23 workspaces and meeting rooms in office buildings previously leased by Convene.

Unlike other flex-office players including WeWork, IWG and Industrious, Convene intends to own most of the real estate it manages, Hamid Hashemi, COO of HBC’s property arm, told WSJ.

According to CBRE, “flexible office space solutions clearly will be a key part of companies’ real estate strategies as they adopt hybrid work arrangements and as new space use patterns emerge.”

While the flex office sector contracted by about 9% during the pandemic, CBRE said it expected flex office supply to resume its pre-pandemic growth trajectory in 2022 as occupier demand increases due to adjustments in work patterns.