Coworking spaces in shopping centers and major malls, where store space is leased as office space, are experiencing rapid growth across the country. These flexible spaces are sought after by landlords and tenants alike and may play an important role in the ever-shifting tenant mixes of modern shopping centers and major malls.
According to recent research from JLL, coworking spaces are expected to grow at an annual rate of 25% through 2023, reaching approximately 3.4 million square feet. To put this exponential growth in perspective, the average annual growth rate in occupied retail square footage from 2010 to 2017 is only 0.9%.
While coworking spaces are experiencing rapid growth, there are many who believe this is not a viable long-term strategy to fill vacant space. Others believe that short-term coworking leases contribute to a fresher, newer variety of retail offerings to keep customers engaged and coming back.
Regardless, both landlords and tenants benefit from coworking spaces, which is a primary factor in its explosive growth in recent years.
How Do Long-Term Coworking Leases Benefit Major Malls and Shopping Centers?
The rapid growth of coworking spaces is great news for landlords in search of creative new ways to repurpose retail space and fill vacancies while promoting a high level of day time foot traffic. This benefits landlords directly through occupied retail space, but elevated traffic levels may also attract other retailers, indirectly helping fill more vacancies for the landlord.
Oftentimes, companies in search of a long-term coworking space are looking for spaces that are larger than the typical retail store. To fit in comfortable seating, conference rooms, computers, technical equipment and more, companies simply need a lot of square footage, which helps shopping centers lease out more of their vacant retail space.
In addition to all of this, most of these long-term coworking environments exist in areas with above-average consumption power too, where the average household income within a three-mile radius is around $100,000. Overall, coworking spaces with long-term leases can be a profitable venture for landlords, especially those facing high levels of vacancy.
The Rise of Short-Term Coworking Leases in Restaurant Space
Short-term coworking environments exist too. Operating similarly to a pop-up retail model, they help shopping centers and major malls to continuously offer a fresh new retail experience. In traditional brick and mortar retail, pop-ups were merely for extra rent money until a new long-term tenant could be found, but now this type of short-term lease is a calculated strategy, and a company called Spacious is taking advantage of this.
Spacious is a retail startup that transforms restaurants and cafes into coworking spaces during their down time. Customers pay a low monthly fee to rent restaurant spaces that have been remodeled by Spacious to promote a more comfortable, productive working environment. This business model is quickly gaining popularity, as the company will soon open up 100 new coworking locations in San Francisco and New York City, and has also recently closed on a $9M funding round.
Landlords have been interested in Spacious’ services so far as they represent an opportunity to experiment and revamp storefronts that aren’t being used to their full potential or are completely vacant.
While Spacious is a promising startup, others in the industry believe that short-term coworking spaces don’t do anything to solve the underlying problems of vacancy in the long-term – they are nothing more than a stop-gap measure and only provide value by creating activity at an otherwise vacant area.
Whether you believe in the long-term potential of coworking spaces or not, there’s no denying the recent growth in retail coworking spaces in both short- and long-term leasing types.
Why Do Tenants Like Coworking Spaces?
The most obvious way in which tenants benefit from coworking spaces is the fact that employees enjoy the many amenities it affords, such as nearby food and shopping, as well as ample parking. It’s hard to beat the convenience of being located in a major mall or shopping center.
Coworking areas in shopping centers and major malls are also start-up friendly. These spaces typically offer short-term leases, easy access to consumers for product testing, and the opportunity to network with likeminded start-ups and professionals.
Bespoke, a coworking area exclusively for retail tech startups in the Westfield San Francisco Centre, is a prime example of this phenomenon. The coworking space, which includes a large space to host events, has been leased to over 75 retail tech startups, all of whom have the opportunity to benefit from each other’s presence through networking and attending each other’s events.
More than 50 international retailers have visited the site for product demos and over 100 events have been held in this space, all over the course of its first year of operation. Not only has the collective power to attract retail professionals to the space benefitted the startups, but it’s been a powerful, creative way for the shopping center to grow their foot traffic.
Shopping Centers, Major Malls and Coworking Tenants All Benefit From this Arrangement
At the heart of the rapid growth of coworking spaces in shopping centers and major malls is the fact that both landlords and tenants have a lot to gain from the arrangement. For landlords, it’s a promising new way to fill vacancies, attract foot traffic, and increase revenues. For tenants, it’s a cost-effective way to please employees and/or make important business connections.
While this is a relatively new phenomenon, coworking spaces are expected to experience rapid growth in the near future and represent one important way that the retail landscape is changing.
For more information about the shifting retail landscape, learn about Directory of Major Malls| ShoppingCenters.com retail data products. As the most comprehensive online source of retail data, DMM helps you stay ahead of the trends and make more informed, profitable decisions.