Alternative Tenants Invigorate Retail
Approximately 43% of employed Americans say they spend at least some time working remotely and there’s no signs of that slowing as the traditional 9-to-5 five-day work week morphs into work-life integration.
DALLAS—The traditional 9-to-5 five-day work week routine is slowly morphing into work-life integration. Approximately 43% of employed Americans say they spend at least some time working remotely and there’s no sign of that slowing.
As a result, flexible space is on the rise with unconventional locations serving as the root of operations. Concurrently, retailers are consolidating stores, leaving prime spots available in retail locations.
“The current retail market is pushing landlords to find new ways to invigorate their space with alternative tenants, including coworking spaces,” according to Holly Rome, director of retail leasing, JLL. “Setting up a coworking space in a retail property provides workers a fun, yet functional space with great accessibility, ample parking and value-add amenities such as personal services, shopping and food options. On the flip side, these tenants bring in daily traffic and have a stable master lease that’s typically five to 10 years.”
To determine if coworking spaces can backfill empty retail space successfully and profitably, JLL conducted its first-ever study to examine 75 coworking spaces that take up more than 1 million square feet of retail space. The highest concentration of coworking spaces in retail is either in malls (21.3%) or urban locations (20%), where available space is being revitalized with unique offerings.
Of the 75 locations reviewed for the report, two are in DFW: Venture X at Village on the Green in Dallas and WeWork at The Shops at Clearfork in Fort Worth. In fact, eight coworking locations in the study are in Texas markets, including locations in Austin, Houston and Harlingen, TX, GlobeSt.com learns.
“Proximity to residential is a partial factor, but not as significant as the ‘cool’ factor for both Village on the Green, across street from Galleria, and Shops at Clearfork, which a similar appeal,” Mark Newman, executive vice president for JLL retail in Dallas, tells GlobeSt.com. “If you office at these locations, you won’t have to resort to the deli in the basement when lunchtime comes–you can eat at a fashionable, new eatery, and shop and run errands at the same time.”
JLL predicts that coworking space in retail will grow at a rate of 25% annually through 2023 and reach approximately 3.4 million square feet, a small fraction of the current 60 million square feet of US coworking space in conventional office buildings. The average retail-based coworking location space is 16,400 square feet, which is slightly larger than a typical mall tenant. However, not all coworking spaces are the same.
“Coworking is no longer a start-up only culture. Most flexible space today actually provides dedicated and private areas to larger companies that need to scale their workforce up or down,” said James Cook, director of retail research for JLL. “This wide range of needs has created four distinct coworking spaces that we think will increase in retail, each tailored with different amenities.”
Retail launchpads: This is the costliest coworking space at $404 on average per person per month. This kind of space is where nascent brands and tech companies can gain access to target shoppers. These launchpads draw crowds and wallets, making the mall a destination to work and play.
Business boosters: These coworking spaces are growth vehicles for entrepreneurs and freelancers, coming in at $255 on average per person per month. The perks include offering special business development tools including capital, consulting services, creative support, specialty equipment, classes and mentors. They are typically located in higher-income areas, and are a good choice to backfill vacant space in mid-level neighborhood centers.
Creative coalitions: These spaces offer community and workspaces for artists, makers and creatives, drawing in Millennials by combining community events and retail in the space. More than 75% of these spaces are in urban locations with walkable neighborhoods.
Telework hubs: These hubs are the most common comprehensive coworking location. The space is a mix of office workers, entrepreneurs and creatives, and represent nearly 80% of the spaces that JLL studied. This kind of coworking format will likely backfill vacant space in mid-level retail centers, taking on an average of 30,000-plus square feet.