Malls all across America that were once home to retailers are now being converted into shared office space as coworking companies branch out to meet raising demand.
Coworking space is predicted to grow at retail properties by an annual rate of 25 percent through 2023, according to a new report from commercial real estate service provider Jones Lang LaSalle.
Shared office space is expected to account for roughly 3.4 million square feet of retail space by then, JLL found in surveying 75 different coworking locations at traditional malls, stripmall centers and within street-level retail shops across the U.S. Retail space left vacant by retailers, including now-bankrupt Toys R Us and Bon-Ton, are being converted into shared office space.
Mall owners are increasingly turning to unconventional tenants to fill some of the estimated 200 million square feet of retail space that is closed or is expected to close as retailers close.
Malls in particular are under pressure when they are handed back much larger locations from department store operators like Sears, J.C. Penney, Macy’s and Hudson’s Bay, since there are few retailers, if any, still growing at that same size and scale to replace these retailers.
Macerich is the first mall owner to land a multiproperty deal with a shared-office space provider. Industrious has roughly 50 locations today in 33 cities across the United States. Other popular coworking businesses popping up around existing retail centers include Regus and WeWork.
The idea for some mall operators is that these coworking spaces will serve as incubators of sorts for new brands that could eventually run stores of their own within those locations. More and more, landlords are looking to have strong, if not exclusive, relationships with younger brands just starting to grow.
Retail real estate analysts agree there is a lot of appeal in bringing more coworking uses into retail. As tenants, coworking companies are typically signing normal- to longer-term leases, and these deals promise to bring more foot traffic to the property for current retailers.
By Jamie Barrie