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As More Retailers Close Their Doors, Coworking Offers Unique Solution

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The mass closure of under-performing retail stores is far from over. As the “retail apocalypse” picks up speed, more closings have already taken place in 2019 than in all of 2018, with almost 6,000 stores shutting their doors.

From Payless ShoeSource announcing the closure of all 2,500 stores in North America in February to Toys “R” Us’ more recent decision to close its entire U.S. fleet, the drumbeat of retail store struggles is loud—and showing no signs of quieting down.

It’s now sadly common to see large-scale retail vacancies in American cities and suburbs alike. Once-popular U.S. retailers like Gap, Macy’s, J.C. Penney, Forever 21, Charlotte Russe, Sears, J.Crew, David’s Bridal, and Guitar Center have all closed a significant number of stores, which has led to many malls looking more like ghost-towns than fashion hubs.

Though e-commerce has disrupted the role that brick-and-mortar stores play in customers’ lives, many retailers have started looking to the flexible office industry as a solution to their costly real estate contracts.

Industrious’ coworking space located in Scottsdale’s Fashion Square mall.

The Merging of Retail and Coworking

Luckily, the retail sector can take comfort in the fact that its vacant spaces are greatly appealing to coworking space developers.

In a study about the future of retail, real estate firm JLL confirmed that coworking space in malls, street-front locations, and other retail properties will grow at an annual rate of 25% through 2023, reaching around 3.4 million square feet. (Note: This 3.4 million square feet is a small fraction of the 60 million square feet of coworking space currently available in conventional offices across the U.S.)

“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 like 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.”

Already, a number of retail owners and coworking operators have partnered together to provide shared offices in storefront locations.

One example of this is mall owner Macerich’s partnership with coworking space operator Industrious, which was announced in August 2018. The partnership, which turns unused retail locations into coworking spaces, officially opening its first Industrious-managed coworking space inside of a Macerich mall in January 2019.

The space, which opened inside of Scottsdale’s Fashion Square in Arizona, has proven to be a viable — and lucrative — solution, offering members access to top-tier dining, shopping, and entertainment after a day of coworking. In this kind of retail-based space, members are able to pop into Shake Shack for lunch or fulfill an online order at an Amazon kiosk without taking too much time away from their desk.

“Our settings deliver top-tier, built-in amenities for today’s professionals, which is why a partnership with experience-focused Industrious makes so much sense,” said Arthur M. Coppola, CEO of Macerich.

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These hybrid spaces in shopping malls are not just appearing in the U.S., however. Mindshare in Toronto’s suburb of Mississauga is housed within a shopping center; HUBBA-TO in Bangkok is located on the third floor of the Habito Mall; and Cre8 in Jakarta is in the popular PIK Avenue shopping mall in Indonesia—to name a few!

1776 — the retail incubator space at Cherry Hill Mall in New Jersey.

The Advent of Retail ‘Incubators’

It is this same experience-driven philosophy that is leading retailers to search for ways to reinvigorate their properties in a manner that better engages today’s customers.

In some vacant locations, mall operators are opening up their real estate to retail and technology startups as incubation space.

At New Jersey’s Cherry Hill Mall, several e-commerce startups occupy 11,000 square feet of vacant space near anchor tenant Nordstrom. These startups are not only able to test their concepts before establishing pop-up shops, but it also gives customers a fun, new reason to visit the mall.

Chicago’s Water Tower Place plans to launch a similar 15,000-square-foot venture known as ‘Cowork at the Mall’ in what was once a Sports Authority store. Additionally, Simon Property Group—the largest mall operator in the U.S.—is working to develop a nationwide retail incubation program for a number of its properties.

These incubators offer fledgling companies the opportunity to work alongside experienced operators and network with already-established brands. Plus, they can help to restore much-needed foot traffic in malls, proving to be a mutually beneficial relationship for both retailers and coworking operators.

WeMRKT’s first-ever location at New York City’s WeWork 205 Hudson.

WeMRKT Aims to Create ‘Modern Retail Space’

It comes as no surprise that coworking poster child WeWork has also managed to forge its way into the retail-coworking arena, as well. In June of 2018, WeWork opened its first retail concept, called WeMRKT, in one of the their New York City locations.

The vision for this newfound “modern retail space” is a location that sells products created by WeWork members, for WeWork members. The 10 products featured at the first WeMRKT were selected as part of a pitch competition, with new competitions taking place on a quarterly basis.

In addition to gaining invaluable brand exposure, the top-selling products in WeMRKT have the chance to be further distributed by SnackNation, which partners with WeWork.

“Our goal is to connect today’s top emerging brands with key consumers at their most engaged moments,” says Sean Kelly, CEO of SnackNation. “I cannot think of a better way to fulfill this mission than by partnering with WeWork and all of the entrepreneurs they serve at their inspiring co-working spaces.”

Since many coworking members are direct-to-consumer companies, WeMRKT is one example of a retail-coworking hybrid that demonstrates an inspiring commitment to members’ success.

With the flexible office space industry forecasted to grow to 30% of all office stock by 2030, retail developers must adapt to meet the needs of modern tenants. As a result, there will continue to be a widespread convergence of office, retail, and hospitality spaces into one, integrated experience for coworkers.


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