ChannelVision Magazine

Co-working Spaces: A New Vertical Opportunity Martin Vilaboy Editor-in-Chief Gerald Baldino Contributing Editor Percy Zamora Art Director Berge Kaprelian Group Publisher (480) 503-0770 Rene Galan Associate Publisher (786) 953-7297 Anthony Graffeo Associate Publisher (203) 304-8547 Matt O’Brien Multimedia Specialist Beka Business Media Berge Kaprelian President and CEO Neil Ende General Counsel Corporate Headquarters 15560 N Frank Lloyd Wright Blvd Suite B4 – 5433 Scottsdale, AZ 85260 Voice: 480.503.0770 Fax: 480.503.0990 Email: © 2018 Beka Business Media, All rights reserved. Reproduction in whole or in any form or medium without express written permission of Beka Business Media is prohibited. ChannelVision and the ChannelVision logo are trademarks of Beka Business Media LETTER The traditional 9-to-5, five-day work week routine is slowly morphing into work-life integration. Approximately 43 percent of employed Americans now say they spend at least some time working remotely, and there are no signs of that slowing. As a result, flexible work spaces are on the rise, as businesses seek new, unconventional locations to root their operations. At the same time, retailers are consolidating their stores, leaving prime spots available in retail locations. To understand if co-working spaces can backfill empty retail space successfully and profitably, retail consultancy JLL conducted its first-ever study that examined 75 co-working spaces that take up more than one million square feet of retail space. The highest concentration of co-working spaces in retail is either in malls (21.3 percent) or urban locations (20 percent), where available space needs to be revitalized with novel, unique offerings. “The current retail market is pushing landlords to find new ways to invigorate their space with alternative tenants, including co-working spaces,” said Holly Rome, director of retail leasing at JLL. “Setting up a co-working 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.” “Co-working 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,” added James Cook, director of retail research for JLL. “This wide range of needs has created four distinct co-working spaces that we think will increase in retail, each tailored with different amenities.” The first type of co-working spaces are dubbed “retail launchpads,” or spaces where nascent brands and innovative tech companies can gain access to target shoppers. What makes this model so unique is its ability to infuse the retail space with makers, innovators and high-tech brands interacting with consumers and offering interactive experiences. These launchpads draw crowds and wallets, making the mall a destination again, says JLL. “Business booster” spaces, meanwhile, offer 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. Next are “creative coalitions,” or spaces that offer community and workspaces for artists, makers and creatives, drawing in millennials by combining community events and retail in the space. More than 75 percent of these spaces are in urban locations with walkable neighborhoods. And then there are “telework hubs,” the most common, comprehensive co-working locations, says JLL. These are a mix of office workers, entrepreneurs and creatives, and represent nearly 80 percent of the spaces that JLL studied. This kind of co-working format will likely backfill vacant space in mid-level retail centers, taking on an average of 30,000-plus square feet. Since 2010, the flexible space sector has grown at an average annual rate of 23 percent, compared to just 1 percent average annual occupancy growth of the broader U.S. office market. For partners targeting the retail sector, and even those not playing in the retail space, co-working spaces offer a new opportunity for vertical specialization, as they will likely present highly specialized types of IT and communications needs for both the owners and the occupants. “We’re forecasting a dramatic shift in office space in the next decade as tenant demand for more flexible space options forces building owners to adapt,” concluded Scott Homa, director of U.S. office research for JLL. “We expect this to drive a convergence of office, retail and hospitality uses into one seamless, integrated tenant experience.” 6 Channel Vision | September - October, 2018