Retail owners are cashing in on the co-working trend in order to fill empty spaces in malls and department stores.
Last month, it was reported that WeWork, the biggest co-working brand in the world, was in talks with UK department store Debenhams over opening a co-working centre in the retailer’s flagship store in London’s Oxford Street.
Mark Dixon, chairman of IWG Group, which owns the Regus and Spaces office brands, told Bloomberg it would be opening more facilities in retail buildings. “We would expect to have quite a few locations in a year or two in more retail-type situations. They are quite convenient for people if they have good parking and good facilities.”
JLL’s Head of Retail Capital Markets, Fraser Bowen, sees the trend taking off across the country with “space above retail in the country’s core cities of Edinburgh, London and Manchester being put over to offices and/or residential.”
A deal with Debenhams would not be out of character for WeWork, which has already cooperated with retail owners in the U.S. In October 2017, WeWork agreed to buy the Lord & Taylor building in New York from retailer Hudson’s Bay Co. for US$850 million.
WeWork will move its headquarters to the building and open a new co-working centre there. However, a smaller Lord & Taylor department store will continue to operate on site and Hudson’s Bay said it plans to co-operate with WeWork in other retail locations.
Speaking at a retail conference, Hudson’s Bay chairman Richard Baker said such arrangements would help bring online-shopping millennials back to bricks-and-mortar retail. “We will drive all of those millennial customers to all of our entrances through the middle of the store and create a tremendous amount of excitement and interest in our retail locations,” he said.
Other office users are seeing the advantages in moribund retail space. In the Detroit suburb of Dearborn, Ford has relocated 1,800 office workers to Fairlane Town Center, a shopping centre owned by Starwood Capital, while it renovates and redevelops its own office space. As well as filling vacant retail space, the new office workers are expected to encourage new F&B tenants at the mall.
In China, developers are recognising that the retail element of ‘mixed-use’ developments should, in fact, have a mix of uses. For example, Chongbang Group, a Shanghai developer backed by APG Investments and Ivanhoe Cambridge, has started to include co-working or other flexible office facilities at its LifeHub projects. The upper floors of its latest mall in Kunshan – often hard to let – are now designated as office space, with easy access to the facilities of the shopping centre.
It’s not just retail; F&B businesses can also take advantage of the flexible working trend. In Tokyo, the Japanese arm of the Hooters chain of bars has teamed up with Spacee, a Japanese space rental app, in order to fill its venues during the off-peak hours between 1pm and 7pm. Hooters provides a desk and wifi for a small charge, whilst also offering reduced prices for food and drinks.
As retail owners look to weather the e-commerce storm, office uses will be just one strategy to utilise vacant space. In undersupplied residential markets, such as the UK, conversion to apartments will be a popular option, but business space use will continue to be useful alternative income source for retail owners.
Click to read more about how investors need to futureproof for the gig economy.