While the closings of under performing retailers are far from over, the brick-and-mortar retail sector can take some comfort in the fact that it still holds plenty of appeal: Just look at the crop of coworking spaces, housing retailers’ coveted millennial customers, that are eager to move in.
The drumbeat of retail store closings and struggles has dominated news headlines, led by Toys “R” Us’ recent closing of its entire U.S. store fleet. While the closings of underperforming retailers are far from over, the brick-and-mortar retail sector can take some comfort in the fact that it still holds plenty of appeal: Just look at the crop of coworking spaces, housing retailers’ coveted millennial customers, that are eager to move in.
Coworking space in malls, street fronts and other retail properties will grow at an annual rate of 25% through 2023 to reach about 3.4 million square feet, commercial real estate research and services firm JLLJLL +0.2% wrote in a study published Thursday. How significant is that? The average annual growth rate in occupied retail square footage between 2010 and 2017 was just 0.9%, JLL said.
“Coworking presents a viable solution for vacant retail space by decreasing vacancy and driving additional foot traffic with a guaranteed daytime population,” the research firm said in its first-ever study looking at 75 U.S. coworking retail spaces, totaling one million square feet. “Added foot traffic may also help revitalize the center and attract new retail tenants.”
Why? The millennial-driven sharing economy — think of Uber and Airbnb — makes a positive case for the continued growth of coworking space. JLL forecast “flexible space” will grow to 30% of all office stock by 2030 as some 43% of the employed U.S. workforce work remotely at least some of the time.
Since 2010, flexible working space has risen an average of 23% each year, outpacing the 1% annual average occupancy rate of the overall U.S. office-property market.
What’s more, the study found coworking retail spaces tend to be in areas with above-average consumption power: The average household income within a three-mile radius of coworking retail spaces is about $100,000. Playing well to the needs of millennials with declining car ownership, nearly 80% of the retail coworking spaces are either very or somewhat walkable, according to the study.