September 06. 2018 11:37PM

Coworking companies might just save dying malls

By STEVE BROWN
The Dallas Morning News


DALLAS — There’s a new tenant coming to a corner shopping center near you.

Tucked into the mall near the shoe shop and just down from the department store, don’t be surprised to find a coworking center.

That’s right — shared office space sharing the shopping center with retailers and restaurants. It’s a new concept that retail centers have come up with to fill empty space and lure more people through their doors.

One of the country’s largest shopping mall owners, Macerich Partners, just announced a deal with coworking firm Industrious to put shared office centers in its properties — the first one will be in Macerich’s Scottsdale mall.

“Our relationship represents a bold step that combines our vision for the future of the workplace with Macerich’s vision for the future of the retail experience,” Industrious CEO Jamie Hodari said when he announced the deal. “We look forward to Scottsdale Fashion Square being the first of many successful collaborations between our two companies.”

Industrious already operates a location in downtown Dallas’ Arts District and is opening another outlet up in Plano’s Legacy business park.

It’s one of a half-dozen or so coworking companies that have been growing fast in North Texas in the last couple of years. These firms have already leased more than 3 million square feet of local office space and are expected to more than double that footprint in the next four or five years.

So far, big coworking companies have been gobbling up space mostly in office buildings. But with shopping center owners trying to backfill spots left behind by merchant contractions, shared office companies are being targeted for more storefront deals.

Commercial property firm JLL recently took inventory of more than 1 million square feet of existing or proposed coworking locations in retail space around the country.

The square footage of shared office shopping center tenants is expected to more than triple in the next few years. Most of the new coworking space is in malls or in urban retail districts.

“The current retail market is pushing landlords to find new ways to invigorate their space with alternative tenants, including coworking spaces,” Holly Rome, director of retail leasing for JLL, said in the report. “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.”

The average retail-based coworking center is about 16,400 square feet — slightly larger than a typical mall tenant, according to JLL.

Nick Clark, who founded Dallas-based Common Desk, has shopping centers on his radar screen for future locations.

“We haven’t got as far yet to go into an actual mall, but we would consider that if the right opportunity presented itself,” Clark said. “The coworking operator is not only filling a vacant space but providing a built-in clientele for the rest of the shopping center.”

Common Desk’s original Deep Ellum location is close to restaurants and retail, and its Fort Worth center is the popular West Seventh District surrounded by retail.

Clark said that a study his firm did found that its locations provide almost $1.4 million a year in spending in the surrounding neighborhood.

“The impact to the shopping mall is an extra thousand people a week coming” to the coworking office, he said. “It’s an interesting solution for a mall owner who has these huge old department stores that are underutilized or have gone out of business.

“And a lot of these retail centers have an excessive amount of parking that are not being utilized during the workday.”

Dallas’ 20-year-old Victory Park development just signed a big lease with New York-based shared office firm WeWork to locate in the plaza retail and office buildings outside American Airlines Center arena.

“I think it’s a great use of space because the retail and food and beverage in the area provides an amenity to those shared office people and the coworking provides a youthful, new type of traffic,” said Terry Montesi, CEO of Trademark Property, which is leasing Victory Park’s retail. “It’s a big boom for our leasing effort.”

Montesi said almost every one of the mixed-use retail projects his company represents has a shared office center or has one in the works.

And don’t be surprised if a shared office center opens in Dallas’ landmark Galleria mall, which Trademark is now leasing and managing.

“I think it makes a ton of sense,” he said. “It adds a cool factor.”