Last July, long before the pandemic hit, the coworking firm Industrious set up space at the Scottsdale Fashion Square. Later it inked deals at other malls around the country. Now that COVID-19 has accelerated the problems in retail, Joe Brady, CEO Americas for The Instant Group, a workspace innovation firm, thinks more of these conversions could be on the horizon.
"If you think about closed Sears boxes, or what's going to happen with the Neiman Marcus space, the problems in retail are front and center at the moment," Brady says. "We're seeing this intersection between people wanting to work near home, and what's happening with some of the struggles in malls and in retail with the big boxes."
Brady expects more groups, including shopping center REITs, to follow Industrious, which is partially funded by Brookfield, by opening flex spaces in malls. These mall working spaces could fit as spokes in the hub-and-spoke office model.
"We think that that makes an awful lot of sense," Brady says. "You've got some pain or challenges on the mall side with excess space, and then you have people who want to get out of their house and work near home. All of a sudden, this is a really interesting blended real estate."
The accessibility of malls can be an attraction to cooped workers who may want to get out of the house, according to Brady. While these people may want to get out of their homes, they don't want to venture far.
"I think people have figured out over the last four months that they liked their families," Brady says. "The idea of this work-life balance and getting off the hamster wheel is appealing to people.
COVID augmented changes in flexible working that Brady thinks will become permanent. "That acceleration of a decade's worth of change in four months is this notion that as knowledge workers, we should be judged on our outcomes or our actions," he says. "We can do some of those actions from our home or from elsewhere."
Malls also offer easy access for these workers, which is helpful in this era of social distancing. "Malls are car-friendly and not mass transit reliant," Brady says. "In malls, you tend to have low- to mid-rise buildings, which are stair friendly and not elevator reliant."
Brady is intrigued by a blended real estate solution where there is a base mall with workspaces and even multifamily.
"You may have some of the larger fitness centers, and then you may have a flexible, agile work environment as well," he says.
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Leslie Shaver
Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.
