Can co-working spaces reinvigorate China’s malls?

 —  Article by JLL Staff Reporter
Inside a mall in Shanghai
Image credit: Shutterstock

Co-working companies are scooping up empty space in China’s shopping malls as the country’s e-commerce boom leads retailers to rethink their bricks-and-mortar strategies.

In Shanghai, WeWork took space in the Xuebao shopping mall. MyDreamPlus’ leased space in the Fucheng International mall in Chengdu, while Guangzhou G.T. Land Plaza’s has used its own model for co-working space.

Shopping centers have been seeking new ways to deal to fill vacant space and draw in shoppers in the age of digital shopping. In 2017 e-commerce accounted for almost a quarter of all retail sales in China, making it the world’s biggest online retail market, according to eMarketer.

The shift has hit traditional retailers and mall owners hard, says Eric Hirsch, Head of Markets, Beijing at JLL. He believes that introducing co-working spaces are among the more stable solutions for mall owners.

“The most immediate benefit for a shopping mall when you bring in co-working spaces is that you can utilize spaces on high floors that are otherwise hard to rent out because of their position,” Hirsch says.

They can also provide additional benefits – for example, CapitaMall Wangjing ushered in a 1500 square meter UR Work co-working space which helped to differentiate its brand from other malls while also moving in a raft of new potential shoppers.

A new type of working environment

Co-working offices are becoming an increasingly popular choice for companies of all shapes and sizes in China, many of whom are looking for a communal vibe, or shorter-term lease commitments than those required by more traditional office space.

In return, co-working providers need to offer innovative, community-centric and professional spaces for their demanding millennial workforces.

Some co-working firms are finding the answer is moving into a shopping mall.

The “Easywork” space launched by Longfor in 2016 started with a 2,044 square meter space at their Beijing Changying Paradise Walk integrated development. Linked to an outdoor patio, it combines roles as a working space and showroom vehicle (for example for meetings, exhibitions and roadshows) for the tenant companies. By the end of its first half month in operation, it was running at 100 percent occupancy.

Another big factor for younger employees is ease of transit. ”When finding a site for co-working, firstly you definitely have to look at how convenient the transit is, whether it’s in a business district, whether it’s close to a metro station,” says Joe Zhou, JLL Head of Research for China.

Matching hardware and software

Despite being a good fit in theory, experts warn that updating retail spaces for co-working habitation require more than a sticking-plaster solution.

“Owners need to get the rebuild right,” says Ellen Wei, Head of Retail Shanghai & China Landlord Representation Lead at JLL. There are two elements to this: Hardware and software, she says.

In ‘hardware’ terms, malls and offices have completely different requirements for daylight coming into the building and interior layout design and themes. Co-working, for example, is best suited to small spaces, ideally 1000-2000 square meters.

The challenge for a rebuild is therefore to wall off that kind of free-standing space and meet the daylight, layout and other design and safety standards required by modern offices.

Office hours are also different to typical retail opening hours, so the challenge is to equip the co-working space with a dedicated entrance, elevator, power supply and HVAC. These factors decide whether a co-working rebuild is feasible, Wei explains.

In ‘software’ terms, an office space has to be sufficiently isolated from the mall operationally. Particular care is required during the rebuild to keep the co-working space isolated from elements such as the mall’s background noise and music and smells coming up from the food courts.

“Done well, there can be a perfect match between a mall and a co-working space but to strike the right balance, mall owners need to re-engineer the core of their building management and amenities,” Wei concludes.

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