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Can Coworking Spaces Save Retail?

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Coworking spaces have served a plethora of modern workers through physical spaces. There have been office blocks, private member clubs, coffee shops and more. Now, there’s a new trend on the horizon: coworking spaces in shopping centres. Whilst this might be an innovative environment for coworking spaces, the arrangement also forms part of the retail industry’s move towards a new shopping mall model emerging in 2030. This trend isn’t constrained by any region; it’s unfolding on a global level with hotspots including San Francisco, Dublin, Shanghai, Melbourne or Moscow. What has the journey involved to date?

It didn’t take long for 2017 to be coined ‘the year of the great retail apocalypse.’ Retailers closed an unprecedented number of stores with many filing for bankruptcy (such as Toys ‘R’ Us), whilst shopping malls simultaneously faced growing pressure to survive declining demand for physical retail space.

Diversification of tenants and technological enhancements might have been pursued by shopping centers as survival strategies in the past, but now are we seeing coworking spaces enter the mix. Coworking operators are taking space in shopping centers and shopping centers are developing their own coworking brands.

Why are Shopping Centers an Option for Coworking Spaces?

Retailers are taking less space and more space is available. Shopping center investment slowed over the past few years and renting space has become cheaper. Forecasts back in 2015 predicted a 20-25%rental decrease in Hong Kong. In 2016 retail investment in the Netherlands was down by 40%. In 2017 Manhattan retail rents fell by 13.4%, Canada had an average 30% retail vacancy rate, Australia’s retail investor intentions dropped by 10% and UK shopping center investment fell by 45%. Now in 2018, the likes of Ginza High Street in Japan are set to hit their lowest rent rates towards the end of the year.

Shopping malls have already tried filling space with hospitality and leisure facilities in the form of restaurants, cinemas, bowling alleys and even indoor ski facilities. However, these offerings aren’t quite enough to avoid the approximate 30% closure of space required for shopping center supply to meet tenant demand.

E-commerce giants continue their notorious online role as the major driving force behind decreasing demand for physical retail space, not to mention the shift in consumer spending from goods to lifestyle experiences. Further diversification is required and it’s starting to take the shape of coworking spaces.

Shopping Mall Owners and Coworking Brands

Westfield, in partnership with Forest City, is one of the first major retail outlets to develop their own coworking brand. In 2015, Bespokeopened on the 4th floor of Westfield San Francisco Centre. The 40,000 sq ft space is designed specifically as a retail-tech ecosystem supporting coworking, events, demos and pop up shops. The space is home to corporate and start-up members spanning industries such as payments, artificial intelligence, virtual reality, experiential, e-commerce, retail analytics and more. Bespoke hit full capacity after just 6 months.

For Bespoke, the main opportunity lies in bridging the gap between startups and big-box retailers. Kimiko Thornton, Senior Director of Innovation at Bespoke highlights, “Bespoke focuses on converging the digital and physical by curating a portfolio of members who are actively working to improve the retail landscape. Members are selectively identified by Bespoke and are connected to the C-Suites of Fortune 500 companies through our corporate innovation tours. Through this program, members benefit from access to retail executives and the opportunity to run pilots in a multi-faceted, consumer-facing environment. Retailers benefit first-hand from early access to the latest retail innovations.”

So, why would a shopping center invest in their own coworking brand instead of letting space to an operator? Kimiko notes some of the benefits: “Driving thought leadership in the industry, bringing in over 100k incremental visitors to our Centre annually, and getting early access to test and support retail innovators are just a few of the benefits. By being connected, we’ve given our startups the opportunity to run successful trials throughout our properties. Examples include Hemster, the on-demand alterations service and July Systems, the retail industry’s best location intelligence and engagement platform.”

In terms of membership types, private offices have been Bespoke’s highest area of demand; offices sold out before opening and an additional office suite was built quickly. With that being said, Kimiko explains how “demand can shift from one type of membership to another within a matter of months. This is why creating a flexible space is so important; we can easily adapt to fluctuating demand. Members do get acquired and outgrow us into their own offices, but we encourage this as we welcome fresh talent on a rolling basis.”

Atmosphere is another coworking space owned by a shopping center, situated outside Moscow’s city center towards the southwest where no coworking spaces have ventured before. The space features a conference hall and is ran by Atmosphere’s multi-business mother company, Tashir, renowned for its largest chain of shopping malls in Russia.

George Engibaryan, Business Development Manager at Atmosphere, explains how “Atmosphere is part of Tashir’s aims to diversify its assets. Running our own coworking space allows us to do this without sharing revenues with an operator. The coworking market in Moscow is still in its early development stages, meaning Atmosphere is a good business opportunity given the current low supply of operators.” Similarly to Bespoke, Atmosphere is located on a higher floor (6th), which might typically be associated with less tenant demand. Yet in this case, Atmosphere benefits from ‘a perfect oval shape and lot of natural light under a panoramic roof’.

The principle challenge faced by Atmosphere is the coworker mindset that business is done within the city center, rather than outside it. George addresses this issue by highlighting how members can avoid time wasted in congested traffic and still enjoy a workspace with a nearby cinema, restaurants and supermarkets.

Atmosphere initially experienced high demand for private offices and currently operates at 80-85% occupancy, but they now see a more equal distribution of demand amongst desk and membership types with open areas preferred by freelancers. Although there is no strict member vetting process, Atmosphere attracts innovative startups through their internal investment fund and explicitly excludes companies making excessive phone calls to avoid disruption to other members.

Operators Taking Shopping Mall Space

On the flipside, we see independant coworking spaces signing leases with shopping centers. Dogpatch Labs is a start-up hub centrally located in Dublin’s digital docklands and is CHQ’s largest tenant. The 1820s shopping center lets space to interesting tenants including the EPIC Museum, is close to the rail station and surrounded by likes of LinkedIn, Facebook and more.

Located across the first 3 floors of CHQ, Membership Manager Jake Phillips states Dogpatch benefits from “being a touch point for well over 8,000 people walking past every day. We built the retail location as a strategic mechanism to deliver our brand values of community and innovation. We are also involved with corporate initiatives; CHQ recently supported Mastercard with their app pilot focusing on the city’s demographic spending data. Being situated in a retail environment means we can also deliver a live storefront.”

Given the historic protection of the converted wine and tobacco warehouse as a Grade A listed building, the fit out costs for Dogpatch were more expensive than a non-retail space. However, the company has seen high returns as a result of the investment. Jake explains how “the investment pays when focus is on design. We built a strong relationship with the landlord through a co-branded building strategy to become a unified, authentic Irish brand and top 10 tourist destination. This journey involved strategic partnerships such as those with Google for Entrepreneurs, community involvement through local food discounts and weekly metric reports.”

Renting space from a shopping center can be a challenge in terms of opening hours beyond the operators control. Dogpatch have many software development teams working early and late hours, but thanks to their strong relationship with the landlord, they’re able to make alternative arrangements for their own operating hours. Dogpatch is also surrounded by alternative laptop hotspots, but with local farmer-grown coffee and a strong ecosystem, member applications aren’t affected. Dogpatch’s typical members include corporates seeking to innovate and start-ups seeking post seed or angel investment to Series A.

Like many spaces, private offices are Dogpatch’s most popular membership type, but Jake emphasises that “the private offices are golden; we reserve and allocate them selectively to growing members. The private offices aren’t listed on our website as we don’t want to be seen as an ‘office solution’. Most of our small teams work from dedicated desks in open space.”

The Verdict

Whether the coworking space is landlord or operator ran, there are a few key ingredients for success: community-based ecosystems as opposed to office solutions, partnerships with retail-tech startups and corporates, utilization of the retail environment for product testing, investment in design and flexibility and a criteria for member selection.

Key benefits include close proximity to leisure facilities, strong transport links and parking space, position at the forefront of retail innovation, extra visibility for increased footfall and popular uptake of private office memberships. The main challenges for operators include lack of control over building operations, potential lack of daylight and opening hours, along with frequent positioning in remaining space on higher floors. The main challenge for shopping center owners is the decision to share revenue by letting space to an operator or launch their own coworking brand as a new entrant to the workspace market.

What Does the Future Look Like?

Given the optimism around coworking within shopping centers, it’s no surprise that CBRE predict shopping centers to reinvent themselves as mixed-use ‘Centers’ by 2030. Who will be the first to get there? Western Australia is particularly active as a leading region for the lifestyle revolution of shopping centers. The Government’s ‘Direction 2031’ removes limitations on the size of retail developments and encourages the development of ‘activity centers’.

The future of coworking within shopping centers is described by Kimiko Thornton as a ‘no-brainer’: “As the retail ecosystem evolves, consumers expect dynamic experiences beyond the traditional storefront. Coworking ultimately contributes to the restructuring of the entire experiential landscape. It’s a trend shopping centers are exploring at a global level.”

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About the Author

This article was produced by Deskmag. Deskmag is the magazine about the new type of work and their places, how they look, how they function, how they could be improved and how we work in them. They especially focus on coworking spaces which are home to the new breed of independent workers and small companies. see more.

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Callum Connects

Mark Winterton, General Manager of InterContinental Singapore Robertson Quay

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Mark Winterton has dedicated his life to achieving unparalleled and extraordinary guest experiences in the hospitality industry.

What’s your story?
I’m a seasoned hospitality professional with over twenty years international experience launching luxury brands, repositioning existing brands and driving innovation for some of the world’s most successful hotels.

As General Manager of InterContinental® Singapore Robertson Quay, I’m responsible for the strategic positioning of the property as the next generation of the InterContinental hotel brand and have been spearheading the hotel since its opening in October 2017, with the goal of achieving a unique and unrivalled market positioning as Singapore’s most luxurious residential hotel.

I started my career with InterContinental Hotels Group (IHG®) in 1995 and have since been dedicating myself towards achieving perfection. I find immense fulfillment in leading my team towards achieving extraordinary and unparalleled guest experiences.

What excites you most about your industry?
The hospitality industry boasts an extremely dynamic landscape, and we are always seeing new hotels opening alongside the entry of burgeoning brands. This growth has, over time developed positive competition and generated positive driving forces that have elevated the overall standard of the industry in Singapore. The industry has a dynamic landscape. There are many opportunities to bring the right people together and create amazing teams to launch or reposition hotels. The process of creating teams, inspiring individuals and then working together to bring a project to life is where I find the excitement lies.

What’s your connection to Asia?
The lure of Asia has always been very strong for foreign economies and companies, with great accessibility to new opportunities, customers, consumers and clients. My first foray into Asia was back in 2007, when I launched Crowne Plaza Changi Airport in Singapore. Following that, I was also based in Bangkok for a couple of years for the rebranding of Crowne Plaza Bangkok Lumpini Park. Over my years in Asia, I have had the opportunity to truly immerse myself in new cultures, establish new connections with key counterparts and friends; and these have further solidified my interest in and strengthened my connection to Asia.

Favourite city in Asia for business and why?
Definitely Singapore. Commonly known as the gateway to Asia, we’ve been blessed with a stable government, a sound political economy and a comprehensive infrastructure for reliable business operations. With tremendous efforts put in by the Singapore Tourism Board towards elevating the city as an attractive venue for visitors, the growth of Singapore as a key MICE destination, coupled with a cosmopolitan pool of talent, Singapore remains my favourite city in Asia for business.

What’s the best piece of advice you ever received?
“You can never be 100% ready for a new role.” I believe that there will always be room for growth and learning on the job. As long as a person is 80% ready for a new role, the opportunity should be extended. I am a strong believer in the development of people and the grooming of talent, and this piece of advice has allowed me to take more chances on people I’ve worked with and developed over the years.

Who inspires you?
Simon Sinek, a speaker with TED Talk.

What have you just learnt recently that blew you away?
I don’t think I can pinpoint just one lesson learnt recently, as learning is an ongoing process. No matter how small a piece of knowledge may seem, it should be valued. Everyday is a journey of learning and development.

If you had your time again, what would you do differently?
Nothing at all. I don’t believe in regrets and everything that has happened thus far, has had a part to play in who I am and where I stand today.

How do you unwind?
Spending time with friends over relaxed conversations and wine or working my green fingers in my balcony garden.

Favourite Asian destination for relaxation? Why?
Bali. It’s one destination where I’ve always returned to, simply because it offers me the same level of comfort and familiarity each time I return. It’s where I can feel most relaxed, yet still be able to enjoy the vibrant dining scene.

Everyone in business should read this book:
Fierce Conversations by Susan Scott.

Shameless plug for your business:
Officially opened on 12 October 2017, InterContinental Singapore Robertson Quay is the first international luxury hotel brand situated at Robertson Quay. Set amidst a dynamic, sophisticated neighbourhood along the Singapore River, known for its dining options and arts houses, the luxury residential-inspired hotel has been carefully curated by world-­class designers, architects and culinary purveyors. Located minutes away from the CBD, the hotel still maintains a stylish but laid back, relaxed feel in the leafy, upscale neighbourhood of Robertson Quay. The hotel offers 225 luxurious studios and suites, including an expansive Penthouse, which has unparalleled views of both the Singapore River and vibrant city via floor-­to-­ceiling windows.

The residential-­inspired property combines elements from Robertson Quay’s industrial and intriguing past with sleek contemporary finishes whilst seamlessly blending into the residential surrounds. Light-­filled room interiors have been designed to magnify the familiar comforts of home where guests may enjoy bespoke amenities such as a specially designed in-­room cocktail kit.

Established as part of a holistic dining and lifestyle destination, the hotel boasts a wide range of restaurant and bar concepts. Flagship restaurant Publico, representing the central core of Italian culture, is a multi-­concept dining destination comprising a variety of Italian experiences under one roof – a neighbourhood deli and bar and a ristorante with adjoining terrazzo by the river. Other highlights throughout the hotel include New York institution Wolfgang’s Steakhouse by Wolfgang Zwiener, and a bar and dining concept from the team behind Izy Sushi. Over 40 other dining options await at the hotel doorstep, in The Quayside precinct.

How can people connect with you?
LinkedIn: https://www.linkedin.com/in/markwinterton1/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Joel Tay, CEO of Soft Space

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With a desire to run his own business, Joel Tay wanted to tick two boxes first – trying his hand in the corporate world and knowing the business he wanted to end up in.

What’s your story?
I’ve always wanted to run my own business. Before that, I needed to fulfill two important things. The first thing, having a corporate foundation, and the second, knowing the business that I’m getting into. First of all, after gaining experience with Ernst and Young, I started a school in Jakarta with my mother, who used to be a teacher. Some of my ex-colleagues laughed at me for doing this instead of working towards partnership like everybody else.

While the school was running, I returned to the corporate world because I was given a chance to try out something I’ve always wanted to try, consulting in IT Security, and this time with PwC. In my second return to the business world, I never looked back. I started a mobile device distribution company with friends, and later on diversified into IT Consulting in Mobile Device Management, and subsequently ended up in the payments business.

Today I manage Soft Space – a company thriving in the payments industry with a group of talented colleagues and engineers. The school I mentioned earlier is now in 8 different locations across Jakarta serving more than one thousand students.

What excites you most about your industry?
Payments are evolving so quickly; there’s so much to learn. No one can really say that they know everything there is to know about payments. I have learnt so much going from one country to another learning each time how payments work uniquely in each society.

What’s your connection to Asia?
Asia is Soft Space’s focus. We strongly believe that markets in Asia will be the primary drivers and innovators in the payments space for years to come.

Favourite city in Asia for business and why?
Bangkok. I have a great business partner there, the banks are innovative, the market is huge and the people are creative.

What’s the best piece of advice you ever received?
My parents reading Matthew 6:33 to me: “Seek ye first the kingdom of God, and his righteousness; and all these things shall be added unto you.” This has taught me to prioritise the important things in life, and then everything else will fall into place according to God’s will.

Who inspires you?
My father and my Godfather. Both are men of principles who are very successful in their own trade, loving to their families and God-fearing.

What have you just learnt recently that blew you away?
The amount of money technology companies in the US lost in 2017. In Asia, and in particular SEA, investors won’t take two glances at your company if you’re not profitable to begin with.

If you had your time again, what would you do differently?
Learn Mandarin. When I was young, my teacher gave a group of us a choice – attend Mandarin classes or wash school toilets. Every time I hear my colleagues laugh when I try to speak Mandarin, I think of that moment when we walked towards the toilet.

How do you unwind?
I watch movies with my wife. It takes us to another world and back to reality in two hours. No vacation can be so fast and effective.

Favourite Asian destination for relaxation? Why?
Bali. Friendly people, great resorts and good restaurants.

Everyone in business should read this book:
Steve Jobs by Walter Isaacson. There are many lessons to be learned from the man who had it all, lost it all, and earned it back again.

Shameless plug for your business:
No one can claim to have one solution that fits all in payments. Your needs are always different and unique to the market you’re operating in. I’d like to think that we’ve been around the industry long enough to be able to advise and customise something for you. https://www.softspace.com.my/about-us

How can people connect with you?
I’m always just an email away – [email protected]

Twitter handle?
@crusaderdotcom

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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