Co-working spaces in Chinese shopping malls - what’s the secret to this ‘perfect match’?

20 March | Shanghai | Asia Pacific | JLL Retail
Co-working companies are scooping up empty space in China’s shopping malls, where retail landlords are seeking new ways to adjust to the boom in e-commerce.

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 office space.

“Shopping centers have been seeking ways to counter the impact of  e-commerce, which has hit traditional retailers and mall owners hard in recent years. Introducing co-working spaces offers a new dimension from the current focus on family-based and entertainment activities”, according to Eric Hirsch, Head of Markets, Beijing at JLL.

“The benefits for a shopping mall when you bring in co-working spaces is that, in addition to helping fill vacant space, they should create more business opportunities for their retail and F&B tenants during working days when foot traffic is traditionally lower.” Hirsch added.

For malls, it can also provide specific benefits. CapitaMall Wangjing ushered in a 1500 square meter UR Work co-working space, killing several birds with one stone: While differentiating its brand from other malls, the move also ushered in a raft of new shoppers.

Why is converted retail space a favorite?
A key issue for co-working in 2018 is how to offer increasingly innovative, fun, and rich communities to their demanding millennial workforces. Some co-working firms are finding moving into a shopping mall might be a good approach.

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 functions 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% occupancy.

Another big factor for younger employees: 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,” Joe Zhou, JLL Head of Research for China, “Shopping malls normally locate in these transportation hubs.

A hard couple to match – both software and hardware need to fit

Experts warn that updating retail spaces for co-working habitation require more than a sticking-plaster solution.

“Owners need to get the rebuild right,” said Ellen Wei, Head of Retail Shanghai & China Landlord Representation Lead at JLL.

There are two elements to this: Hardware and software.

In ‘hardware’ terms, malls and offices have completely different requirements for daylight penetration 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 thus to wall off that kind of free-standing space and meet the daylight, layout and other standards for office space.

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 are factors that decide whether a co-working rebuild is feasible.

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 PA background music and interior smells.

“A perfect match between a mall and a co-working space needs the right conditions for re-engineering,” Ellen said.