Office landlords are increasingly willing to invest in and collaborate with local retailers, making upfront investments to sustain the space and bolster the overall building environment, according to a new report from Colliers.
This is vital for all parties, including jurisdictions with the capability of converting some space to residential, which could ease demand for affordable housing while enhancing the area’s livability.
The symbiotic relationship between the office and retail sectors emerges as critical in driving long-term growth, Colliers said.
“Together they can strategically leverage mutual benefits to navigate dynamic market forces,” according to the report, suggesting short-term tenancies as an option.
“These short-term arrangements with small business tenants require minimal landlord investment in converting spaces for subsequent use,” Colliers said. “And in some cases, salvage their financial investments.”
For retailers, this could create a more diversified tenant mix, potentially attracting foot traffic to well-established brands in a physical setting.
Given the struggle to bring workers back to the office, many existing retailers such as sandwich shops, dry cleaners, and daycare providers, are out of business, Colliers reported, and many of the goods and services that supported the office ecosystem have disappeared, limiting, and straining the remaining stores.
“The ideal scenario would be for office owners to invest and re-think the traditional retail market rent model in partnering with mature local retailers, particularly in food and beverage, to support those businesses and help bring back additional office tenancy,” Michael Lirtzman Head of Office Agency Leasing, US, Colliers, said in a prepared statement.
One example Colliers offers is an initiative in Arlington, Va., that expanded the diversity of businesses permitted within office buildings, to include breweries, urban farms, dog boarding facilities, virtual golf centers, commercial kitchens, labs, entertainment venues, and indoor recreation facilities, among others.
“These communal retail spaces can be considered an avenue for fostering personal interaction and revitalizing foot traffic patterns through alternative modes of walkability and transportation,” according to the report.
