Third Spaces as a Form of Capital

Starbucks recently ended its open-door policy in the US, signaling a retreat from its role as a “third space”—a communal area outside of work and home where people can gather. This shift reflects a broader trend: businesses are moving away from creating spaces designed for connection. At the same time, factors like rising housing costs and shrinking public infrastructure are making third spaces more necessary than ever.

The result is a significant gap in the market. For businesses, this isn’t just an opportunity to attract foot traffic—it’s a chance to leverage a unique and undervalued resource: space itself. Third spaces are not merely venues; they are capital—an asset with intrinsic value that can be used to generate social, cultural, and financial returns.

The Decline of Third Spaces and the Market Gap. What Happened to Third Spaces?

????1.????Space as a Scarce Resource:

The physical space for people to gather has become increasingly rare. Businesses once recognized its value, but corporate priorities have shifted toward maximizing financial efficiency.

????2.????The Impact of Rising Housing Costs:

Rising rents and shrinking living spaces have made it impractical for many people to host others at home, creating greater demand for public gathering spaces.

????3.????Cultural Shifts Toward Isolation:

The rise of digital entertainment and e-commerce has reduced the need for physical interaction, accelerating the decline of communal spaces.

????4.????The Corporate Efficiency Trap:

Businesses like Starbucks, which once thrived as third spaces, have increasingly prioritized profits over creating environments that foster connection, leaving consumers without accessible places to gather.

Third Spaces as a Form of Capital

Space itself is a form of capital because it can be leveraged to create other types of value.

Capital isn’t limited to financial resources—it includes assets that generate value in different ways. Third spaces represent a type of physical capital with unique potential:

Social Capital: Third spaces allow for the formation of relationships, trust, and community bonds. For businesses, this translates into customer loyalty, word-of-mouth marketing, and brand affinity.

Cultural Capital: Third spaces shape cultural identity and provide a shared context for communities. By hosting events, encouraging creativity, or simply offering a space to belong, businesses can position themselves as central to cultural movements.

?Financial Capital: While space may seem like an overhead cost, it generates tangible returns by creating memorable experiences that drive repeat visits, foster brand loyalty, and build long-term customer relationships.

The act of providing space as an asset creates a flywheel effect: the more people gather, the more value the space generates in the form of stronger communities, shared cultural identity, and increased financial engagement.

In other words, the value of space is not just in its utility but in its ability to create new forms of capital that benefit businesses and communities alike.

It’s Dave and Busters All the Way Down

In response to the growing demand for communal spaces, many businesses have defaulted to what I described as “Dave and Busters All the Way Down.” These venues—characterized by their combination of arcade games, bars, and casual dining—have sprung up in downtown areas of cities all over the U.S.

While these spaces may initially seem like a solution to the lack of third spaces, they often fail to meet the deeper needs of communities.

Why This Approach Fails:

?????????It over-commercializes the third space, focusing on transactions instead of connection.

?????????It leads to oversaturation, with competitors offering similar “entertainment-driven” models.

?????????It ignores the core need for authenticity, community, and accessible design.

To stand out, businesses need to avoid this red ocean of predictable models and instead lean into designs that emphasize genuine connection and purpose.

Strategies for Building Meaningful Third Spaces

????1.????Reframe Space as an Asset: Treat the physical environment as a foundational resource to be leveraged for long-term social, cultural, and financial gains.

????2.????Prioritize Authenticity Over Commercialization: Design spaces that feel inviting and genuine, rather than transactional or overly branded.

????3.????Build Inclusivity into the Model: Make spaces accessible, affordable, and welcoming to diverse communities.

????4.????Integrate Digital and Physical: Enhance third spaces with digital tools to create hybrid environments that extend their reach and impact.

Third spaces are more than just physical venues—they are a form of capital with immense potential. As businesses move away from providing communal spaces, a significant market gap has emerged. By recognizing the inherent value of space and leveraging it to create social, cultural, and financial capital, forward-thinking brands can shape the future of connection and commerce.

The real question is: Who will recognize that in the race to dominate the market?

TL;DR

?????????Starbucks and other companies have abandoned the third space model, creating a market gap. Rising housing costs and fewer gathering spots make third spaces more valuable than ever.

?????????Space is a form of capital. It can be leveraged to generate social (relationships), cultural (shared identity), and financial (revenue) value.