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The Office Hub and Spoke Model is Getting Another Look

The office hub and spoke model is nothing new. Before the pandemic, corporate occupiers experimented with having a central office in a downtown urban area with scattered satellite offices in nearby suburbs. The idea of a distributed workforce was already gaining steam long before anyone ever heard about the novel coronavirus. By the time the pandemic hit, remote and hybrid work had already risen.

We all know what happened next: The pandemic forced almost every white-collar employee to work remotely, and every company had to plan for the new hybrid work future. Suddenly, the term “hub and spoke” became front and center in the conversation around the workplace.

Some of that talk has since died down as workers begin to make the commute back to their regular offices, but that doesn’t mean the hub and spoke concept isn’t still on companies’ minds. “We haven’t seen many companies who have pulled the trigger yet on the strategy,” said Bryan Berthold, Global Lead of Workplace Experience at Cushman & Wakefield. “Businesses are trying to get aligned first with what’s happening with their workforce rather than aggressively going after a strategy that may not make sense in a few years.”

The office sector certainly has more clarity than it did in March 2020, but attitudes toward returning to the office remain cautious. The number one question for occupiers now is what their employees want. Companies are collecting data and insights on what’s happening with remote and hybrid work and return to the office, and many occupiers may not be ready to make any bold moves. Hub and spoke would, for the most part, entail acquiring new real estate assets, and some firms may not want to expand office footprints just yet.

But hub and spoke may still be on companies’ minds as some executives still aren’t keen on remote work. Hub and spoke would mean more in-person working, which execs are hoping for. The ever-controversial Elon Musk, Tesla’s CEO, is further evidence of some executive’s distaste for remote work arrangements. Musk recently sent an email to Tesla executives that demanded office workers return to their desks or leave the company. “If you don’t show up, we will assume you have resigned,” Musk wrote. Musk’s hardline stance against remote work is an extreme example of a return to office policy, but he’s not alone. Goldman Sachs CEO David Solomon has called remote work an “aberration,” and other big-name executives have challenged it, though many have backed down and caved into at least a hybrid work policy.

“Well-being for employees has actually been going downhill since the pandemic started,” Berthold said. “Workers say they like remote and hybrid, but it’s not working out very well for them to a certain extent.” Of course, employee well-being could be dropping for several reasons, including the persistence of COVID-19 or any number of socio-economic problems currently in the U.S. But Berthold questions whether remote and hybrid work itself isn’t causing problems, including increased loneliness, mental health issues, and burnout.

Big wheel

The hub and spoke model originally described a company with an HQ in the city and satellite offices in the suburbs. But the definition of hub and spoke has expanded during the pandemic. Executives are now asking how to access the best labor pool, and sometimes that means a “hub quarters” in a major metro area and then spokes in different national markets. A company could have a central office in Boston and open satellite offices in growing secondary cities like Austin, Texas, or Nashville. Big corporations like Google and Amazon are already doing this, but the idea has spread to smaller and mid-sized companies.

Utilizing the hub and spoke model means companies would think remote-first when hiring new employees, but focus on specific national markets in their strategy. So, if a company ends up hiring ten or more employees in Denver, why not open a satellite office there? The employees could still work on a primarily remote basis, but they’d at least have a branded, central location to meet that keeps them tied to the company.

This strategy could enable a corporate occupier to take advantage of population shifts and nationwide migration patterns. Secondary markets in the Sunbelt continue to grow in places like Phoenix and Atlanta, so placing satellite offices there allows companies to gain access to those ever-increasing and talented labor pools. 

“The mantra could be ‘decide where to live first, and then decide where to work,’” said Adam Segal, Co-Founder and CEO of cove, a tenant experience and building operations tech provider. “It’s fascinating because this really changes things for the future of the office and, arguably, makes the office more valuable.”

Different spokes

Segal said his company set up a hub and spoke for a company in 2018, but they haven’t been asked about them as much lately. He thinks it’s because there’s been such a slow re-entry back to the office. “With the return to the office, we may not have clarity for another 2 to 3 years,” Segal said. “Anecdotally, we see people coming back, but many companies may sit tight for a while before deciding what to do with leasing and long-term planning for their portfolios.”

The companies that sit tight may decide to simply continue with hybrid and remote schedules without adding new real estate assets. After all, with hub and spoke, employees’ homes could be spokes. There may not be a need to spend on new real estate if employees can just work from home and still be productive, despite whatever problems remote work may cause. And with a new wave of virus cases nationwide and uncertainty about the future of the pandemic, the ebb and flow of return to the office and COVID fears are keeping some companies cautious.

Another way to enact a hub and spoke strategy is to use flex spaces as spokes. Some companies are doing this now; it’s a low-risk opportunity to test the market and get employees to work in-person together. Flex space leases are typically much shorter and require less commitment than a traditional office lease, so companies can shed the leases without much hassle if they’re not utilizing the space enough.

Real estate experts say the satellite offices have to be full of amenities for the hub and spoke model to work, and that goes for whether the spoke is in a nearby suburb, in a different national market, or in a flex space. Spokes can’t be in an isolated suburb where it takes a while to drive to lunch spots or other amenities. The location must be ideal. The satellite offices also need to give opportunities to the employees there, allowing them a chance to move up the ranks in the company instead of being a dead-end office cut off from the company’s main headquarters. Otherwise, companies would just churn through the labor pool in the satellite office’s area.

Rolling along

Using a hub and spoke strategy can help draw workers back into the office. The whole idea of the strategy is to service employees, and if satellite offices are opened closer to workers in the suburbs, it cuts down on their commute times. Offices in urban areas where employees tend to live closer to where they work have a higher return-to-office rate, according to a recent Wall Street Journal analysis of combined data from the U.S. Census Bureau and access control platform Kastle Systems.

Of the ten major U.S. cities with the most significant dip in office occupancy during the pandemic, 8 had an average one-way commute of more than 30 minutes. So, it stands to reason that cutting down commute times will draw employees back to the office. And one way to do this is by opening satellite offices closer to where employees live, including giving them access to flexible workspaces.

Whether or not the hub and spoke model truly comes to fruition is still up for debate. The strategy was utilized pre-pandemic, and while it gained popularity in the business media soon after COVID hit, not many companies have pulled the trigger on it yet. That doesn’t mean it won’t happen, though. The hub and spoke model can be enacted in many ways, and some company executives may be thinking about it differently. 

Opening satellite offices in other, growing national markets can allow companies and landlords to lean into the population shifts and national migration trends. Companies could still maintain a presence in gateway metros like New York and San Francisco while catering to secondary cities. This idea could be brilliant as cities like New York and San Fran have struggled to increase office occupancy rates and have seen plateaus or declines in population levels.

Flexibility has become an essential aspect of the office sector since the pandemic started, and the trend of the distributed workplace has taken off. Hub and spoke could be another way for occupiers to service employees, cutting down on commute times and getting them back to in-person work. The hub and spoke model is nothing new, and while it may not be highly utilized at the moment, the potential is there. As office occupiers and landlords gain more clarity on the future of work, hub and spoke is on the menu of options to adjust to the new office workplace reality.

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