The phrase “hub-and-spoke” is popping up all over. It is a reference to a proposed new location model for the knowledge workforce, with downsized downtown offices surrounded by satellite offices placed in other locations around town. (CBRE’s 2020 Midyear Review offers just one example of a large real estate firm putting forward such a model.)
The logic goes something like this: The necessity of working from home during the COVID-19 pandemic has convinced corporate occupiers that their employees can be effective and productive without being physically co-located five days per week. Despite this, most people will nevertheless want to work from offices because they miss the socialization, collaboration, and, in some cases, the demarcation provided by the physical workplace. However, they will only want to do so some of the time. All this, it is thought, combined with the hassles of commuting and the density of public transit, will make it hard to justify the traditional large, downtown corporate office.
We wanted to examine the hypothesis that this new corporate office strategy might be changing the way we use, and therefore value, commercial real estate. Our latest report, The Rise of the Suburban Office looks at what impact, if any, the hub-and-spoke model will have on the office landscape.
“There is a utility in the hub-and-spoke model,” says Doane Kelly, Vice Chairman, Director and Head of Savills KLG Advisors. “Not everybody has an adequate situation to work from home. By putting an office nexus in points around a metro area, you give people an opportunity to work in a place that is better suited than at home.”
But Kelly and others in the industry are quick to point out that there are limitations to the concept as well. Kelly alludes to some of them in the recent report Lessons from COVID-19: Potential Impacts on Portfolio and Occupancy Strategy. These limitations reveal several considerations occupiers and their landlords will want to keep in mind before jumping into the hub-and-spoke strategy with both feet.
The first question to consider is so basic that it sounds almost mundane: What is the space in the hub or spokes for? “One of the big lessons of COVID is how poorly we’ve managed the workweek in the past,” says Kelly. “We never segmented individual time from collaborative time, and we tried to do it all in the office, five days per week.”
Occupiers risk making the same mistake if they fail to think through the goal of implementing satellite offices around a central hub. For some workers, the home office presents serious limitations even on individual “focus” work. It could be a lack of dedicated space, a strain on internet bandwidth, the distractions of household life, or a combination of all three. For these workers, a quick jaunt over to a nearby spoke office could provide a welcome taste of sheer technical adequacy.
But for many others, a visit to any office only makes sense if and when their work is actually enhanced by being with others. This could lead to purpose-built “spokes” designed specifically for brainstorming or training sessions. Or perhaps a location that provides the type of social energy craved by extraverted employees. In any case, the rationale for any workspace should not be taken for granted.
The overall performance of knowledge workers during a long-term absence from the office has almost certainly been a pleasant surprise to their companies. The debate about actual and perceived productivity could rage on for a while, but it is clear enough that office workers have scored a few Zoom-assisted points for the efficacy of remote work.
Yet it is also true that this was accomplished by people who had spent months or years immersed in their respective office cultures. What happens when that is no longer the case? How will employees—especially new ones—learn and adhere to the intangible aspects of their organizations?
“If you have collaboration in all the spokes, you are dissipating your culture,” explains Arnold Levin, Director, Strategy at Gensler. “You still want to be able to bring people back to the hub as a place to maintain that culture.” Levin sees the spokes as convenient “touchdown” spaces for employees, but not exclusive workplaces. He believes there should still be a place to bring everyone together at least occasionally.
“You could reduce footprint in the center, but maintain a hub,” he says. “But if so, you are not looking at the hub as a place to maintain a presence instead of maintaining a culture.” In his view, spaces large enough to bring an entire team together will still be necessary, even if spokes are added for employee convenience.
A third consideration is one that should be obvious. Even if a given company has clusters of employees living in the same suburbs, they probably are not part of the same department, team, or work group. This means that spoke offices are unlikely to be a good solution for the kind of intensive team collaboration common at many companies. What if, for example, team members live spread out across multiple suburbs that are hours of travel apart?
“This is a huge limitation to the strategy,” says Savills’ Kelley. “In many ways, hub-and-spoke could really still be a form of virtualization.” To get teams together, argues Gensler’s Levin, spoke offices are not ideal. In fact, hubs may be better for that purpose. “Hubs can be used on a rotational basis across teams,” he says.
This does not necessarily mean that spokes are useless for teamwork. In fact, it could be a benefit to co-locate with fellow employees who are in different departments. The kinds of interactions that happen across departments, sometimes randomly, sometimes by design, can be drivers of innovation and performance. But when teams need to meet together, the spoke office’s biggest help may be it’s quiet space and powerful wifi.
The fact that urban office buildings have become so highly amenitized has important implications for any location strategy that includes the suburbs. If knowledge workers feel productive at home or in other remote locations, enticing them to return to a stereotypical suburban office, an isolated island in a sea of parking lot asphalt within walking distance of nothing, will prove difficult.
“People are going to want to see the same amenities that they are used to in urban areas,” says Levin. “You are going to want to put a spoke near where people live, but also in amenity rich neighborhoods.” Levin argues that people coming to a suburban spoke office will want to do all the things they have gotten used to doing downtown: grabbing lunch or running an errand or taking a walk.
“If I were a developer, I would try to think differently about how we build a suburban office, and how it connects to the neighborhood,” Levin says. “As new developments come online that offer amenities, they will become attractive places to work.”
A lot about the workplace is going to change in the post-pandemic world, and that may include where it is located within its given population center. Part of this change might be due to a switch to the hub-and-spoke office strategy. But if this is the strategy that companies do take, there are still a lot of unanswered questions about how, and if, it works.
Hub, Spoke, and Flex
Envisioning future office location strategies
DATE: September 29, 2020 TIME: 1:00 PM PT, 4:00 PM ET