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Are Corporate HQs a Thing of the Past?

Going forward, employers will further embrace hub-and-spoke models where people work from home, retail stores, restaurants…oh, and the office too.

There’s no doubt the pandemic has dramatically shifted how and where we work. It forced companies overnight to embrace remote working as the new norm. But in the post-COVID future, we’ll emerge from our homes again and eventually head back to offices. And none of it will look the same.

We’ll be working from home some, maybe a day in a satellite office, some rented time in a former department store, remodeled into a co-working center, or a hotel room, and perhaps jot into the corporate headquarters for a bit.  The future of work? It will look a lot more flexible.

The groundwork is being laid for a work-from-anywhere future. Already, the idea of a “central business district” is more or less dead for now. We’re seeing the dissolution of large corporate headquarters in exchange for smaller, remote offices with less commute time. And in the years to come, the “office” will be a wide range of flexible working options.

“Employee choice is at the center,” says Eivind Karlsen, vice president of product at Industrious, which has 85 shared work locations across 45 cities. That’s important because after eight months of COVID social distancing and remote working, as many as 70% of workers say they want to return to the office for three days a week or more, according to a recent survey of 2,600 U.S. workers by San Francisco architecture firm Gensler. At least 93% of them said they didn’t want to work at home full-time. 

This hub and spoke model of work is here to stay 

Going forward, corporate headquarters may be the place you go to work mainly for access to core company leadership. Large Fortune 500 companies are anticipating corporate leases that should expire in the next year or two, and they’re looking at hybrid work setups that rely on more of a hub-and-spoke model, with a variety of workspace options surrounding a downsized corporate office, with smaller teams working together, says Karlsen. 

“It’s the new model of flexibility, and the conversation is across the board with our [18,000] member companies,” says Karlsen. “It’s just a matter of when, not if.”

Already, companies are shifting away from expanding large corporate offices inside urban centers and instead are creating hubs in second-tier cities with lower rents—and lower salaries. This new dispersed workforce ideally can be a great way to find and attract new talent and save costs.

Coinbase CEO Brain Armstrong wrote in a recent blog post about his vision “to have one floor of office space in 10 cities, rather than 10 floors of office space in one city.”

At least 25% of CEOs say they’ll reduce their footprint in New York City and 16% will relocate entirely, according to a survey by the Partnership for New York City. But big tech companies with cash on hand, meanwhile, are moving in. Amazon, Apple, Facebook and Google have a presence of more than 22,000 employees in New York, with thousands added in 2020.  In San Francisco, Pinterest recently decided not to expand its space. Amazon said it will invest $1.4 billion in remote work spaces in Denver and Detroit. Facebook said it would open hubs in Atlanta and Dallas and figures half of its staff could be located away from headquarters in a few years.

“The office is not going away,” Mark Dixon, CEO of flexible workplace provider IWG told Fortune in July. “It is changing.”

In fact, Venture Beat quoted AOL founder Steve Case as recently suggesting the COVID-19 pandemic will spread the startup culture to cities outside coastal tech hubs, drawing entrepreneurs, investors, and employees to new geographies.

All this, of course, is brutal for real estate in American major cities. Moody’s, for instance, projects advertised rents for commercial listings in New York to drop 21% this year—worse than the 19% decline during the 2008-2010 financial crisis.

Office buildings as apartments (and vice versa)

The setup for working at home may also change. The pandemic has illustrated that WFH is not always particularly comfortable or professional. Residential real estate developers are working to change that, bringing a more polished setup to local apartment buildings.

The pandemic has prompted remote workers to flock to luxury buildings like Hoboken’s 7 Seventy House in New Jersey, with more space and the right amenities—such as outdoor gardens and co-working spaces—that make for more comfortable remote working. And new multifamily buildings are also now incorporating larger onsite co-working spaces and private meeting space amid the pandemic.

Ben Krasnow, managing director of Charlotte, North Carolina real developer Crescent Communities, says his firm has a number of projects that incorporate co-working into the plans due to COVID-19. Multi-family developments will increasingly focus design around “people who are able to work remotely digitally and are not bound by any specific location,” Krasnow told 

Developers of office buildings are also recognizing that their buildings are great for people who need to work from home today, and at various times in the future. The Missing Lofts, for instance, in Falls Church, Virginia, was built for office space with fiber-optic lines, enhanced utilities, and parking lots, but the units are also adaptable for one- or two-bedroom apartments. No matter who rents it, the price is the same: $2,000 per unit.  “Part of the benefit of this product type is that it allows the building to adapt to wherever the market may go instantaneously, and for no additional cost,” developer Robert Seldin, CEO of Highland Square Holdings, told Forbes

The offices inside empty retail stores and restaurants

Communication, productivity and camaraderie tend to thrive when you see people face to face. And in the coming months and years, employees who need to meet with other local team members may head to their local shopping centers or big box stores. Last year, malls in Scottsdale, Chicago and Boston began transforming empty storefronts into shared office space. According to a pre-pandemic report by Jones Lang LaSalle, co-working space inside retail properties was expected to grow by 25% each year through 2023.

Since the pandemic, major retailers have filed for bankruptcy—JCPenney, Lord & Taylor, and more—and thousands of restaurants have shut down, leaving millions of attractive square feet in desirable areas for other uses. The developers of the glitzy Hudson Yards in New York, for instance, are now touting office space inside former retail space, including Neiman Marcus’s 200,000 square foot store.

Industrious, the nationwide provider of co-working space, has also opened up remote work space inside hotels in Austin, Brooklyn and San Francisco, as well as setting up co-working space inside 20 retail malls around the nation. The company also started a monthly membership called Oasis, for people and teams looking for office space to use just one or two days a week. 

These shifts in the real estate market have opened up opportunities for employers and professionals looking for quiet outside the four walls of their homes.

Likewise, KettleSpace, a temporary on-demand workspace provider, has partnered with hospitality brands to provide office and meeting spaces. The founders believed that the “traditional co-working” model was too expensive and limiting for many professions, and started “coffee shop co-working” experiences with snacks, coffee and WiFi. The company started at a TriBeCa gastropub in late 2016, and now has a network of on demand spaces in New York and Brooklyn.

“We’re not going back to the old ways of doing things,” says Karlsen. “Companies will increasingly put in the hands of employees the decision of where to work and how to work best.”

In the end, that will look different for every company and every employee, whether it’s getting tasks completed at home, checking into a conference space at a restaurant for a client meeting, or perhaps heading over to a nearby satellite office for some team collaboration. The professional day-to-day is increasingly becoming less about ‘where’ and more of ‘wherever works’.