The global health crisis may lead more companies to adopt a “hub-and-spoke” approach to determining office locations, according to one prominent academic who focuses on urban studies.
Large corporate headquarters may move to urban centers, and small satellite complexes may be created in the suburbs to serve remote workers, wrote Richard Florida, a professor at the Rotman School of Management at the University of Toronto, in a recent Harvard Business Review article.
“With the rise of remote work, many families and older and more vulnerable people may opt to move to less-crowded suburbs, exurbs and even smaller cities,” wrote Florida. His theories on talent migration and urban renewal have gained attention in books including The Creative Class and Who’s Your City?
This approach is certainly one that some asset managers are weighing, says Darin Buelow, Deloitte Consulting’s leader of global location strategy.
“It’s still early days,” he says. “A lot of companies aren’t sure what their real estate strategies are going to be,” and a lot depends on what happens with the pandemic and a potential vaccine, he adds.
Indeed, most shops seem to be intensely focused on the short-term steps they must take to safely reopen their offices, although exact dates are unknown for many, and stretch as far out as June 2021.
A little more than half of the nearly 100 managers Callan surveyed in August have specific reopening dates, a recent report shows. Most plan to return in 2021, Ignites reported.
Fidelity has not yet announced a specific date for when employees will return to the office, a spokesperson writes in an e-mail.
“Fidelity continues to focus on how we will return to the office, rather than on defining when we will return to the office,” he says. “Safety will dictate every decision we make. … The curve of the pandemic will direct our actions.”
And when the firm deems that returning to the office is safe, “it will happen at a gradual pace,” he says. “We will take our time emphasizing safety over speed. As a company, we will return to the office.”
While much remains uncertain about employees’ eventual return to the office, one thing is clear: C-suite executives are focusing more on long-term location strategy than ever, Deloitte’s Buelow says.
“I can’t think of another time when the workplace and future of office has been on the CFO and CEO agenda for essentially the entire economy, all at the same time,” he says.
Executives across industries are motivated to stay on top of decisions involving their real estate needs because leases come up for renewal every year, Buelow adds.
Determining location strategy involves numerous factors. And those factors — such as employee safety and satisfaction, having access to a deep talent pool and real estate costs — have been complicated by the global pandemic.
On the employee side, nearly three quarters of workers surveyed by PwC in June said they’d like to go into the office two days a week after the pandemic ends. Almost a third said they’d prefer never to return.
Very few firms are likely to require employees spend five days a week in the office, says Bhushan Sethi, PwC’s joint global leader of people and organization.
“They’re all using words around a hybrid workforce,” Sethi says.
Some 36% of fund employees said they plan to return to the office one or two days a week after Covid-19 is under control, according to an Ignites survey fielded last week. Nearly 300 readers participated. About a third said they plan to be in the office three or four days a week, and 10% said five days. The remainder, 21%, said they never plan to be in the office, except for important meetings or events.
Franklin Templeton CEO Jenny Johnson said earlier this month that she expects a “hybrid” work schedule for employees post-Covid, with workers spending part of each week in the office, and part working remotely.
Though many industry leaders have also said that remote work will play an increased role in the workplace of the future, some have also raised concerns.
“Cultures are not meant to be done in a remote fashion,” said BlackRock CEO Larry Fink during a virtual conference this month.
The hub-and-spoke arrangement that some see as poised to grow due to the pandemic could lead to situations where young workers are more likely to work together in the headquarters city, and middle-age and older workers may make more use of the “spoke” offices, says Florida, the urban studies academic and consultant.
“I think this is what will happen especially in the United States where it is much more difficult to raise children in large cities,” he writes in an e-mail. “I think this poses a challenge for younger workers because it limits their ability to develop personal and professional networks with older, more established workers and managers, and limits their access to mentors.”
Some 64% of location-strategy consultants surveyed by the Site Selectors Guild said locations in suburban areas are “likely” or “very likely” to be considered by companies “looking to expand, relocate or open new facilities in the next 12 months.” Nearly 60% said the same of midsize cities. In contrast, only 10% said large urban areas are likely candidates for expansion, relocation or new facilities.
Participants in the online survey are members of the Site Selectors Guild, which bills itself as “the only association of the world’s foremost professional site selection consultants.” (Deloitte’s Buelow is a member.)
Firms are least likely to pick New York City for projects in the next year, according to all 50 or so consultants surveyed. More than 60% said Los Angeles was an unlikely candidate, and 42% said the same of Chicago.
Companies are more likely to pick midsize cities, the consultants said, including: Boise, Idaho; Colorado Springs, Colo.; Columbia, S.C.; Columbus, Ohio; Greenville, S.C.; Kansas City, Mo., Reno, Nev.; and Tucson, Ariz.
Waddell & Reed in January signed a lease on its new headquarters in downtown Kansas City, Mo. The firm is currently headquartered across the Missouri state line in Overland Park, Kan.
The pandemic has not changed the firm’s objectives with moving to a new headquarters, a spokesperson writes in an e-mail. Waddell aims to move in 2022.
“Overall, we believe the future will focus around flexibility and not one singular approach to the way work should happen,” he writes. “From a workspace perspective, utilizing physical space to enhance employee connectivity, company culture and employee social solidarity will be even more important in the future.”
In mapping out a broader location strategy, firms will seek to balance employee satisfaction with nurturing a strong company culture, says Jeanne Branthover, managing partner of global financial services practice at DHR International, an executive search firm.
“Change is definite,” she says. “There’s no way we’re going back to what we were.”
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