Not Your Grandma's Wagon Wheel: Hub-and-Spoke

The current catchphrase being applied to office leasing, "hub-and-spoke" was derived from the supportive design of early wagon wheels.  The energy for motion originates at the hub and is then transferred outward via individual spokes, thereby generating motion.

I'm sure you remember learning about covered wagons during your American History class in school.  Well, their large wooden wheels with massive hubs and spokes kept those behemoths rolling across the plains of the U.S., and make an excellent graphic illustration of how "hub and spoke" works with businesses.  Historically, it was considered a business distribution method, but with the advent of Covid-19 and the ensuing disruption to a centralized business workforce, it is now being applied as an office/work model for an increasing number of large companies.  

With the government enforced lockdown during the Covid-19 pandemic, in order to keep "rolling" companies had to figure out a way for their employees to work from home and still be productive.  Enter, Zoom, Go To Meeting, and a host of other video conferencing applications.  Problem solved, but another problem was ultimately created... Employees didn't want to go back to a centralized workplace once the lockdowns ended.  Since this attitude among workers was extremely widespread companies were at a loss as to how to bring their employees back to full, focused production and not have to deal with the inefficiency or negative "woke" press from mass layoffs.  

One increasingly popular solution has been the application of the "hub-and-spoke" business model.  Large companies began looking for smaller regional support locations, "spokes" that could be controlled from a central business office, or "hub".  As defined by Bryan Robertson, PhD., co-founder of ComfortZones Digital, Inc., in a recent Forbes opinion piece, "The hub-and-spoke model enables a centralized “hub” for people to come together, while also providing the choice to work from “spokes.” A spoke does not have to be a conventional office, but instead any place from which a person can be productive. This can include a satellite office or the home or even a coffee shop—a spoke can be an outpost of 50 or of one. Determining where to establish a formal spoke office versus relying only on informal spokes like a person’s home is dictated by the density of a company’s staff. If enough people live in and around a city, a new spoke would make sense. Similarly, if enough people live within a sub-market in the same market that the hub exists, a spoke also makes sense. "

In order to accommodate the new demand, CRE is seeing a transition from the standard office model to that of "flex-office" from providers such as WorkLodge, Serendipity Labs, and Regus.  Longtime Houston CRE institution, Hines Interests has also gotten on board in a big way offering coworking space and executive office suites in two Houston locations via their concept, The Square, which offers office space by the "hour, day, or month".  Because of the early success Hines is seeing in Houston, they plan to expand The Square concept to their properties globally providing amenities as shown below.

To compete with new builds, existing office buildings will have to reconfigure currently vacant space to accommodate the new demand by employing "behavior-based designs" and mobility factors.  Workspaces will have to allow for high-tech meeting rooms, collaboration zones, "closet" rooms for private video and phone calls, and quiet rooms for individual work.  In general, mid-level employees of large companies utilizing hub-and-spoke locations won't require dedicated individual offices due to the mobility factor offered by laptops and smartphones.

There is an unexpected upside to this shift for employers.  In addition to solving the immediate problem of encouraging employees to come back to a more traditional work setting, employers are actually benefitting from access to a wider talent pool, allowing them to tap into new markets for candidates that they may not have done previously.

Finally, the rise of the hub-and-spoke office trend will present a unique opportunity for boutique commercial brokerages and independent commercial agents, because those agents will have a greater opportunity and ability to work individually with developers and existing landlords to assess the needs of established regional employers, as well as those relocating to more attractive business areas, such we see here in Texas, and to make sure needs are met so vacant spaces are filled.  The possibilities are endless for those who are able to see the potential and opportunities.