Opportunity Ripe for Companies to Open Up Excess Office Space to Community, Clients, and Co-Working
Updated: Aug 19, 2022
In the late 2010s, it was fascinating to see Capital One roll out Capital One Cafes in a joint venture with Peet's coffee. On the surface, it was a direct response to a growing problem sweeping legacy retail banks: underutilized physical square footage in an increasingly digitized banking system.
Instead of ditching the outdated homes to bank tellers, and taking a bath on long-term retail leases, Capital One reinvented their urban footprint into a gateway for customer awareness, acquisition, and as a way to promote financial literacy.
Starting as a digital-first bank, it also created a new kind of consumer touchpoint. Think online adverts, billboards, or TV spots but packaged into a physical location with ancillary benefit to the broader environment – maybe native advertising at its finest.
It's become an innovative story of truly auditing the use of space and taking actionable measures to turn what looked like a dated model into opportunity. And now it's a roadmap for how companies with bloated office space in urban districts can themselves approach a similar dilemma in an increasingly digitized working system.
The parallel clicked when Ross Mayfield – the Product Lead for Integrations at Zoom – discussed how one of his earlier start-ups expanded their physical footprint into an adjacent space open to the community, well before expansive telecommuting or co-working firms like WeWork were even blips on the radar.
The anecdote came from Mayfield's discussion with John Sviokla, Senior Advisory Partner at Manifold, which is a venture firm and studio in Chicago. Their entire discussion was worth a listen for anyone interested in the dynamic discourse around virtual work, namely hybrid workflow, and it's possible a recording will be uploaded on Manifold's website.
But this distinct point on use of space, or Mayfield's thoughts on "flex office space" particularly in the context of a hybrid model, deserves to be fleshed out even more.
Earlier this week, Google raised eyebrows when they dropped $2.1 billion to outright purchase St. John's Terminal, a currently under construction industrial-chic tech office in Manhattan's Hudson Square.
Just as a rapid rise in people working remotely during the pandemic doesn't spell the end of the physical office, Google and other tech companies locking up physical real estate doesn't mean work-from-home was just a fad either.
As can often be the case, both ends of the spectrum represent the extremes of the likely reality, which in this case is a hybrid model – where a no-one-size-fits-all approach will be employed by companies from start-ups to those with trillion dollar market caps.
In urban areas, hybrid may mean all employees split time between home offices, "third spaces", and the corporate hub, while hybrid can also mean more bespoke plans – where teams are distributed, a mix of fully remote or primarily in-office personnel.
The name of the game will ultimately become people-first accommodation. That's how the brightest companies will compete for the brightest talent.
But what all of this really means is no matter the chosen blueprint, there's going to be a period of correction and sorting. It's no secret that companies are already tied to hefty physical commercial office leases, with the office market in the United States comprised in the billions of square feet, with an additional 163 million SF of new office inventory currently under construction.
While tech companies have been gobbling up office space in Q2 like people absorbing social media content, it remains to be seen how the strategy will transcend to other sectors.
Whether it's an energy company or a marketing agency, office layouts are going to continue to shed the formica and felt cubicle walls for open, creative spaces – a trip to the office is going to feel a lot more like stumbling into a trendy cafe. And that's a good thing as far as collaboration and atmosphere is concerned, but not every company is going to need as large of a footprint when the office becomes more of a passive, laid-back basecamp rather than an organized ecosystem.
So if the primary function is becoming more open in how the space itself is organized, what about becoming more open in who it services?
The opportunity is ripe for companies to not just reduce the cubicle workstations scattered across their floor plates, but to take this open-concept to another dimension and open it to clients, the community, and stakeholders as well.
This model works exceptionally well for small to mid-sized companies who will simply have less demand absorption for in-person working populations. If these companies are faced with shedding 20-30 percent of their office footprint, instead of framing it as "negative excess" it could also become an "opportunistic surplus."
Space is a commodity and it's only a sunk cost if used inefficiently. It becomes an additive resource when repurposed. Instead of converting entirely to expansive collaborative internal hubs, divvying up some of the space for alternative external functions is where the true integrative value emerges.
Office Space As A Sales/Activation Funnel
B2B sales may be reshaped entirely as the process moves digital, but prior to the Covid-19 pandemic, in-person trade shows and exhibitions were a crucial component to a company's marketing playbook.
Beyond just the face-to-face dynamic, the whole concept of an experiential marketing booth that activated attendees was the fulcrum of these events. What companies gain in being able to take their value proposition across the country and place in front of the right stakeholders, they potentially lose in the associated costs, poor conversion rates, and disadvantage of their banner being five feet from a relevant competitor's.
Imagine taking a cue from Capital One, and designating a portion of one's office space to a customer awareness and sales activation hub. Instead of investing money in square footage expansion, peeling back office footprints in underutilized regions (places where the majority of the team is now remote) and reinvesting those resources into strategically positioned sites could be the better play.
Imagine a hard-money lender for construction financing who travels across the country to get in front of home builders, home owners considering rehabs, partnered lenders, and capital markets clients repurposing some SF of their corporate office into an immersive room – building an updated kitchen, a video wall highlighting digital content of customer success stories, and loan officers on the ground talking to customers about how Lender XYZ can provide the capital for their next project.
Is the office space in a high-traffic business district? What about a sign that says "Want to remodel your bathroom? We Can Help You Fund It! Visit Suite 302."
Suddenly foot traffic isn't just visiting a building's ground-floor boutiques, cafes, or service retail, but they're also taking the elevator up a couple floors to the 5-stories of offices above – windows they've previously simply glanced at.
Satellite HQs are even more uniquely positioned to blend office with B2B and B2C experiential sales channels. Take Netflix for example. They just announced they're going to open up a local office in Toronto with an initial headcount of 10-15 employees, with the expectation to grow.
As a business with job functions that can certainly be done remotely, at least part of the time, Netflix would be wise to consider this as they undergo the build-out of their office space. While they'll likely follow an open-concept design with a conference room or two, this is an opportunity to take one level of their lease and make it external space.
If the forecast is to only accommodate let's say 75-100 employees at scale vs. 250 due to increased remote work capacity, then what about internal offices along with a screening room open to the public, where downtown passerby can watch behind-the-scenes content, upcoming trailers, or even pilot episodes.
Not so much a theater but an immersive advertisement for Netflix content. And for the growing Canadian filmmaker industry, how about a place for hopeful showrunners, directors, and actors to stop by and pitch their screenplay, expertise, or talents to junior execs building out project teams – a physical front door for content ideation, collaboration, and talent sourcing that integrates the local film trade community.
From the mid-sized loan servicing construction lender to Netflix tech-giants of the world, these external arms of their floor plates can be activated for events as well. Instead of traveling to set up booths across the country, the lender could actively invite customers and partners to their own hosted summits (because they now have the tailored space) and Netflix could equally fly in an actor or director for public meet-and-greets ahead of a show's release.
Remote work's freeing up of square footage allows the CEO to have a corner office, employees to meaningfully collaborate, and the company to have its own experiential Expo Space – enabling connection with clients and partners in ways previously unimagined, all the while simply redistributing the costs to an existing home base.
Office Space As An Education Incubator
We've written before at BedSideHustle about how transformative remote work is from an optionality standpoint, especially as it applies to rural communities. People across the Rust Belt, to The Heartland, to the rural valleys and mountain towns of the coasts will potentially have unparalleled access to jobs as digital work adoption moves along the S-curve.
Less attrition in struggling labor markets could be a byproduct as all sorts of local municipalities become more "plugged-in" to a national and even global economy.
The friction to this new frontier lies in both accessible broadband access and education barriers. Most remote work is housed in the "Knowledge Worker" economy, and empowering people to have options across the spectrum of the service, trade, and knowledge job market needs to be a priority moving forward.
This vision can only be tangibly realized once the education across the country arms people with the skills necessary to participate in a versatile and increasingly tech-driven world.
Economists, sociologists, and city planners – along with public policy experts – have all identified the need for public-private partnerships to this end.
In that respect, it makes sense for existing surplus office space to be translated into front-line training facilities for those interested in acquiring skills in programming, digital marketing, finance, UI/UX design, and data science – ostensibly the premium STEM skill sets.
From Google to Oracle, the corporate "campus" has been a long-held strategy, pulling new college grads into the funnel, and cycling them through programs that polish their custom enterprise skills.
This exclusive model should be opened up to communities – particularly high school students, young adults, blue-collar workers looking for a career switch, and really any underrepresented socioeconomic population.
On-site training between a branded satellite office in partnership with a community college or municipal library could be a solid place to start, with existing office SF or even newly programmed office stock helping to close the gap.
Bring community education to exurban and rural offices and building out a truly distributed business district (DBD) becomes possible, all the while embedding companies more firmly into their host locations.
Rather than city leaders try to bring in a new anchor company to spur job creation, influencing existing enterprises to boost local education could be a wiser long-term investment. BedSideHustle covered DBD's and profiled a variety of cities, towns, and regions primed for applying this type of roadmap in a prior publication.
Office Space As A Complementary Co-Working Center
From the rise and fall to possible resurgence of WeWork, co-working is now a mainstream model, even if it existed in various forms prior to venture-backed dominance. Where as independent co-working aims at creating synergy between member companies and users of the space, there's now an opportunity to sharpen the vertical.
Sure, a company could look at 2,000 SF of underutilized office space in a remote world and quickly convert it to a sea of sleek stools, tabletops, and Edison lightbulbs in a sub-leasing strategy, where members across varying professions subsidize their master office lease.
But there's also an opportunity for the segmentation of these members to not be so random.
Look at a company like Etsy, which has created an entire network for independent sellers to reach customers and sell their wares via an online channel. Etsy is a publicly-traded powerhouse with a $28 billion market cap, nine global offices, and around 1,500 employees.
Some Etsy sellers are part-time hobbyists while others run full-fledged businesses, using Etsy as just one of their many sales channels. Etsy sellers are also craftsmen, primarily producing hand-made goods.
Of course, there are a variety of business functions involved with running an e-commerce business, from managerial accounting, to marketing, to inventory management, and content creation.
These functions can be done on a laptop from almost anywhere in the world, but why not at an Etsy branded co-working center? Allocating 20 percent of a corporate office to a place where Etsy sellers can work, elegantly weaves the customer together with the corporate service.
Etsy's product managers, engineers, customer service team, and ad reps could be on the ground floor as various sellers flow in and out during the day, answering questions and deploying solutions. Etsy could charge a co-working membership fee and offer credit days to qualifying sellers.
If Etsy really wanted to make use of unneeded office space as a percentage of their team clicks away remotely, the physical presence of their HQ could be reimagined as a creative workspace for the non-business functions – yes, providing Etsy sellers with studio space to actually produce their goods. Once again provided via subscription fee or customer credits.
The Etsy model could apply to any number of B2B businesses, with everyone from Salesforce building out co-working space for enterprise sales teams using their software to Robinhood investing in ultra high-speed internet and letting retail traders congregate at a reimagined 21st Century "Trading Floor."
Co-working is a great way for businesses with bloated office space to disseminate some of the cost, but segmenting the space-sharing to create synergy between users and a company's product suite is akin to building a physical CRM and upsell channel in a digital world – the irony where going remote with corporate teams serendipitously opens the door to getting more face-to-face with customers.
Overall, as companies grapple with how to repurpose, scrap, or manage their excess office space in light of shifts to hybrid working models, it would be advantageous for them to look outward – as a multitude of opportunity exists to reimagine office space as a vector to external activation rather than merely a means of internal function.