Why Does A Headquarters Matter Anyway?
As the past year has decentralized the corporate work environment, it has also caused some employers to rethink the central piece of that environment: the headquarters.
Some companies may eschew a headquarters entirely. Cryptocurrency trading platform Coinbase declared as part of its recent initial public offering filing with the Securities and Exchange Commission that its workforce is entirely remote, and thus it has no headquarters. Coinbase didn't respond to requests for comment.
It is perhaps appropriate that a company operating in such a digitally native space would not find the need to have its employees meet "IRL" to build culture, as was the case for plenty of tech startups years before the outbreak of the coronavirus pandemic.
But going headquarters-less is still a fairly rare decision. A company’s headquarters is often both a central part and a crucial expression of its identity, even though it had become less and less devoted to housing the bulk of a major company’s employees even before the pandemic scattered the workforce. As hybrid remote work and hub-and-spoke models of office look to become a permanent fixture, the importance of a headquarters is less likely to be about day-to-day operations going forward.
As office-using companies consider what will be gained and lost with the increased prevalence of remote work, among their chief concerns has been maintaining the connections, both professionally and socially, that allow employees to better understand the company they work for and the people they work with, said Tamar Moy, Newmark Northeast executive managing director of workplace strategy and human experience.
“What’s really rising to the top of priorities is bringing people together face-to-face,” Moy said. “That’s especially important spiritually, in the sense of maintaining an organizational ethos for what it means to be company X. Meeting people, interacting, is important for talent recruitment. So the importance [of a headquarters] is higher as the need to bring people together is higher, even if the hub is smaller.”
A headquarters that operates more as a gathering place than an operations hub would have a layout to match, with more space devoted to common areas, conference rooms and event spaces, Moy said. If potential new recruits or business partners tour the headquarters to get familiar with the company, then the headquarters’ visual style has a greater impact than it would at an office with more emphasis placed on the work itself.
“A headquarters has traditionally signified, ‘We’ve made it as a company,’” Moy said. “It’s a physical manifestation of your brand and your success … That is why it needs to be the physical embodiment of the company, even if it’s accessed less frequently.”
For many industries, where a company is headquartered has arguably been more central to its identity than what the office itself looks like. Finance firms seem to carry more cachet if they have a Manhattan address, much like Silicon Valley has been so coveted by tech firms. Even outside of a specific industry, companies are well aware that their headquarters’ location conveys a message.
“There are companies that sit in the suburbs of Philadelphia and say they’re Philadelphia companies,” Philadelphia Deputy Director of Commerce Dawn Summerville told Bisnow. “And we love the greater region, but they say that because no one knows where, say, Malvern is. Philadelphia, like other cities, continues to be a draw.”
Part of that clustering is for the purpose of associating with the center of an industry’s universe, but the more pragmatic benefit is to be where the talent knows that jobs in their sector will be, CoreNet Global Senior Vice President Tim Venable said.
“It’s comfort in numbers, comfort in the peer group,” Venable said. “It definitely means that you would not be making a mistake by bringing your HQ [to a certain city] because, look at all the companies that have already done it and are successful.”
As the workforce has accelerated its migration away from coastal cities, being in the right place to recruit talent has arguably receded as a priority to more financial concerns. CBRE’s late 2020 move of its headquarters to Dallas from Los Angeles, which came without any significant changes to real estate or employee headcount — though CBRE has since laid off 200 people, reportedly primarily in back-office roles — was likely motivated by financial factors, multiple sources not involved in the decision told Bisnow.
Texas’ lack of corporate and personal income tax or the aggressive incentive packages it offers new job creators moving in from out of state has made it the most popular destination for companies looking to pull up stakes, even as it has strained the state's infrastructure and finances. The equation is similar to why so many companies are "based" in Delaware, even without any physical presence there.
Movement of headquarters might become more frequent if the commitment required to do so is less onerous, like with CBRE, Venable said. Finding, renting or buying and then designing a new hub, to say nothing of subleasing or disposing of the previous location, will always be more expensive in the short term than a simple renewal.
“When a company decides to pick up and move, it’s not a two-to-five-year decision, so over the long term, the financial projections will probably bear out the savings,” Venable said. "And they would likely get financial incentives from wherever they’re moving, and it's the lower-cost environments that they’re targeting.”
One movement the anticipated growth of the hub-and-spoke model will likely accelerate is the decentralization of operations. Like with New York finance giants moving divisions to Florida or Amazon HQ2 in Washington, D.C., the purported benefits of bringing everyone together have receded in the face of the pure desire to be where talent is.
As people have de-emphasized living near where they work when moving in the past year, companies will have to reconcile the benefits of in-person collaboration and socialization with the desire for talent that is not necessarily as likely to move for a new job. Rather than subsidizing three new recruits from, say, Indianapolis, to relocate to the Bay Area, it may now be more cost-effective to simply take some space in a coworking location in Indianapolis for those three hires to have a base and occasionally fly them to the HQ for events.
“That sort of occasional touchpoint to retain a sense of connection could still take place in a central hub, which would imply travel,” Moy said. “And there could be regional hubs, but in general, the headquarters is about connecting people to the brand and the purpose of the organization.”