What Is The Value Of An Office Location?

The iconic Lord & Taylor building on Fifth Avenue undergoing a full renovation before Amazon moves in 2,000 new employees.

In mid-August, Amazon stunned everyone when they announced their plans to open 630,000 square feet of office space in the iconic Lord & Taylor building on Fifth Avenue. Almost immediately after finalizing the purchase in early March, the future of the space was thrown into jeopardy. Within weeks, offices across the country were abandoned. Overnight, kitchens, living rooms, and spare bedrooms became the new office and to everyone’s surprise, telecommuting was a success, prompting many prominent companies to publicly reconsider the future of their physical footprint and the very need for traditional office spaces. Yet despite this shift in thinking, Amazon is still planning on housing 2,000 newly created jobs at the Fifth Avenue location when it is set to open in 2023.

Amazon in not alone in betting big on the future of offices spaces. In early August, with no sign of a vaccine in sight, Facebook agreed to lease all 730,000 square feet of office space in the James A. Farley building in Midtown Manhattan. Increasing their already massive physical footprint in the city to over 2.2 million square feet.

While many businesses are exploring permanent work-from-home strategies, Amazon, Facebook, and a host of others are tying their futures to in office work, in strategically selected locations. So, what do they know about the value of a physical location that everyone else seems to be overlooking?

Context Matters

Offices embed employees into local contexts. As office workers interact and become connected within and between offices, local communities of practices emerge. Communities of practice are succinctly defined as social learning systems that advance knowledge through collective efforts. Over time, these communities develop their own unique meanings, ways of doing things, and cultures, which differentiate them from other communities of practice working in the same field. Evolving along a multitude of different trajectories, fields are best thought of as landscapes of practice, with wildly varying topographies that are constantly shifting. They are rarely unified entities. Where you are located therefore influenced how your organization thinks, acts, and evolves. And in some instances, moving across town is enough to change how your organization operates.

Accessing communities of practice, however, is not as simple as just showing up and being present. If you want access to a community’s most cutting-edge knowledge, you have to become embedded into the local context. Unlike simple information, such as an address or sales figure that travels easily through vast and loosely connected networks of individuals, complex knowledge disseminates very differently. Complex knowledge travels slowly because it is unfamiliar, challenging to understand, and often transgressive to our beliefs. To grapple with these kinds of ideas and concepts, we need help from others to translate, interpret, and convince us of their value and utility. This is a highly interactive process that is most successful when played out between individuals who share a high degree of trust and vulnerability with one another. We also need time to build familiarity. As we know from personal experience and research, the more unfamiliar something is, the more exposure we need to it to gain comfort and understanding. If we want access, we need to become members of the specific community and build the kinds of relationships that enable complex knowledge to be transmitted. Hence why surface level interactions are not enough.

What business seem to be overlooking as they contemplate going permanently remote is the unique value that specific localized communities of practice offer. Through the strategic selection of office locations, Amazon and Facebook are tying aspects of their futures to the unique knowledge being created in Silicon Alley. Knowledge that is distinctive enough from that being produced in Silicon Valley, and other tech hubs across the U.S. that they are investing in, that they see strategic value in embedding in these local contexts. While virtual connectivity tools are unquestionably powerful in compressing space, they fall short of embedding you into localized contexts, spontaneous interactions and exchanges, and culture. Here are three often overlooked contextual dimensions to consider when contemplating the value of your physical footprint and its location.

1. Labor Pooling // Increases Knowledge Spillover

Not surprisingly, people gravitate towards regions where businesses are hiring. If there are sufficient opportunities for upward mobility, people tend to stay, moving within and between companies. Once a critical mass of opportunities is hit, regional inertia sets in, pulling people in from more distant and diverse backgrounds. With increasing inflows of individuals, eco-systems of subspecialties and ancillary services emerge, further building the allure of the region, depth of its labor pool, and capacity to develop new knowledge.

Embedding in local contexts promotes knowledge spillover as new hires forge intimate relations within their new office. Through these exchanges, new hires can introduce new perspectives, ways of doing things, and ideas.

Also not surprising, when we move between companies, we don’t show up as a blank slate. We bring with us our unique experiences, personal backgrounds, and accumulated knowledge. Every new hire presents incredible opportunities for companies to learn new skills, perspectives, and ideas. If new hires, however, are on boarded virtually, it is challenging to build the raptor with colleagues necessary to access the most critical knowledge they can contribute to our organizations: that which is new and unfamiliar to us. While over the long run we are often able to build the necessary trust, vulnerability, and exposure to access this unique knowledge, in rapidly evolving fields it will likely be too late to access time sensitive knowledge. Being embedded in local contexts promotes knowledge spillover as new hires forge intimate relations within the office.

2. Informal Social Networks // Increases Velocity of Knowledge

Informal interactions create interesting contexts for discovery. Whether at a bar, loosely structured meet up, or in line at a coffee shop, informal encounters offer the possibility to bump into new people and a sense of conversational freedom. We have all experienced this, the friend we are with bumps into another friend, and all of a sudden, we are captured by some new idea or perspective and fall deep in conversation. Spontaneous interactions allow previously unacquainted people to discuss the rabbit holes they are currently pursuing or riff on ideas they are grappling with at work. What is also taking place is the exchange of knowledge across networks. The more these moments occur within and between communities of practice, the faster new and unfamiliar knowledge is transmitted. While the brief point of exchange is not enough to translate challenging and unfamiliar concepts, it makes their existence known within the community. They illuminate signals to grasp onto and pursue.

Trust nodes help bridge otherwise disconnected networks, opening the possibility for new and unfamiliar knowledge to pass between groups. Mutual trust in a friend helps expedite the lengthy process of forging the kind of relationship needed to exchange complex knowledge.

In the 1970s, groups like the Homebrew Computer Club and bars like the Wagon Wheel became informal hubs for exchanging new knowledge in Silicon Valley. With the inherent lag in print trade publications, people needed spaces where they could freely associate and discuss the new kinds of problems and possibilities that were popping up daily on their horizons. Today, with the world in the palm of our hand, access in not the issue. Our challenge is twofold: Identifying what matters amidst the incessant noise of the internet. And more importantly, gaining exposure and making sense of concepts and ideas that sit outside of our current field of vision. What remains constant, however, is the role that interpersonal relationships play in disseminating this kind of complex knowledge. Trust, vulnerability, and follow-up encounters increases when a trusted individual introduces us to someone new. Our mutual trust in a friend helps expedite the lengthy process of forging the depth of relationship that research finds is critical to exchanging complex knowledge.

3. Boundary Crossing // Increases Innovation

Some of the most innovative concepts emerge when disciplines collide. Combining and transforming aspects from different fields encourages new and unanticipated assemblages to emerge. Assemblages that either transform existing products and services in unanticipated ways, or, create entirely new types of products, services, or customer segments all together. Building 20 at M.I.T. — considered the most innovative places in U.S. history — is filled with countless examples of this. The Bose Corporation, computer games, and contemporary cognitive sciences all got their start when scientists crossed disciplinary boundaries and started exploring ideas together in the now demolished building.

When groups with different perspectives and ideas collide, they create the generative friction required to expose taken for granted assumptions and expectations. If harnessed correctly, this can shake up an existing field or create a new one.

Following Building 20’s original use to support war efforts, it found a new purpose housing overflow faculty, graduate students, clubs, and technical services from across the campus. People who had previously worked in isolation from one another, often with no knowledge of each other’s disciplines, were all of a sudden working side-by-side. Filled with a sense of curiosity and open minds, occupants of Building 20 started exploring each other’s labs. Conversations quickly led to cross-disciplinary collaborations. Blurring boundaries, disciplines folded together as they converged in shared spaces. Sparked by the friction of diverging ideas and perspectives, taken-for-granted assumptions were being exposed. This awareness enabled teams to identify new ways of transposing and recombining ideas into transformative new concepts. Without the shared spaces that promoted unstructured exchanges, many of the innovations would never have been realized. Because there are no roadmaps for developing truly novel ideas, we have to experiment and discover together. Trying to do this virtually adds an additional hurdle to an already challenging process.

Exploring new frontiers of knowledge requires a collective effort that extends far beyond the boundaries of any one company. Cohesive communities of practice provide the framework for bringing together all of the individual facets of knowledge that collectively generate innovative insights. Situating yourself into a thriving local network of companies will not in itself grant you access. Your company’s organizational structure, mindset, and culture must be open to engaging with those outside the walls of your office. This is precisely what it means to be embedded into a local context. You are part of the movement exploring new frontiers and establishing new ground — not coming in after it is mapped out and other have already exploited it.

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Andreas Hoffbauer, Ph.D.

Andreas Hoffbauer, Ph.D.

Founder & Director of Atelier Kultur, Doctor of Organizational Innovation & Creativity