REAL ESTATE NEWS

As return-to-office mandates proliferate in the Bay Area, co-working giant Industrious is betting that employers will embrace a hub-and-spoke model allowing workers to stay closer to home in a region that before the pandemic was notorious for its lengthy commutes.

Industrious is looking to expand across the Peninsula in response to demand from workers who moved away from San Francisco or the heart of Silicon Valley and are ready to fill satellite offices closer to home rather than trekking back to headquarters locations.

“I need to recreate the hub-and-spoke model,” Peri Demestihas, Industrious’ head of real estate, told the San Francisco Business Times.

“I’ve heard from major occupiers that say, ‘We’ve got employees who don’t want to come into San Francisco every day because they now live in this area,” he said, referring to the Peninsula.

The co-working firm, now fully owned by CBRE, has two locations under development near Stanford University set to open this fall, including a 41K square foot space at 1950 University Circle and a 28K square foot space at 1881 Page Mill Road.

The office recovery in the Bay Area appears to be accelerating, driven by the generative AI boom and an influx of an estimated $90B in venture capital last year, about half of the total VC haul in the U.S. in 2024.

Demestihas said Industrious has been signing seats for its newest locations at a rapid clip, months before those projects deliver.

An Industrious co-working location at 3223 Hanover Street in Palo Alto quickly filled up with AI startups, professional services and financial firms, he said. JPMorgan Chase eventually took over the Hanover Street location because it needed more space.

A new return-to-office policy announced earlier this month by Gap Inc. appears to validate Industrious’ hub-and-spoke strategy. The retailer said employees located closer to its Pleasanton office hub could report there instead of the company’s San Francisco headquarters.

Gap is rolling back expansive remote work permissions, aiming to restore a five-day in-person work week by September 2. According to a company-wide email obtained by the Business Times, only 34% of the company’s workers have been coming in Tuesday through Thursday at Gap’s headquarters at 2 Folsom.

Between now and September, Gap is requiring employees to begin coming into the office “with greater frequency and regularity.”

The retailer is offering workers the option of using three non-consecutive “flex weeks” per year when they will be permitted to work remotely, as well as “flex Fridays” between Memorial Day and Labor Day. Beginning next month, a pre-tax commuter subsidy of $50 per month for 12 months will be available to eligible employees with lengthy commutes.

Amazon, which has a large corporate office in San Francisco as well as substantial office assets in South Bay, inked a licensing deal with WeWork in December for 217K square feet of flexible workspace at 401 San Antonio Road in Mountain View.

WeWork renegotiated 190 leases and exited 170 co-working locations during its Chapter 11 restructuring last year. In Silicon Valley, WeWork still has two co-working locations in San Mateo and one each in Palo Alto and San Jose.

Led by a bevy of big-ticket tech deals, office leasing volume in Silicon Valley soared to 2.4M square feet in the fourth quarter, the first time the quarterly tally has surpassed 2M square feet since Q2 2019.

Source: GlobeSt/ALM