Update: On September 14, for nearly $368 million dollars.
It was supposed to represent the future of the office: in 2018, REI broke ground on a corporate headquarters intended to embody its company culture. The eight-acre campus, in the Seattle suburb of Bellevue, was imagined as a playground of outdoor amenities, including a fire pit and a blueberry bog. Sleek garage-style doors would let air into the office, while courtyards blooming with native plants would serve as alfresco conference rooms. The Wall Street Journal “the most outdoorsy HQ ever.” Fast Company joked that REI was building “.” Move-in was slated for summer 2020.
But now the future of the office may be no office, and instead of taking up residence in Bellevue, REI is responding to the pandemic by putting its never used, nearly finished HQ for an undisclosed sum. “The dramatic events of 2020 have challenged us to reexamine and rethink every aspect of our business and many of the assumptions of the past,” CEO Eric Artz in a video call last Wednesday.
Coming as it does after months of cuts—REI roughly 300 corporate employees in April and 400 retail employees in July—the decision could be a sign that the company needs to raise cash to retain its remaining workforce. Or the sharp pivot could be an indication that REI, the first major outdoor retailer to follow in the footsteps of Ի by declaring remote work a central part of its future, is thinking a step ahead of its peers.
Most likely, there’s truth in both interpretations. In an interview with ϳԹ, REI’s chief customer officer, Ben Steele, emphasized the strategic benefits of the decision while acknowledging the need to recoup the spring’s losses. “It’s important to replenish the balance sheet so that we can be prepared for the storms ahead,” he says.
REI that it would suffer a 30 percent drop in revenue compared to the previous year. Since then, most of its 162 stores have reopened, and people driven outdoors in search of safe fun have created what Steele calls “unprecedented demand” for everything from boats to bikes to camping gear. Though a strong summer won’t fully make up for a spring of what outdoor-industry experts told ϳԹ were “jaw dropping” losses, REI has revised its financial predictions in a more optimistic direction. “We went from asking questions about what we needed to do to stabilize to asking what decisions we can make to help us build our future,” Steele says.
That future will benefit from an influx of capital whenever REI sells its headquarters, he says. Several buyers, including Facebook, are , according to the Seattle Times. REI hasn’t announced what it spent to build its offices and won’t comment on a possible sales price other than to say that the company expects “a positive return on our four-year investment.” It seems fair to ask whether the new age of remote work might be a less than ideal time to put a corporate campus on the market, but Steele says that REI “will look for and expect premium pricing.” In the years to come, the company envisions allowing employees to “flex” between working remotely and commuting to one of three smaller satellite spaces in the Seattle area.
Some of the savings from downsizing will be directed toward meeting the new forms of demand that the pandemic has brought into play. “As a lot of shopping and transactional behavior moved online, we’ve seen places where we need to improve,” Steele says. “REI is known for its in-store expertise and experience, so we’re thinking about things like virtual outfitting to see: Can you have that experience online? Curbside pickup is not something that we see going away—people like the convenience. There are ways we want to invest to make that better for customers and also for employees.”
It’s also impossible to say how far away the post-pandemic future remains—another reason that REI may be making the right move by unloading an expensive asset. “There are a lot of unknowns in the next year or two,” points out Jessica Wahl, executive director of the Outdoor Recreation Roundtable trade association. Even if demand for outdoor gear is high, no one knows for sure how the pandemic will continue to depress spending power or disrupt the supply chains that retailers rely on for products. “Companies are making budget cuts that are not indicative of their health today but are setting them up for success if that health changes,” Wahl says. “You have to plan for what it looks like if things get really bad.”
With remote work the only option for many businesses at this time, it’s not hard to imagine that other outdoor retailers may soon follow REI’s example. “REI is a leader in our industry,” says Lise Aangeenbrug, executive director of the Outdoor Industry Association. “Any time they make a decision like this, it impacts everyone, including their vendors, who will think, Well, if REI did this, should I?”
REI’s plan is on trend with the future of office work that experts across many fields have begun to predict. In for the Harvard Business Review, a group of researchers at the architecture and design firm HLW argued that companies should seek ways to balance the benefits of remote work—increased flexibility, freedom from commuting—with the fact that “people will still need places where they can come together, connect, build relationships, and develop their careers.” The authors propose that satellite offices represent an ideal compromise, both because their small size supports close collaboration and because, “from a resilience perspective,” they provide more places where people can work through natural disasters, power outages, and other disruptions.
Ultimately, Steele argues that instituting flexible policies vis-à-vis geography might fit REI’s culture better than any headquarters, even one created with a blueberry bog. “We’re a national organization, and life outdoors looks different in, say, Atlanta than it does in Seattle than it does in Minneapolis or L.A.,” he says. By necessity, the inventory in any given REI store reflects the natural landscape of the place where it’s located, but the company’s corporate employees have never been likewise dispersed. Steele points out: “To have that model stretch into HQ is an interesting possibility.”