Smart Buildings

Hub & Spoke Workplaces: the Good, the Bad & the Ugly

It is over six months since we published our March 19th article — COVID-19, the World’s Biggest Remote Working Experiment is Underway — and the workplace is still in flux. Around the world, companies have one eye on bringing employees back to the office and the other on the potential of distributed workforces in the post-COVID era. The last six months have been a period of reflection and employers must now tap into the new mindsets within their workforce before they select a strategy for the new world ahead. In a survey by the Harris Poll and CBRE of 1,000 US office workers, 62% appreciated the money they saved working remotely, 58% appreciated not having a dress code and 55% liked not having to commute. In fact, 56% of respondents now say they want a flexible remote environment vs just 37% before the pandemic. Most people don’t want 100% remote work, however. A survey by […]

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It is over six months since we published our March 19th article — COVID-19, the World’s Biggest Remote Working Experiment is Underway — and the workplace is still in flux. Around the world, companies have one eye on bringing employees back to the office and the other on the potential of distributed workforces in the post-COVID era. The last six months have been a period of reflection and employers must now tap into the new mindsets within their workforce before they select a strategy for the new world ahead.

In a survey by the Harris Poll and CBRE of 1,000 US office workers, 62% appreciated the money they saved working remotely, 58% appreciated not having a dress code and 55% liked not having to commute. In fact, 56% of respondents now say they want a flexible remote environment vs just 37% before the pandemic. Most people don’t want 100% remote work, however. A survey by Gensler showed that only 12.0% said they wanted to work remotely full-time, while iQ Offices and JLL surveys reported 93% and 94% wanting a traditional office augmented with flexible working options.

In response to the issue, the ‘hub and spoke’ model has emerged as a potential solution, or at least as a widespread buzz-term, in the commercial real estate sector. Hub and spoke describes a distributed workplace model that combines a central hub office with smaller spoke offices strategically located near popular residential areas. For most hub and spoke applications, remote working is included as another level of “spoke”, where employees have the flexibility to work in the hub office, a communal suburban office, or from home on any given day.

In response to the buzz, Memoori explores the good, the bad, and the ugly perspectives of the hub and spoke workplace model. Read in any order and make up your own mind:

The Good | The Bad | The Ugly

The Good

The hub and spoke model is a progressive approach to the flexible workplace trend that has been growing significantly over the last decade — since the 2008 economic downturn and the rise of flexible work trends. The model is designed to make the best of both worlds after the disruptions caused by the COVID-19 pandemic, offering the freedom to work at or near your home, whilst also providing the social and cultural stability of communal offices that organizations traditionally seek. All staff can be in all places at any time, seamlessly integrating their home office, local spoke, and central hub into a highly collaborative and productive work-lifestyle.

“The office is not going away. It is changing,” IWG CEO Mark Dixon said in an interview with Fortune Magazine. “The workplace [will become a] hybrid. People can work from home, and people have been doing that. They will work from offices near where they live, and then they go to the headquarters to do important stuff: meet, collaborate, new ideas, business review, the stuff you need to do face-to-face.”

The in-person experience is important to collaboration, innovation, and ultimately the productivity of employees. However, it is different for everyone and flexibility provides a framework that can cater to all the different personal preferences within an organization. The hub and spoke model can, therefore, allow each employee to work the majority of their time in the place they are most comfortable and productive, only insisting employees come together when the in-person experience is deemed necessary. Location flexibility adds a powerful new level to the human-centric workplace.

“People are asking themselves, why do I go into the office every day? Why do I structure my time this way? You can’t throw away the shared human experience of going into the office, and people don’t want to work remotely all of the time. But more flexibility is needed,” says David Cairns, CBRE Senior VP, Office Leasing. “I can see a future where we have street-front level, neighborhood-centric flexible space, bookable by the minute. This is space where people can have meetings, collaborate, and just get out of the house and into an office environment. It’s for people like me who don’t want to go all the way down to a downtown office most of the time.”

The lockdowns and stay-at-home orders across the world have given almost all office workers a chance to experience working from home for an extended period. Home office furniture and appliance sales shot up across the board as office workers committed to and developed their workplace at home, providing an extraordinarily authentic remote work experiment, unimaginable before the pandemic.

Some employees discovered that home working raised their productivity and improved their work-life balance, others didn’t and have been desperate to get back to the office. Most, however, were somewhere in the middle, seeing the benefits of remote work on some days and the need for an office on others. Companies, meanwhile, developed the digital infrastructure for remote work and were able to see how a distributed workforce could operate.

“The effect of three months of working from home has been that there is now a high level of trust between employers and employees, and more trust and collaboration between them,” Cushman & Wakefield International partner Charles Dady said in late June. “So we’ll see corporations adopt various mixes of remote working, urban, suburban and drop-in locations.”

The new buzz-term is “localism,” meaning workers can stay home if they want or take a short trip to their local spoke to get the office experience. Social distancing will still be around for a while driving the need for more and bigger office spaces where they adapt to the inevitable fluctuations of public health regulation. As we move into a deep recession, the crowded and high-cost downtown areas simply cannot cater to a return-to-the-office with the required drop in density. Low-cost suburban “spoke” workplaces may be the only way to bring people back.

“Businesses are looking for floor space in which you can make social distancing work. That means nice, open floor plates, and if they can find that on flexible terms in the suburban business parks, and they need it now to make their business work, they will do it,” Chris Cheap, managing director of Avison Young’s UK Regions division, said.

This was echoed by Adam Segal, founder of DC-based satellite-office and co-working company, Cove. “I think the pandemic expedited the future, which is, ‘How can I work closer to home? Generally, I think downtown will become less popular, except for those who do it right, and there will be a rise of smaller, suburban offices.”

Workplaces evolve and crises force us to evolve quicker. COVID-19 has presented a highly obstructive crisis to the traditional workplace, essentially stopping employees from going to the office for what might be a year or more. Cushman and Wakefield’s latest report predicts office real estate will only get “back to normal” by 2025. That gives plenty of time for the hub and spoke model to drive its business case into a space that is ripe for disruption.

The Bad

The hub and spoke model is an impractical approach to the flexible workplace trend and will erode the foundations of company-culture that drive innovation and productivity across organizations. While trying to make the best of both worlds after the disruptions caused by the COVID-19 pandemic, the hub and spoke model limits employee freedom, leaves many workers stranded in low-quality offices, and will create disruptive siloes that will choke productivity. Despite being marketed as a solution to the pandemic, this model will actually decrease occupant health and wellbeing, which then reduces productivity and profitability.

There is no correlation between the area employees within a company reside so, logistically, an employer using a hub and spoke model will find each participant of a meeting is based in a different office across a wide suburban area, making it no easier to bring people together than it would for remote workers across a city. Any attempt to utilize a spoke office for in-person meetings will always disadvantage some, so most in-person meetings will be held at the reduced-capacity hub, creating a logistical problem that undermines the entire model. According to some, it will place a great strain on the business power structure.

“The term hub-and-spoke originally referred to a transportation model in which small, regional airports funneled flights to larger, centralized ones. In management terminology, it’s an informal, centralized way for a leader to maintain almost unilateral power, whether or not that’s the leader’s stated or recognized intention,” says Liz Kislik of management consultancy, Liz Kislik Associates. “Unfortunately, hub-and-spoke leaders often lose sight of their team’s joint potential and the synergy that comes from all members working in concert. Over time, they focus more on their own effectiveness and satisfaction with each relationship, rather than on the team’s overall success.”

Large commercial buildings have evolved over generations to create the environment for organizations to optimize collaboration, innovation, and productivity through workplace design, technology, and policy. Spoke offices cannot hope to have all the meeting rooms, breakrooms, kitchen/catering facilities, gyms, or super-fast Internet of a large commercial building. Furthermore, central business districts (CBDs) have evolved to cater to the employee and those employees may expect the same conveniences in their spoke offices.

“People are going to want to see the same amenities that they are used to in urban areas. You are going to want to put a spoke near where people live, but also in amenity rich neighborhoods,” says Arnold Levin, Director, Strategy at Gensler. “If I were a developer, I would try to think differently about how we build a suburban office, and how it connects to the neighborhood. As new developments come online that offer amenities, they will become attractive places to work.”

Right now, there simply isn’t enough suburban office space to facilitate any kind of mass shift to hub and spoke offices, and the space that is available is nowhere near the standards employees have come to expect in downtown offices and CBDs. For years the building industry has highlighted the fact that only the best buildings can truly boost occupant health, optimize productivity, and attract the leading talent. So, implementing a hub and spoke model would mean a huge step down on all fronts unless significant construction takes place. COVID has made healthier workplaces a top priority and this is just not possible in current suburban building stock nor is it attractive for many to develop en masse as we head into a recession.

“Two decades of minimal out-of-town and business park development leave occupiers with little choice. The modern, Class-A suburban space occupiers want is scarce, or in some markets doesn’t exist,” says David Thame et al. in a Biznow article. “Before the coronavirus pandemic, few major companies wanted suburban offices, so few new ones were built. What is on offer instead is either poorly located, or fails the modern tests of well-being. In the wake of the outbreak, nobody wants an unhealthy office, and many old properties fall into that bucket.”

Furthermore, with no correlation between the area that employees within a team or business unit reside, all teams will be divided across a range of different spoke offices. In scenarios where the majority of a team lives in one suburb and share one spoke office, those that don’t, will feel ostracized. Across organizations, siloes will form based primarily on a person’s socioeconomic and ethnic status, rather than the departmental, hierarchical, or social equivalents in a traditional office. Siloes are never good, but those defined by the area you live are worse — for collaboration, productivity, company culture, and social harmony.

“If you have collaboration in all the spokes, you are dissipating your culture. You still want to be able to bring people back to the hub as a place to maintain that culture,” explains Levin. “You could reduce the footprint in the center, but maintain a hub, but if so, you are looking at the hub as a place to maintain a presence instead of maintaining a culture.”

When exploring all the workplace options for the crisis and beyond, companies will have to ask themselves who they are, how they operate, and what they represent. Those answers have evolved naturally in their traditional office environment but to replicate and maintain that culture across distributed suburban offices is a huge challenge with no assurance of success. Spoke offices may reduce the use of public transport but they do not support virus prevention, where remote work is the obvious solution. After the pandemic, whenever that will be, companies will be embracing the cost-saving and flexibility of remote work or desperate to get everyone back to the traditional office.

The Ugly

The hub and spoke model is a workplace buzz-term that reframes pre-COVID-19 flexible working trends in order to slow the relentless slide towards remote work that has been accelerated by the crisis. While trying to make the best of both worlds after the disruptions caused by the pandemic, the hub and spoke model is an attempt to dissuade companies from considering a shift to a largely remote workforce. The ball was already rolling towards remote work, hub and spoke is not going to stop that, and the future does not bode well for the commercial office sector.

“You sell apples. Suddenly everyone wants oranges. What do you do? Something like this dilemma confronts major office markets across North America and Western Europe, where the coronavirus pandemic has hit hardest,” says David Thame et al. in a Biznow article. “The open question, as US cases surge again and a speedy recovery seems less likely, is whether this is a temporary disconnect between supply and demand, one the market will speedily resolve as the pandemic and the social distancing it involves fade away, or has the coronavirus broken the property market in a more fundamental way?”

As the surveys show, more people want to work remotely now than they did before the pandemic and no one can say with certainty that COVID-19 does not represent a surge in the long-term trend towards a remote-dominated workforce. Not all jobs can be done remotely but many more than we thought possible six months ago. For those that can, remote work now represents the low-cost, zero-commute, pajama-comfort working solution that will appeal to many. Home offices, city planning, and society itself will evolve to meet the varied needs of remote workers as the continuing waves of COVID-19 force employees in major economies to stay home.

“The truth is, big companies have been doing hub-and-spoke for a while now. When we talk about hub-and-spoke during and after COVID-19, I’d call that version 2.0,” says David Cairns, CBRE Senior Vice President, Office Leasing. “I think it’s fair to say, when you look at the employee surveys that are coming out, people want more choice. They want to be closer to their families, avoid commutes, and work in a less disruptive environment. All of that means the office as we currently think about it will have to change.”

While promoting the hub and spoke model, Cairns makes a great case for remote work. Remote work gives the worker even more control of their lives and they are able to be even closer to family. It could even change the age-old stereotype of busy professionals missing precious time with children or the elderly. While children may not always play their part in a productive work environment, people will adapt their homes and schedules to suit the new normal, while remote flexibility will support school closures during current and future crises.

Perhaps most significantly zero-commutes and less active commercial real estate will be a huge step for the reduction of emissions and energy consumption. And, most significantly to businesses, a decade of research suggests that remote work actually means greater productivity.

“Before [COVID-19], here’s what typically would happen if a leader at one of the companies we work with and I decided it would be great to meet in person. We’d try to line up schedules. We wouldn’t be able to find a match for weeks. Then we would, but something would come up and we’d have to reschedule. I might end up traveling months later, if at all,” said Andy MacMillan is CEO of human insights platform UserTesting. “Now we just say three magic words: “Let’s do a Zoom.” We could have said that before the outbreak, of course. But we didn’t because it seemed impersonal. Now it’s as personal as can be.”

Six months ago most of us couldn’t have imagined a world of mass remote working, but many have adapted and found a much more productive way to work and live. Consider the number of virtual meetings you can attend in a day versus the number of in-person meetings you could conceivably do, or the time you would start work at home against the process of reaching the office and then settling in at your desk. Studies since March, and many more dating long before COVID-19, find overwhelmingly that remote work leads to more productive workers.

“From performance to engagement, all studies show that remote workers are indeed more productive than their in-office counterparts,” concluded a Hubstaff meta-analysis of the best research on the topic. “Studies repeatedly prove that remote employees get more done. They perform better, get work done faster, and take less sick time. Employees also love remote work. Remote teams are happier, and people who regularly work from home report higher job satisfaction. That leads to higher engagement and better productivity.”

Claims that we need the in-person experience for the social connections that drive collaboration, innovation, and company culture are not wrong. However, hub and spoke models are not providing that with their teams distributed over smaller offices across wide areas, siloed based on the neighborhood they live in. We would still be in our offices if it wasn’t for COVID-19 and the flexibility of remote work would still be a growing trend, the hub and spoke model only serves to keep employees in a space where they have some value to the giants of commercial real estate. Without traditional offices, a big industry goes down.

Co-working was already posing a threat to the traditional office but commercial real estate firms were able to take a stake in that space, albeit alongside some fast-growing startups. In a world of remote work, however, co-working changes from the style of giants like WeWork, which focused on startups and corporations, to the independent co-working spaces that cater to individual remote workers. Not all remote workers will work from home, but they are more likely to choose friendly, neighborhood co-working spaces that connect them with likeminded people in a co-created space, than want to sit in a stranded spoke office in a suburban business park. Such a remote work dominated world would cripple the commercial real estate sector and also have much wider economic consequences.

“The COVID-19 pandemic had an immediate and profound impact on the commercial real estate sector, and the commercial real estate landscape in the US will likely be dramatically transformed as we emerge from the pandemic,” says Jessica Wong, Special Counsel at Cadwalader Wickersham & Taft LLP. “Although the long-term impact of the coronavirus pandemic is not yet clear, the social distancing requirements and health concerns, along with the shift towards remote working, reduced travel, and increased online shopping, will change the landscape of commercial real estate – in particular, offices, hotels, and malls, which make up more than half of the mortgages in commercial mortgage-backed securities transactions.”

The ugly truth is that the traditional office is not coming back anytime soon and we don’t know what that situation will be when it returns. The extended remote work trial may convince companies that remote work is cheaper, more productive, and more resilient to lockdowns or whatever else the future holds. Months or years of remote work may mean employers and employees alike are desperate for the culture that comes with the traditional office environment we have developed over generations. However, it is very difficult to see any scenario where the hub and spoke model becomes a significant part of the workplace structure, now or in the future.

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