• Tue. Feb 7th, 2023



After COVID, a hub-and-spoke office style could become the norm

Probably the most constant reminder of the lingering effects of COVID-19 is our daily work routine. For most of us who are either not allowed to return to the office or choose not to, each day is a quest to work productively in our home environment while ignoring the unavoidable household distractions. Technology has helped us adjust to our new reality, and many surveys have shown that employees believe they are as productive, if not more so, working from home, and in fact prefer the WFH model.

Their employers may not agree. Anecdotal evidence and quantitative studies show that while many big companies have embraced the WFH shift for the moment (see: Twitter, Google, Facebook, Salesforce, Microsoft), such a model ultimately must evolve. Even the most ambitious champions of remote working acknowledge that in-person interaction with colleagues is healthy for morale and company culture, and that it enables a greater degree of collaborative innovation not possible with Zoom or Teams, which tech leaders agree is an essential catalyst to growth.

In the ultra-transient knowledge workforce, concerned bosses fear that an employee with too much unsupervised freedom may be more of a risk for poaching by competitors. Talent acquisition in the tech world is a costly and competitive game.

Plus, we are all, for the most part, social beings. Justin Bedecarre, who advises tech companies on office strategies, notes, “Working from home is not for everyone. A lot of it people miss each other, and the energy of having everyone together.”

Netflix founder Reed Hastings was even more direct, describing sustained work from home as a “pure negative,” although he acknowledged that perhaps a schedule of one day per week WFH would strike the right balance.

Back to an office, maybe not THE office

One thing is clear: The days of a monolithic HQ-centric model are numbered, if only because of the economics. Already under financial pressures, C-level execs are eyeballing the real estate line item in their operating budget and see a cost-cutting silver lining in the pandemic cloud. A recent survey from KPMG reports that nearly 70% of large company CEOs plan to reduce their office space. This is especially true in expensive tech hubs like the Bay Area, Seattle, and New York, where officing an employee can cost up to $15,000 or more a year (and with new distancing protocols in the office, the cost-per-square foot for each employee also increases). A survey by the Partnership for New York City of CEOs of NYC-based companies revealed that 25% intend to reduce their footprint in the city by 20% or more, while 16% have plans to relocate from the city entirely.

Biting the bullet now and getting out of long-term leases has become part of this trend. Pinterest recently opted out of plans to expand its San Francisco office, to the tune of $9 million.

The pandemic has reinforced what many tech companies already knew: that a dispersed workforce can be effective in finding and retaining talent. Companies are now seeing the opportunity to use this even more to their advantage, offering workers increased freedom of choice in where they can do their jobs. Downsizing space in urban centers, while at the same time looking to second-tier cities with lower rents and lower salary norms becomes even more attractive now. This makes good business sense for management, shareholders, and employees alike — reducing operating costs while making workers happier.

A hybrid hub-and-spoke model redefines the workforce

Most experts agree that a hybrid WFH/office model will be the new norm for companies moving forward. And this will change the real estate footprint for many. We have seen Amazon announce it is investing $1.4 billion in remote working space in places like Denver and Detroit. Facebook has said it’s content to have its employees work from wherever they want but intends to open satellite offices where they can cluster and check in regularly, a significant shift for a company that had paid new hires a $15,000 bonus if they agreed to live within 10 miles of HQ. It figures up to 50% of its staff could be located away from HQ in a few years. Other companies are following suit, with a strategy to disperse from the command and control structure of old.

Coinbase CEO Brain Armstrong paints the picture in his blog post, which many are emulating: “… the vision is to have one floor of office space in 10 cities, rather than 10 floors of office space in one city.”

Such a hub-and-spoke model is even more of a sound strategy in the current environment, and cities and regions across the country are rolling out the welcome mat to attract companies and workers alike. Modern workspace offered in flexible configurations and use terms is readily available in a wide range of cites.

If you build it, will they come?

Well before we knew what a coronavirus was, people were looking for more geographical options for starting and running tech businesses. AOL founder Steve Case famously started a venture fund a few years ago called Rise of the Rest, which sought to find opportunities in “flyover” cities between the coasts.

In looking at the fallout from the COVID-19 situation, Case noted that the pandemic will only accelerates that notion: “… the COVID-19 pandemic will encourage people — entrepreneurs, investors, and employees — to consider opportunities outside of the coastal tech hubs. People who have been considering a move, to tap into the sector expertise that exists in many parts of the country, or for a lifestyle change, or to be near family and friends, may choose this moment to relocate, accelerating a talent boomerang, and helping emerging startup cities rise.”

Tech companies should see the wisdom in this in how they build for the future. The pandemic presents opportunities to rethink our approach to the modern workforce and the advantages of geographic diversity.

Ernest Andrade is founder and director of the Charleston Digital Corridor and also founded Andrade Economics. Both entities are focused on positioning communities for sustainable economic prosperity. He has played a key role in the City of Charleston for nearly 20 years, helping shape that city’s comprehensive approach to developing its high-wage, low-impact and diversified economy.

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