The Hub and Spoke Office Model - A long term solution for businesses?

The perception of how we use the office has changed hugely since the start of lockdown and no doubt the impact of the COVID pandemic will continue to be felt for a while as we adapt to the new normal.

One of the most sweeping changes that has arisen from the pandemic has been how and where we are able to work. Since lockdown the bulk of people not deemed to be key workers have been working from home, often using the kitchen table, spare bedroom or even sheds as makeshift offices. This has led to an almost universal adoption of video conferencing software such as Zoom and Microsoft Teams to conduct team meetings and maintain staff morale. While working from home was initially embraced by many however it does seem that with lockdown measures easing there is now becoming a 'Working From Home' fatigue with some employees itching to have ‘normal’ interaction with colleagues.

With many companies now evaluating what longer-term work patterns look like as we return to some semblance of normality, it does seem that working from home or closer to home during the working week is being considered as a longer-term way of working. One potential solution for businesses is the hub and spoke model.

What is the Hub and Spoke Model?

The term Hub and Spoke was originally coined in the aviation industry. Instead of airlines sending flights that were not at full occupancy to and from smaller ‘spoke’ destinations (point-to-point), flights would change over at a central ‘hub’ destination between the two airports. The hub airport then becomes the connecting location. Since the model was pioneered in the 1980s, it has been adopted in many industries outside of aviation such as product logistics and social media distribution.

In the world of commercial property, the ‘Hub and Spoke’ model has begun to emerge and refers to a more flexible workspace and working style. Historically and even up until recently (pre-COVID) companies have adopted the traditional head office model, - in which a company operates from a single, larger city centre head office - the ‘Hub and Spoke’ concept enables employees to work from either their city ‘hub’ or a strategic spoke location, which would include more regional workspaces.

In practice this could mean a company with a head office in London choosing to downsize and open up satellite offices in surrounding areas such as Reigate, Richmond or Guildford. Equally for companies with a main office in Manchester, this may mean downsizing and opting for satellite offices in locations such as Rochdale, Stockport or Warrington.

So, what are the benefits?

Cost Efficiencies

Adopting this type of working model would mean downsizing the city centre office in which the company is based - since their centralised workforce will be reduced - and open up a range of strategically-placed smaller offices in more regional locations. Taking space in regional or ‘spoke’ locations are generally cheaper than city centre locations and by reducing square footage in the city there would be comparative savings in rent and expenses, as well as typically reduced business rates.

Freedom of flexible workspace

Given the uncertain economic times, flexibility has become vital for businesses. 5 year plans have become 18 month plans as companies try to navigate through the choppy seas of the pandemic and the difficult economic conditions. With the right flex space operator, ‘hub and spoke’ offices will allow businesses to work within a broader business centre network and provide companies with more freedom compared to traditional long-term leases. An example of this is the Regus subsidiary Spaces, where occupiers with certain types of membership are able to use business lounges at all Spaces locations.

Flexible leases offer exactly that with shorter licence agreements, fewer T&Cs and all-inclusive rents which provide greater certainty for businesses in terms of cashflow. Most flexible office providers also offer occupiers the freedom of movement within their centres, providing them with the ability to upscale at short notice.

Shorter commutes, happier staff and a larger talent pool

The opportunity to hire from a wider talent pool is one that comes with regional offices further afield. With one centralised office hub, businesses are confined to certain geographical compromises such as commuting distance, time and cost. For example, a person that lives in Guildford may be deterred from wanting to work for a company with a headquarters in West London, due to the commuting times and cost of transport. However, if that company had a satellite office in Guildford as well as at other ‘spoke’ locations around London, it would open up the potential talent pool for that company.

Shorter commuting times as well as giving employees control over their working location is likely to result in a happier and more loyal workforce.

So, what are the drawbacks?

Scale of Business

The main drawback is the scale of business. A company with a 1,000 person office in London could see benefits to having spoke offices in regional locations, however a small business of say less than 10 people would probably not see as much benefit in their team being fragmented. Smaller businesses would probably see more merit in enabling staff to from home one or two days a week rather than opening a regional satellite office.

In addition, companies that already occupy large headquarters are usually tied in to longer leases of say 10 years with a 5 year break clause – How quickly they could transition to this type of model will largely be dependent on how quickly they can exit their existing lease whether that is by actioning break clauses, the natural expiry of the lease or by negotiating lease surrenders. Naturally I cannot see landlords being overly receptive to tenants wanting to surrender their leases due to the current market uncertainties.

Administration

Having more offices means more administration. Although taking flexible space on all-inclusive rents are easier than say a traditional lease, having for example five offices means the logistics of setting up these offices, five lots of monthly rent payments, five offices to manage (including office consumables and the IT infrastructure) and five lease events to monitor. It is of course manageable but could be argued to be more administration compared to having one building and one lease.

People Management

The general consensus during the pandemic has been that technology has worked and that if anything employees are probably working longer hours than they were previously. However, if regional offices were to open which included people from different departments (Marketing, Finance, HR), people would still need to attend conference calls for their respective departments and arguably having different team calls throughout the day could lead to distractions and perhaps even a slight reduction in productivity.

While the effects of the pandemic are continuing to ripple throughout the economy and challenge businesses throughout the UK, many companies are considering alternative and more flexible workspace options. Companies adopting this type of model are likely to place greater emphasis on workplace design at their city centre hub as they increase the areas for collaboration and business development. While there will always be a place for the city centre office, the ‘hub and spoke’ model could be the solution for many businesses as they adapt to new working patterns.