Hybrid working: Why it isn’t ideal, Invest News & Top Stories

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(REUTERS) – Hybrid working is often presented as a flexible compromise that secures the best advantages of office-based and remote work, but the reality is likely to be the worst of both worlds.

Commercial real estate owners, with large investments in central city office buildings, as well as their bankers, have been the strongest promoters of the blended work model. For them, the advantages are obvious, since hybrid work would minimise the reduction in central office utilisation after the pandemic.

For other employers and employees, as well as public transport operators and service businesses, hybrid work is likely to prove expensive and inefficient.

Employers’ expenditure on central office space will remain high while employees need larger and more expensive accommodation to work from home, much of which is used only some of the time.

Travel costs and commuting times will remain high, borne by either employers or employees.

Public transit operators will face a cut in the number of journeys, capacity utilisation and fare income, which will be challenging financially given their relatively high share of fixed costs.

Centrally located service businesses depending on office workers will lose a share of their income, while suburban and non-urban businesses will see only modest increases, leaving both underutilising space. As a result, hybrid work will leave most offices, retail outlets, homes and transport systems underutilised, leaving most firms and workers worse off than in fully office-based or fully remote models.

Most large employers are preparing to order their employees back to the office for half of the working week, or more, once the epidemic has been brought under control.

The main justification is that only office-based work can secure effective collaboration, creativity and teamwork, as well as the transmission of ideas, knowledge and culture throughout the organisation.

If employees spend on average three days each week in the office, still a relatively high share, the amount of face-to-face contact time between any two workers falls to just 36 per cent.

If employees spend two days a week in the office, average contact time between any two workers falls to just 16 per cent, assuming attendance at the office is randomly distributed through the week. This is the reason many employers are talking about the need for a relatively high number of days each week to be spent in the office, generally three or more.

To boost contact time between employees in the same team or in closely related functions, many employers are promoting rota systems, requiring employees to attend the office on specified days.

But increasing contact time between same-team workers can be achieved only by reducing it even more between employees in different teams and more distantly related functions.

In a hybrid model, employers will also need to schedule office attendance throughout the week to maximise occupancy, minimise space requirements and minimise office costs.

If employees all try to work in the office on Mondays, and remotely on Fridays, employers would have to provide seating for the entire workforce, erasing any savings. But frequent office attendance will limit options for relocating residences farther from central cities to suburban and non-urban areas to reduce accommodation costs or pay for larger homes.

Bottom line: Employees will still have to commute frequently, likely with increased fares, and need bigger homes, but find it hard to move farther away because of the continued ties to the office.

Public transportation systems rely on high levels of ridership and capacity utilisation to cover their high fixed costs and keep fares affordable, as well as making them very energy efficient.

For transit operators, the only way to make up the income shortfall is to raise fares, seek increased government subsidies, or shrink the network. Like employers, transit operators try to utilise their capacity as efficiently as possible, which ideally means that commutes are spread evenly throughout the week.

If employees all try to commute on Monday and work remotely on Friday, the system will remain overcrowded at the start of the week, underused at the end, and have lower revenues overall.

Retailers, restaurants and other service businesses located in city centres depending on commuters would be hit hard by a shift to remote work but might not benefit much from a hybrid model. In a hybrid model, the number of customers at city centre businesses is still likely to decline, but many costs for rent, property taxes, utilities and even to some extent workers, are fixed or at least sticky.

City centre and suburban/non-urban businesses will end up splitting the potential customer base while both groups have underoccupied buildings and reduced profitability.

The result is that hybrid work could make almost everyone, from employers and employees to transit operators and service businesses, worse off than either fully office-based or fully remote working.