Hybrid working model: Is this approach sustainable?

The hybrid working model is reportedly experiencing significant growth resulting from economic uncertainty, mainly caused by the Covid-19 pandemic.

Garrick Faul

Many company leaders have been forced to adopt this location-flexible arrangement, which enables employees to combine working from the office and at home.

“Organisations are carefully considering their income statement and real estate costs due to the ‘new way of working’, and are looking for opportunities to cut costs,” says Garrick Faul, Director at Megatrend Properties.

Faul explains that staff costs and property costs are the two biggest line items on most companies’ income statements.

As a result, companies have had to put downward pressure on these line items through a reduction in office size and salary cuts or retrenchments, which have become commonplace.

Meanwhile, Growthpoint Properties, which recently reported a 19.9% increase in office vacancy rates from 15.4% in 2020, says that the full extent of the hybrid working model is not yet clear.

Paul Kollenberg, Head of Asset Management: Offices at Growthpoint Properties, says that the Government mandated work-from-home was prolonged by the third wave.

“However, many tenants are keen to return staff to their offices. There is a renewed appreciation for the role that offices play in nurturing workplace culture, values, collaboration and leadership, while recognising the need for flexibility,” notes Kollenberg.

In its annual results, Emira Property Fund reported an increase of office vacancy rates to 17.0% in June 2021, from 6.9% in June 2020.

Ulana van Biljon, Emira Property Fund Chief Operating Officer, says that slower take-up of space continues as leasing decisions takes longer.

“Whether it’s a physical office versus work-from-home or a hybrid working model versus flexible space, will be company specific,” she says.

Is the hybrid working model sustainable?

Faul reiterates that the sustainability of the hybrid approach will be company specific. This will be driven particularly by the nature of work (industry/sector), size of the company, as well as the actual work that the staff perform.

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“From a cost perspective, it will be easy to justify the hybrid model, as it has a direct impact on the income statement through reduced rentals and other property-related costs.”

Faul points out that the difficulty will be when businesses start looking at the qualitative factors that drive productivity and performance. This will include human resources management, workplace culture and brand association, and the interconnected network within any office that actually makes it run.

According to John Jack, CEO of Galetti Corporate Real Estate, a hybrid/rotational occupancy strategy is most popular as employees can come into the office for periods of time on specific days.

He notes that tech giants, such as Google and Facebook, are embracing a hybrid model and require their employees to come into the office a few days a week.

“One thing is clear – many of the companies who created the technology that enabled us to work from home during the national lockdown, have themselves rejected the fully-remote working model,” says Jack.

Office sector market trends

However, Faul says there will always be a group that will never return to the office. “As the world approaches normality, we expect an increase in work-from-office, and a slow return to the cultures that have been in place for a long time with a proven track record to produce results.”

Faul points out that one of the major concerns about the home-from-home model is the quality of office space (home office) as a temporary fix to self-isolation.

“Most people don’t live in homes that have a dedicated office space. It is therefore not a sustainable working environment, particularly with the difficulty of separating work time and home/family time.”

Cost-cutting measures

Eskom, a state-owned entity is considering the hybrid working model going forward.

André de Ruyter

Group Chief Executive, André de Ruyter, says that currently, about 42% of employees work remotely, with the exception of power station sites, transmission and distribution staff members.

“As an essential service, we were allowed to continue operating at full capacity even during lockdown level 5 in 2020. Our priority was the supply of electricity, and maintaining the safety of our people,” he says.

De Ruyter says that as lockdown restrictions were lifted, some of their staff members have returned to the office.

“Our consideration of the hybrid model is a move to cut operational costs, and we will leverage on technology to ensure a smooth transition,” he says.

Eskom’s Group IT has enabled a large number of the workforce to work remotely during the lockdown.

“We are engaging our staff and developing policies to remain productive and deliver on the organisation’s mandate.”

De Ruyter says Eskom continues to explore the most optimal and efficient working models in its operations. Any decision in this regard will be taken in consultation with all the relevant stakeholders before being communicated publicly.

South African office properties here to stay

Global trends in hybrid working model

A Verdantix report entitled: 5 Best Practices for Success in the Hybrid Working Era reveals that over the past 12 months, a number of organisations have announced plans to accelerate their implementation of hybrid working strategies.

Furthermore, the report notes that while most companies plan to maintain their real estate portfolio sizes due to Covid-19, many organisations aim to use hybrid working as a strategy to reduce their footprint.

As an example, in 2020, Fujitsu in Japan announced that it will transition to hybrid working to reduce its current office space to about 50% of current levels.

Deutsche Bank plans to close 150 branches in 2021 and will allow its staff to work from home for up to three days a week once offices reopen, according to the Verdantix report.

Companies want offices to become more strategic asset centres of innovation and collaboration, and will implement five models of hybrid working.

1. 60–40 model

This model aims to balance remote work with office work, thus enabling staff collaboration time in the office.

2. Office–centric model

Staff will primarily work from the office for collaboration and use of on-site specialist equipment.

3. Remote–centric model

Employees will work fully remotely with some access to offices or event space for company meetings.

4. Split workforce model

This working model will vary by job role or department, with a mix of hybrid, remote and on-site roles.

5. Decentralised model

Companies will have hubs that provide local offices for staff and to enhance talent access.

The report concludes that real estate managers should not think of hybrid working as the ‘end goal’ of the office. Rather, it should be seen as the next step in a longer evolution of the workplace.

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Edited by Gudrun Kaiser

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Safrea or its members.


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