Let’s Get Real Episode 14: The Next 10 Years of CRE
Discussions on the Workplace and Corporate Real Estate Podcast
Some of the highlights of the show include:
- Breaking down silos in corporate real estate
- The CRE industry and optimizing real estate
- Using technology to gather CRE data and using other data sources to inform decisions
- Solving the space supply issue – how do you decide how much you need?
- Can big companies manage their own flex space?
- How to transition away from leases and into flexibility
- Set and forget it, long term leases
- Getting utilization out of unused spaces
- The next 10 years in real estate
- Amenities and enticing people back to the workplace
- Is remote work creating community silos?
- Landlord responsibility to create engaging spaces
- Can technology solve the problems landlords and building owners are facing?
- Why are companies struggling to choose: remote-first, return-to-office mandates, or wait-and-see
Hey everyone, welcome to Let’s Get Real with Sandra and Friends, a workplace consortium podcast brought to you by Relogix. I’m excited to be sharing conversational musings about current events and how we envision the ever-changing world of work. I’m Sandra Panara, Director of Workplace Insights at Relogix. With 25 years of hands-on experience, I help value engineer global workplace portfolios and employee experiences by aligning workplace analytics with corporate real estate needs.
Have any questions, comments, or suggestions for future podcasts? Please drop me a line at [email protected].
Dave Cairns started his career at CBRE in 2012, after being a professional poker player where he was ranked as one of the top 100 online tournament players in the world for a time. Since then, Dave has become a thought leader within the commercial real estate industry, with global recognition. He is an avid content creator on LinkedIn, who is highly respected by his peers, and has received over 1 million views in 2020 alone.
Working alongside his team, Dave focuses on working with high growth companies in the tech sector, Space-as-a-Service Operators, and with financial services firms on a local, national, and global level. Dave also leads a partnership with Deloitte on their Technology Fast 50 program, advising many of Canada’s fastest growing technology companies on their real estate requirements. He is also the co-founder of CBRE Forward, a platform designed to showcase the fastest growing tech companies in Canada.
Welcome Dave, I’m really happy to have you join me today on the Let’s Get Real Podcast. Before we begin, why don’t you tell us a little bit about yourself?
Sure! I’m Dave Cairns, I’m an office leasing agent from downtown Toronto. Although, I recently relocated, so ironically I’m a remote worker now. Someone who helps companies rent offices big and small, nationwide, throughout the world, I’ve decided that it’s best for my family and for me personally to move out East. So that’s me in a nutshell right now in the moment.
Prior to getting involved in real estate, I was a professional poker player for probably 5 years, and then casually before that throughout high school. It’s interesting to be in the real estate industry and now draw on my experience as a poker player, because what I’ve realized is that I lived in this digital-first and asynchronous world prior to getting into the real estate industry. And I kind of shut that part of myself off for probably 7, 8 years before the pandemic hit. Then as the pandemic has hit, I decided that rather than cold calling customers about office space, something that they couldn’t probably give two shits about for a lot of different reasons, why don’t I publicly journal my thoughts and see how they evolve? So, that’s actually what I’ve been doing, aside from obviously my day job in helping companies continue to deal with their real state requirements.
But I’ve become very active and vocal on social media, talking about the future of work, the future of real estate, things like that. I think I make some peoples’ veins pop out of their foreheads and I think other people are very much supporting my message, so it’s been an interesting experience.
I’m curious, how did you go from playing poker to wanting to be in real estate?
Truthfully, I was very lost at the point of leaving the poker world. I left poker as a result of this event that took place called Black Friday, which as a day where the United States government indicted the two largest online poker websites for tax evasion, money laundering, and wire fraud, and other charges. I was already becoming disenchanted with the lifestyle, probably more so than the game itself. So, I took that as a sign from the universe that perhaps this big event in the poker world was time for me to pay attention and move on.
So that’s what I did, but I was treading water for at least 12 months–I took a sales job at a bucket shop company with several of my friends from high school and university. That didn’t pan out very well, in part because I started to blow the whistle on some things that were going on at the company, not unlike what I’m doing on social media today. Thankfully CBRE supports me in what I say.
But I left that job and was just floundering around, and I was fortunate to have some friends and family in the real estate industry, and they expressed to me that they thought that the brokerage side of the business might be well suited to my background and experience and personality, given that it’s 100% commission. I had good interpersonal skills and that kind of thing, so I honestly took a bit of a leap of faith.
I feel very fortunate that I was able to land at CBRE, which, even with connections to CBRE, is difficult to do. But I couldn’t be happier to have built my career at that company. I think it’s the best platform and it’s been able to allow me to spread my wings. Having the voice that I have with the brand of CBRE behind me, it’s certainly not hurting me.
I concur with what you’re saying with respect to having the support of the company behind you. It’s great that you do have CBRE support. You are obviously very active on social media, and that’s how you and I connected. But you are very vocal about your thoughts and your ideas, you do have a voice, you have an opinion. And truth be told, I was inspired by you, by just watching what you were doing and how you took a position, you were very strong in your beliefs. I was always more the observer, or the consumer of social media, just kind of listening to what other people were saying and not really participating–but always feeling that I, too, had thoughts and opinions about certain things, and it’s like, why not? What’s holding me back from putting it forward?
It’s interesting because prior to joining Relogix, I worked for large companies, and it wasn’t really something that the company promoted or wanted you to do. They didn’t want you to be on social media, you always had the social media policies that you had to deal with. You had to be very cognizant of the image that you were portraying as an ambassador of that particular company.
I don’t know now if it’s just because the switch has moved over into real estate, which is now exploded and everybody’s curious about what to do, what not to do, how to think about real estate, how not to think about real estate, that there’s a lot more conversation in that regard. But I’m still seeing that there’s a lot more select people who are much more vocal than what could be, where you’re really getting different angles from different people from all walks of life, with respect to the companies in which they actually work.
I often think, how cool would it be if actual employees in different companies, not necessarily in a real estate position, could speak very freely about their experiences and about the office and certain things that they like or dislike? How much more real would the conversation actually be about the direction that the workplace should take? Yes, there are surveys, everybody’s surveying everybody. And that sort of gives you a gauge, but really hearing it from an employee’s perspective is really valuable. That’s why I go to Reddit because there you get the unabridged version.
Well, I will say, you are definitely one of the most insightful people that I follow, so I’m really glad that I was able to inspire you in some small way. You speak with such strong data behind what you say. And I’ll admit, the first time you came into the conversations I was having, you made my veins pop out of my forehead a little bit, because you were saying things that I didn’t understand.
I bring this up because I think there are a lot of little silos within the commercial real estate industry. Despite the fact that a company such as CBRE has every single platform service under the sun, there’s not nearly enough cross-pollination that’s actually happening inside of organizations of a big size. I’m not trying to single CBRE out, I’m just saying it’s a by-product of large organizations. And what I want to say to any brokers or anyone in the service side of the industry who might be listening to this podcast is that there’s nothing more important than listening to people such as yourself who are not directly in the brokerage world. Because we are not in a position to be doing back of the napkin stuff anymore with customers. And what scares me actually, is that customers often want to do back of the napkin stuff themselves. They don’t really want to dive into the details too much. But we have a responsibility, especially in light of this revolution that’s taking place, and a lot of continued acknowledgements around the dreadful stuff going on with climate change–we have a responsibility. So I’m just doing my best to listen to people like you as much as I can and try to learn things that I don’t understand.
Well, thank you for that. I think it’s true, we hear often even in our world questions about the need for data, the need for technology, and is it really necessary because there’s info out there that’s good enough. And I think there’s definitely truth to that. Just this morning I was in a discussion on a post I made about the need for technology to give you that very granular level of detail and someone asked the question, why do you even need that? Because you can use high level metrics to get a sense of how space is being used, and yes that’s true, but it really depends on what your ultimate objective is. And that’s really where understanding what kind of data fits the bill is really important in terms of being able to drive the outcomes that ultimately the customer, which is the tenant in this case, wants.
I actually worked at CBRE for a number of years, in the workplace strategy consulting arm. I didn’t work directly with brokers, but for example, you’d be working on a deal that’s potentially going to close and then the workplace strategy element comes in that says ok, there’s a million square feet but maybe you don’t need that much space. Then you get into a conflict.
You’re messing up my fee, Sandra, get out of the way! I’m trying to make money here!
Exactly! To basically offer that service within the same organization sometimes creates a conflict of interest. Now that was before the pandemic, and I think now that probably has changed. I don’t know how what you’re seeing on your side, but because tenants are now coming to organizations like yours to help them figure out how much space they actually need, is that industry positioned to do that for companies?
We are positioned to do it, I think we need to just actually do it. What I think is going to be very productive is the fact that companies have shone a light inside of their own cultures and workplaces to a far greater degree than they ever did in the last decade. As a result, they’re being more prudent with who they actually choose as partners and service providers. They’re asking more questions, they’re looking for people that have a beginners’ mindset to the problem. I think that sophisticated customers that need brokerage services are more concerned with people who are willing to ask questions and not necessarily even know the answer, than they are with those who really want to dictate terms to them and tell them what the answers are.
Because the truth of the matter is, there’s no meaningful data at this point whatsoever, and in that regard, in general, whether it’s the commercial real estate industry or otherwise, I think we need to pay attention to matching more intuitive people with more data-oriented people. I think that combination can present such an amazing possibility for customers.
So, I’m way more on the intuitive side. I used to be a poker player and we used to use software that would literally track granular levels of information around peoples’ behaviours in the context of the game. And it would really help inform making decisions. But the problem with relying solely on that approach is you become a bit of a robot, and you say goodbye to that X-factor that is being a human being. And there’s a saying in this poker movie, Rounders, in short, “sometimes it just comes down to feel, what’s in your guts”. And I think we’re at a moment right now where we need to actually pay attention to that feeling and what’s in our guts and talk about it.
We don’t have the data, but we need to talk about it. I hear a lot of people in my industry say things like, I’ll believe in hybrid working when the data shows that people can be productive and engaged in a hybrid capacity. Until then, I don’t give a shit. I think that’s, in the best way, kicking the can down the road, and in a more unproductive way, they’re actually just looking for the status quo to prevail because it serves their status, their financial compensation structure, and so on. And herein lies the biggest problem that the commercial real estate sector has. We have compensation structures and even worse that prevent us from wanting to change.
It’s interesting what you say about the fact that there isn’t data, because there’s been some discussion about that this past week. I actually posted a poll to ask people why companies are stuck. The number one response is: there’s no data. And I question that, because being obviously on the technology side of real estate, or CRE tech, and being able to provision things like sensors and say hey, you can put sensors in and get a sense of how people are using space–sometimes I think, well is that really necessary? If people aren’t coming into the office, which we saw when the pandemic started and the whole business basically was put on hold, why is anybody going to put sensors in?
But the reality is that there are other data sources that exist within an organization, even though you’re not back 100%. There has been movement for the last 6 months, 9 months, people have been returning to the office to some degree. It’s similar to the argument you made about poker, where you focus on the behaviour. It’s not so much focused on say, what’s our occupancy, it’s at 20, 30% but we don’t know if it’s going to get to 50 or 60–it’s digging into that 20 to 30% that are coming back to the office and trying to understand who is that user. Bringing in information about what’s their job function, what teams do they belong to, when they’re coming in, what are they doing? Are they meeting? Are they coming in to work because maybe they don’t have space at home?
It helps with understanding commuting patterns too. I’m thinking about workplace initiatives where you think, we have a certain percent of people that live within a 20km radius, and if you now overlay that to your badging data, you can get a sense of the people who come in to the office 4 days a week maybe live 10km or 5km away from the office, vs the person who comes in once every 2 weeks, lives 50 or 60km away. You start to the understand the supply and demand need much more deeply, based on not just the behaviours, but the attributes that relate to the users of that space. You can start to think, if this is true for our entire organization, how do we start to re-think how we provision space to people? And where should that space actually be?
The thing that I’ve been talking about since 2019 is that there’s a mismatch on the supply side. The supply just doesn’t offer an asset that can be purchased in short, medium and long, all under one roof. It’s starting to change, cool landlords like Ivanhoé Cambridge, led by innovative people like Jonathan Pierce who’s a friend of mine, are partnering up with the likes of WeWork, to be able to actually, in an intentional way, and as a lease up and retention strategy, involve them at the asset level, and see how they can provision to have spaces that are either fully communal or can be rented, like a private suite for a company that’s a series A start-up. Instead of going out to the traditional market and leasing let’s say 10,000 square feet, they could take 5,000 dedicated and then benefit from using conference space, meeting space, event space, hotdesking, through the coworking that’s available in the building.
Herein lies the problem. Pre-pandemic I was working on a deal where a big tech company RFP’d a flex-based operator prior to even going to a landlord to discuss growth in Toronto. And the reason they did that is they needed more space, but they only really had visibility on about 15,000 square feet of space that they knew they needed definitively. Over and above that amount, they were forecasting what they thought they needed. They finally said to themselves, this is crazy, we go out there and lease 80,000 square feet, 65,000 of it sits dormant, and we might even actually build it before anybody comes. And it doesn’t make any sense. So they were starting to try and solve some of their own flexibility issues by bringing in a third party operator.
And when I was bearing witness to this as the service provider, I’m saying to myself, how much longer are these big customers going to manage all of their own flexibility and service issues themselves? They’re starting to truly become self-aware, because nobody was doing anything like that 10 years ago. Or for another 10 years–are they going to lease 80,000 square feet from a landlord because they think they might need it? There’s a 0% chance, there’s no way.
Then you add layers to this thing–there’s the growth of marketplaces like LiquidSpace or UPFLEX or Upsuite, there’s a whole host of them that are just blowing up. You fast forward that tape another 5 to 10 years, these kinds of groups are not even just trying to supply space like Expedia, they’re trying to become consultants, and effectively almost compete with brokers on some bases to be able to help customers understand utilization of their space and inform future strategy. This thing’s getting completely turned on its head. Despite the fact that most landlords’ portfolios are 95% leased right now, and the average lease term in their portfolio is 9.5 years, it’s a very easy way for them to just shut their eyes and ears off. And then add to it Amazon or Facebook taking more space, and basically this is their excuse to just never do anything. Because the sky is blue and everything is fine. It’s not, the sky is grey. There will be darkness before the spring–before the new beginning of going to work, there’s going to be some really stormy clouds. And I don’t think those stormy clouds have really even reared their head yet.
It’s interesting what you’ve just described, because I think there’s definitely a lot more movement in the flex space, maybe because we’re paying attention to it more now, but I think just generally there is a lot more interest and movement in that area.
I think the burning question for most companies who are currently in space that they’re leasing, is, what do they do? You have these options that are available to you that provide flexibility, so that you’re not committed to something longer-term. But let’s say the average lease is 10 years and you’re 3 or 5 or 6 years into it and you still have 4 years to go, is there an option, or is there an out, something in the works on the brokerage side, or from a landlord’s side, to help transition to something more flexible? How far away is something like that where you’re not tied into it for the next 5 years, 10 years and too bad?
Well, you hear a lot of consultants provide good insights to customers and say, you should band together within the building and put more pressure on the owner to take some of the space that you have, pool it together and turn it into common space that you’ll contribute a portion of the revenue towards but not entirely like you are right now, and deal with major poor utilisation issues.
The problem is, landlords are completely unmotivated to do this, and it’s for a variety of reasons. One is that their customer is not really their customer. Their customers are lenders, are LPs, are brokers. These are the people that they care more about interactions with and have ongoing active relationships with, more so than those that they sign a lease with. They care greatly about that customer when that customer is on the street looking for space and they wine and dine them during that phase, but as soon as the 10-year lease is signed, it’s set it and forget it. So that’s a mindset problem that is starting to shift. But it’s still really an epidemic of its own.
Then there are structural issues. And the structural issues are how the industry values its properties and how it’s seeking lending, and those kinds of things. That’s all structured on long-term leases with credible, financially strong tenants. That’s the issue that fundamentally needs to shift in order for landlords to be able to more freely shift the supply. Because I think customers are going to get creative and try to find ways to solve for these problems that you bring up that are very real problems. But I think they’re going to come up short in a lot of capacities.
And also, we have to remember, they have their own businesses to run. In a lot of cases, it’s going to be easier for a customer to just write off the poor utilization, or write off the lease and just wait till it expires and deal with it then. And that’s an unfortunate reality.
What I’d be doing if I was a landlord is I would be calling every single tenant in my building and portfolio, I’d be trying to get a real sense of whether they were likely to renew that lease or not and if they were not, I’d be proactively trying to figure out large blocks of space that I could get control of and turn it into this full stack commercial real estate product, where, from the minute you walk into the door, you have activated amenities, activated meeting space, activated everything. Because that’s the other issue–that landlords go and design these amenities but they’re not in the hotel business, for a simple analogy. So these spaces are not activated properly, nobody uses them, and they basically become operating expense write offs. They’re contributing to something that they don’t use.
And then later on, what blows my mind about the traditional leasing model is, you get companies coming in, building up these Taj Mahals, and then the lease expires, and it gets torn down because it’s not universally applicable. We look to every other area of our world, and there are sharing economies that are exploding everywhere.
I think you need to follow the younger companies to see where the trendline is headed. Younger companies are willing to give up personalization and even privacy for more flexibility and more service. Imagine the world we’re going to live in when Gen Zs are running companies. For these people, everything is in their pocket. Everything is on this device. They’re going to be like, 10-year lease? What? Sorry, that doesn’t work for me. I’ll just take no office, we’ll rent an Airbnb, we’ll figure something out. Young companies will get so much more creative with how they congregate.
I think the next 10 years are going to be highly transformative. But real estate is really frustrating, in the sense that it takes so long for anything meaningful to happen. But I would ascertain that if you were to compare the last 50 years to the next 10, I strongly believe it will look very different.
I agree with you there. You were talking about amenities–and this is something that I often grapple with–do you believe that there is anything that a tenant or even a landlord for that matter, can do to entice people to want to come back to a building?
It’s kind of funny, almost laughable when you really think about it. The answer is yes, but I’ll make fun of it and poke fun first. I made a post last week where I said, there’s no office amenity more valuable than the choice to go there or not. That is the most profound amenity that a knowledge worker can actually have. I believe that, I don’t know if you believe it?
Absolutely, I totally agree.
Ok, so if we believe that, then all of these fancy amenities are far less relevant than that. Again, I’ll draw on my poker background. It really didn’t matter how quality the space was that we chose to actually physically interact in. What mattered was that the right brains were in the room doing something that needed to be done in person. It’s really that simple. And we had the appropriate technology and if the technology wasn’t working, then we had a problem. So, I would actually argue that technology is the fundamental, most important thing for those interactions. Then other than that, it’s the right people being in the room and wanting to be there together. So yes, I think the hotelification of the office is a real thing, and it is coming, and it’s going to happen. But it is not even close to as relevant as the right people being in the room and having the choice to be there or not.
I agree, I’ve been thinking recently about what the difference is between an amenity provided by a hotel vs a company or an office that’s providing a similar experience, a similar amenity. And really the difference is that the hotel’s business is based on the service. You need a hotel if you’re travelling away from home, and they obviously have competition with the Airbnbs of the world, but it’s a completely different experience. You make that decision; do I want a hotel experience or do I want an Airbnb experience?
But what I think is interesting about amenities, is it is laughable, but I look at it a little bit differently. When I go into an organization and I start asking questions about their corporate objectives, I look at their annual report if they’re a public company, look at talent attraction and retention, sustainability, community-building, these things that virtually every company has in their annual report. Then I look at the services and the amenities that often the tenants will build. Years ago, having a gym in the office wasn’t something that most companies offered. A few did, but a lot of companies frowned upon using it during office hours. They wanted you to use it before work, at lunch, or after work, in which case, what’s the point of the amenity?
So, when that became more mainstream, then I started to look at it from the standpoint of, ok, you care about sustainability–bear with me here–if you care about sustainability, you have an office that’s located in downtown Toronto that you’re forcing everybody to drive into the city to work in. And in the case where a company does offer flexibility–which is forward looking now, because I’ve worked at a company where you did have that option–but they offered the amenities to try to entice people to come into the office.
But if you care about my health, or you care about sustainability, then give me an allowance that I can use to join a gym in my community that’s 5 minutes away, so I’m not coming down to the office just to use the gym that you’re offering me. It’s going to cost you probably the same amount of money, or even less, because most people don’t take advantage of these programs. Companies will have budget allowances, but usually it’s less than 20 or 30% of people who actually use the money to participate in these programs. But it’s a win-win. You can still be flexible, and you can still care about my health, but you’re giving me the choice, versus putting everything in a building and making the building the center of everything. So that’s where I’ve always struggled, is to say yes, you can put hotel-like amenities, cafés and lounges and restaurants and the like, but to your point, it’s not about the beautification of the place, it’s the brains that are coming together, to do what they need to do.
100%. I think that the reason why you would probably see that some WeWorks are more occupied than traditional offices right now, taking aside for a moment the fact that the financial contribution is more flexible, is really because there is a brand that stands for something that those that go there believe in. I think that’s a key piece. If you’re going to be hotelifying the office, it has to stand for something. And I think that increasingly what we’ll see is that rather than buildings being a complete random selection of tenants that are there for no reason other than that the location matches the location that they’d like to be in, you may see these buildings start to look more homogenous, in that the people that are in there stand for the same things.
Dror Poleg talked about this sort of thing at length, notably how remote work could create community silos that are not very diverse. And perhaps we really are moving into that kind of a world, and again, I’m too naïve to be able to really comment on the implications of it all. But I think that’s really key. Right now, landlords don’t really have consumer-facing brands. Nobody can tell you who owns a building–no employee of 145 King St can tell you that QuadReal is the owner of the building. They have no idea, and they don’t care. And they don’t care because there’s no reason to care. So that’s definitely got to change.
But additionally, when I go back to my poker example, what I think structurally needs to happen (and this is more at the organizational level and it will influence real estate by it happening) is that when we play poker, we had all of the infrastructure in place that we needed to do the thing that we wanted to do, which was play the game. We had the software that we could play the game on. And then we had things like Skype and messaging forums, where we could communicate with each other either synchronously or asynchronously, to learn the game and build community. So it was very much a digital-first kind of approach to the way things were done. What actually happened was that there were no mandates of any kind, it was just that the infrastructure was there to use, and it was very grassroots how the collaborations happened and who with.
I’m very much a believer that this is, organizationally speaking, the direction that companies need to move in. If they move in that direction, it’s not really going to matter so much if they have all this sexy stuff in their space. Sure, it’d be great if they could have it, but more importantly, it will be a structure that gets the right people in the room for the right reasons at the right time. And then you adjust your real estate strategy around that.
It’s funny that you mention Dror, because I was going to say the same thing. I know in one of the early sessions of the Real Innovation Academy course, which I think you took as well, there was a question around, if you could have an opportunity to meet with anybody that you wanted to, dead or alive, who would it be? And it was geared still around the office setting. It was fascinating actually, the answers that you got that had nothing to do with people in the organization. It was artists or people that were inspired by musicians or people from any walk of life.
And what was interesting for me was that I experienced the WeWork environment when I left corporate and did my own start-up several years ago and didn’t have an office, so I was a nomad for a couple of years. I opted to go in and work in these co-working spaces, and the first thing that jumped out at me was, how different the communication and the ability to connect with like-minded people from different companies was. This was not what the experience was in the corporate world. I think about how much more valuable that was from a learning perspective. So, when I think about WeWork its the success, depending on how you define success, I think about this whole concept of building community. In the early days I remember they would bring guest speakers in and try to bring people in with different interests so that you could rub shoulders with people from companies that maybe you wanted to learn a little bit more about. And I think often about how valuable would that be for people that are in the corporate space. For years, companies have been very particular about not cross-pollinating with other companies, because–
Competitiveness, security, whatever.
Exactly. But the learning aspect and how you innovate and how you grow and ideas that you generate, have to involve conversations and experiences outside of the organization. And so, I think that kind of experience is extremely valuable for companies to be able to move forward.
And imagine instead of it being WeWork directly, at least the landlord had a stake in the game, right? And the issue again comes back to a couple things. I remember at the beginning of the pandemic, I was talking a lot about how the onus can’t just rest anymore on all of these companies to deliver a great experience for their employees. And the prevailing sentiment from the landlord community at the time, and I expect in many regards is still the prevailing sentiment, is that that’s not our job. Our job is to find a great piece of dirt, erect or buy a building, deliver the four walls, and then the rest is your responsibility. And that’s a mindset problem, but part of it is again tied to the financial compensation structure. And the level of effort and lack of understanding. When you think of these community spaces that you’ve just described, it’s a landlord’s worst nightmare. It’s short-term purchasing behaviours, high levels of activation, and having to deliver active service. You have to actually be more like a hotel concierge than you are an asset manager, and this is literally their worst nightmare.
And herein lies the problem–this is what’s needed. This is what is desired, this is what’s going to keep these buildings full. Someone made a comment on one of my posts the other day that said, putting a rock-climbing gym in a 10,000 square meter facility in Saskatoon is not going to fill the building. And they’re dead right, it’s not going to fill the building. But community and real human connection might. Right? So, it’s less about the spatial design and more about the programming.
On a completely different tangent, do you think technology can solve the challenges that are being faced by landlords and building owners? Just being able to get a better understanding of what’s actually taking place in the building, so understanding the behaviours, understanding who the users are? You said at the beginning, their interest hasn’t really necessarily been the tenant, other than when they’re looking for space, but now if you’re trying to stay alive, for lack of a better word, you need to kind of have a sense of what’s happening in your building. And so do you think technology could solve for that, to alert landlords on what’s taking place at a level where they can be more proactive with how they’re dealing with and how they’re going to interact with their tenants that maybe they didn’t have before?
In a very short answer I would say yes, but it’s very important to not romanticize it either. The companies want a couple things. They want to be able to flex their space up and down, inside of the building that they’re in, or in a building that’s close by. And they’re not naïve to the fact that this is a physical product, so it can’t be as nimble as a technology software service that they’ve purchased–they get that. But what they’ll say is that it really is solely my problem. Like, if my needs change, I’ve got to sublease the space which is really inconvenient, involves me taking the reins on dealing with that transaction, dealing with everything related to relocating myself, and it’s going to take time and I’m going to lose money. So if the landlord actually had an asset that was basically better set up to allow people to go up and down up and down up and down, and that building space is better universally workable, interconnected and well thought out–not like, our flex space is sort of an afterthought that we’ll deal with at the end once we get 90% of the space leased traditionally, and hopefully we get it all leased traditionally so we don’t have to worry about it!–if they can get rid of that and actually deliver what customers want, I think they’ll be surprised in a good way that they can command premiums for that real estate, and it’ll just change hands. The vacancy will not be as profound as they think it will be. So that’s one big problem that they care about.
Then the other one is actually new market entries. They would love it if their landlord could go on the road with them. And to me the only way that can happen is if the landlord has an operating platform within their suite of services that they can actually transact outside of their own footprint. That’s the only way that will happen. So those are the main issues that companies are trying to deal with. And beyond that, yes, you’ve got to design the right kinds of spaces, but we’re talking about this a third time–it’s just a sexy factor. It’s not nearly as important as the right brains being in there and wanting to be there. And it’s pretty basic, the kind of stuff you need to make that happen.
We’re seeing every day posts by all kinds of organizations, some that are taking the bull by the horns and making decisions on being remote-first, others are mandating the return to office, and some are just not doing anything at all right now, they’re just waiting to see what’s going to happen. Why do you think this is the case?
If I were to generalize, I think it has a lot to do with the amount of time that the organization has been in business. And even really what they do and how that came to be in the first place. Take a company like Dropbox. They’re on the leading edge and they’re a cloud software company. Of course, they’re not going to romanticize where their work happens, right? They’re willing to look at this problem with a completely beginners’ mindset. Then you’ve got Salesforce, they’re one of the most inclusive large employers in the world, and they’re willing to say things like, we’ll put everything before where work happens. What and why and how come before where. What a great statement. That to me, suggests that they trust their people, that they recognize that no one location is a silver bullet, and they’re going to do whatever they need to do to make their people productive. And if 25% of them never want to go in to the office again they’ll facilitate that. If 60% of them want to go in there on a very fluid basis, they’ll facilitate that.
Then on the flip side, you’ve got what I’ll call legacy companies, and I’m calling them that because they’ve been around for a long time, but there is also a correlation to their relevancy in the market. And they’ve been led typically by white males who are used to ruling from their castles. So, when you combine all of those forces together, it’s not surprising that you’ll hear those types of folks say, we need to get people back to work. It’s like, dude, we’ve been working! Your definition of work is not what work is. Work’s not a place, culture’s not a place. But they don’t see it this way. And for some, it’s an easy slip, because you know it’s natural to say, “I’m going to work”. We’ve all been saying that for decades. And we did, we went to work. But we’ve now realized work’s not a place. And this is what the smartest organizations understand and they’re building a workplace strategy around that.
I completely concur with what you’re saying. Well, this has been great, thank you very much for your time today and for your insights. Any final comments?
No, you let me drop the mic with that last one, so I’m good!
Ok, great! Thanks Dave!