Workplace of the Future: How Technology Will Reinvent the Way We Work and Transform Our Cities

[Music] I'm not certain that we could have identified a more appropriate moderator for our next panel than my colleague James Scott James for a little background who you have seen throughout the Forum is a lecturer and research scientist of the real estate technology and transformation Hub at at the center for Real Estate James has extensive experience in digital twin smart buildings automation 5G and artificial intelligence today he will be moderating a panel titled workplace of the future how technology will reinvent the way we work and transform the very fabric of our cities he has assembled three Stellar panelists to engage in this conversation the panel will showcase how the concept of work is changing and what this means for commercial real estate looking at all available research this panel will help the audience better understand how new technologies future Innovations systemic changes in demand and Mobility will come together to influence how our cities will look in the years to come please welcome James and his panel [Applause] thanks everybody um on reflection the the four of us decided when we were getting miked up that we're actually going to do a review of the Celtics game last night I think it's only fair that we we go down that path um no to uh to to before we we kick off um just the the future of workspace I know we've dealt with some incredibly important issues over the last uh day and a half or so but for me the future of workspaces is right up there because it's not just the valuation of you know where this is all going but and the devaluation that could possibly coincide with a lot of our our assets that are out there in the marketplace but there's the secondary effects that coincide with that be it at a multif family development situation or be it the retail on the ground the tax take for a city and of course even the transportation Network that we'll we'll discuss as well within a city so to begin I'd love to introduce the panel um I'm going to get each of them to do it themselves we might start at the end drawer good morning every everyone congratulations the city of Boston uh my name is Jor POG I'm these days mostly an author and speaker I wrote a book called rethinking real estate which came out just before covid and predicted a lot of the pain that a lot of people are going through at the moment uh before that I spent a couple of decades in private Equity Real Estate uh and Tech and these days I'm writing another book about the future of work and kind of the future of the whole economy more broadly and how it impacts every everything we take for granted uh in the built world and Beyond fantastic and and I'm Ben brlo I am the chief research officer for jll uh big global commercial real estate services uh and investment management firm uh based in Chicago I am based here in Boston um so this was a nice commute for me and um my job is to lead a team that tracks and analyzes real estate markets all around the world and anything that's impacting them and that has been a fascinating time to be doing that so looking forward to the discussion uh hi I'm aaja professor of CI Transportation thank jimes and Caris for the invitation here uh I'm a transportation person so my Outsider to this forum here my wife is Works in real estate we talking about basically everything don't move is within real estate everything do move com to me right that's kind of the partnership we have uh talking about the future work before I think we talk about what is work actually so if you ask everyone a question for you to think about it's not an easy question to answer yeah these people wouldn't know right so work I mean economic sense is a labor for money right the most material notion but socially most people acquire their meaning of life from work it's a part of the social identity but more physically work is actually buying people in a specific time space and organizational structure at it is until Co here right so work from one side provide Economic Security provide your social identity but also is Anchor in the physical space right but now today I think we are arguing that this anchor is being shaken right so today hopefully look at the implication of such uh job anchor is relaxation of it fantastic um of course in typical Irish fashion I have um stereotyped each one of these individuals one as a futurist one as a realist and one is an academic I'm going to hope over the course of this conversation that we can see if we can get these guys to cross over into different sections as we as we developed some of these ideas which one is which that's for you guys to decide um so to begin um you know I might just take a kind of a a general approach to this Ben I might start with you um you know it's been you know a couple of years since the pandemic we have you know heard numerous reports in the media of the demise of office we heard you know if you were here yesterday Paul Marcus had a very strong opinion on what he felt the office Market was like you know from what you guys are seeing at jll like how bad is it really TR at this moment in time you know and you know is it the same everywhere across the board yeah so I think the last part of your question is probably the most important one because the the reality is the headlines don't quite capture the Nuance it's much worse than the headlines say in some parts and not nearly as bad as the headlines say in other parts um and I think people kind of forget the pandemic is what everybody goes to about the changing world of work and the workplace and hybrid and I know we'll get into all of that and how that that's impacted utilization of office space and I can maybe share some perspectives today from our clients who are occupiers uh we do a lot of work with investors but also on the occupier side and recently have spent some time with some of our biggest occupiers across Industries um who are all trying to figure out this hybrid equation but keep in mind when you're thinking about the office Market there are other issues that office is working through right now that maybe don't get played up as much it's very Capital intensive and for 20 years or more interest rates sort of and and and decline in cap rates kind of covered that up but it's every time you need to reten in a building and the the the the um the math wasn't probably working properly but was being covered up so it's very Capital intensive um you have uh because of that Capital flowing away from the sector um so you have kind of a supply and demand issue on the capital side and then also you have which hit all sectors but on top of all that the interest rate um Spike which um when you layer that cake on it's it's it's qu quite a lot to to to um for the market to absorb and then of course and we'll get into this a little bit too you have issues of where the asset is in certain cities that are struggling for a variety of different reasons so um our clients on the investor side and on the occupier side are trying to figure out which office works and which doesn't where do we need it and where do we not need it and that I think will make for a really interesting debate cuz it's a very complex um discussion that needs diverse perspectives and I guess the one thing I would say at a high level is that the um the overall demand has shrunk and so there is and and there's obsolescence that have crept into a lot of the office market and that part is experiencing quite a bit of pain and I think we've only seen probably part of it so far it's going to be maybe a bit of a slow moving train wreck um as debt maturities come up and and um and that flows through but the high end of the office Market that fits the purpose that our occupier clients at the demand side wants is um is doing quite well um there are some issues there too in the capital stack but it's doing quite well and the demand concentration on that part of the market means that I actually think you know that could end up being one of the one of the top performers if you go out over the next kind of five years or so so happy to get into that further but that's a quick overview um I think we'll definitely touch on that in a few minutes um draw you know you um just to kind of get your viewpoint on something you know work from home has become a you know synonymous you know with with the Working World these days but I you know some people have their arguments to and from it but I don't think there's really any doubt at this moment in time that there is a a hybrid future for for most people involved within the Realms of of of real estate but with that you know employees seem to want and demand a lot more from the the the product that's available in the marketplace how do you envisage the workplace of the future you know and and more importantly what will it what will it take to get there so let's start with with the bad news yeah I think building on what Ben just said U yeah I think the narratives in the media are kind of either overstate or understate but mostly they distract from what is actually happening uh so just to set things in context I like to look at what happened with the retail apocalypse that we've all kind of been observing for about 20 years and over there up until Co all of the destruction that we've seen in retail was just because of 133% 1 3% of demand shifting online out of a pie that was constantly growing and with the problem that everyone foresaw in advance and have been speaking about for 30 years and to an industry retail and even retail landlords that is much more Dynamic is constantly expecting change it's pricing and change in terms of how it is capitalized and yet we all know how much damage it caused so when it comes to office even if you assume that just 13% of demand will shift and out of a pie that is not growing into an industry that was not prepared for it and is even in denial of it right now and for assets that were totally not capitalized in a way that reflected any dynamism or any uncertainty this is going to be very painful now on top of that you have a couple of other layers that didn't exist in retail so the product so one total demand I think will be reduced by 10% 20% whatever it is second it will be reshuffled so even the demand that exists is suddenly popping up in all sorts of other places closer to people's homes in new types of towns different parts of the city different types of buildings so in aggregate maybe it sounds like not too bad but in reality it means that a lot of buildings are just not where they're supposed to be and since they cannot move they become unsustainable financially the third layer of this is that even the demand that is attractive that people want to go to is now operated completely differently it has operating expenses that are much higher it has Capital expenses that are much higher and become obsolete much faster so it becomes more like an operating business which is not necessarily a bad thing people make money in operating businesses all over the world but it's not real estate it's not an asset that just gives you a check because it exists it's an asset that has to be managed it has uncertainty that correlates differently suddenly with all other types of assets it becomes more or less attractive to different types of investors at different parts of its life cycle uh so we're looking at a very radical change now to answer the actual question that you asked me um the office of the future is not a place it's a network so your role as a provider is not to take this box and try to convince people to come into it but to come to an employer and even all the way down to an individual and enable them to do whatever it is that they have to do at any given moment moment now increasingly that means being able to open different doors in different places for different purposes throughout the day the week the month or the year so if I may say some dirty word if you think of something like we work Finance differently operated differently but as a goal as having that Network that is branded that gives people something in their hand that just allows them to book whatever they need walk into wherever they need access whatever they need uh I think this is the office of the future and even like the kind of Tam or more boring versions of it just the fact that demand is getting reshuffled and I think that's the real story here we talk a lot about work from home and you know the employees want this and the bosses want that the story here is not about whether you'll work in your bed or work in an office the story is that work is getting distributed into many more places most of it will still happen in offices but there will be in other places they'll be operated differently and we'll talk about that later maybe because I want to fin but the biggest driver here is actually not from the employees that's that's the narrative at the moment but the employers themselves need it to be that way most of them don't even understand that they do or why but this is the reality J Ben any any comments on that I agree um the the world of work is going to be much more Dynamic and the office buildings of the past are not fit for the future and that's one of the big things that um that is the challenge right now a there are probably too many of them B some percentage we'll find out are somewhat obsolete either from a amotization sustainability technology location perspective and those things are hard to change especially in a world where the cost of capital is high and capital is not looking to flow into Office Buildings right so you're going to have this um stranded segment of the market and the only thing I keep reminding people is that does mean that the part that do that can get either is already or can get fit for purpose has I think an enormous opportunity um because I do think still there will be quite a bit of work that can or should be done in person together and that's using the term work broadly right that that that but the idea that fly to safety I feel like a lot of people use it as a coping mechanism because it's a bit like seven years ago looking at Apple stores in Louis Vuitton and saying oh these are doing well so let's all just build Apple Stores and stores but the market cannot cannot carry that you know so it's nice that some buildings are doing well but using that as a formula I think to give anyone hope for the future is going to cause a lot of you know heartbreak yeah there will be on that give a maybe a a example close to the heart of c and Department of urb study and planning iecture we are actually contaminating moving uh you may heard the Metropolitan Warehouse that's we build the whole school supposed to move in and there's a lot of kind of debate tension in that but I just want to reflect on that I think as a corporation let's say let's say the MIT as a corporation right how do we think about the design the space and the future of work what's the interaction that when you talking about I don't think we have a clue how to manage this process yeah everybody is imagining a particular situation uh there are some top down uh corporations just push down ever come at home they also mostly allow top bottom up approach right MIT very much taking the bottom approach in this right I would just say this is much a learning process here uh C does arit if you think about three discipline are exactly one who study space study design study Community study real estate we are struggling ourself how to figure it out I think in the next few years the lot of learning that the corporation together with employee the employee employee Dynamics so interesting depending on the labor market tensity you have a different balancing of power on this going on as well right but that's it's interesting I I agree with you completely but we've been hearing that for maybe two and a half three years now and I haven't seen a huge amount of you know driving forward with this or kind of a better understanding of how to make it all happen this is going to be a slow process isn't it this is not going to be simple I think a little bit about the presentation from Roberto yesterday about revealed preferences and what draw said I totally agree with there's been a ton of um a lot of the headlines are driven by I would say employee preference which is is an important factor of course especially in a relatively tight labor market uh we can debate whether that'll stay tight or whether uh AI will disrupt that but that certainly has been part of what our occupier clients are focused on got to be very sensitive to and thoughtful about employee preferences but I think what's happening now that gets a little bit to your point about how this is playing out is um just like we all did in that exercise yesterday with Roberto of trying to measure preference versus performance and thinking about the dimensions that go into that equation we don't have all of the data to measure it yet and we don't have all of the um and people aren't thinking necessarily about the whole equation and I think the way Roberto put it yesterday is is brilliant it's the way we've been talking about it it's not a right or wrong work from home or hybrid or um in office necessarily it's actually a series of tradeoffs and it depends on the job function maybe on the age on the location on the company on the industry on the type of work that you're doing for that for your job or in that day and what I think where I I like the word draw used is sort of this is going to become more Dynamic and more networked is hopefully there's a future where people are doing the right work in the right place at the right time to to maximize for them and for the company that combination of preference and performance because they're both important but they don't always they're not always aligned and there's a trade-offs and this has worked really well I mean it's almost like it was staged um you can ask some questions sometimes also if you want I think we should ask him the three of them threatened me earlier on that they were going to turn this conversation on me which I thought was you know very unfair um but on the idea of preference and tradeoffs J you know a lot of your work you know is worked off mobility and the commute and the commute as one of those trade-offs is often right up there with with design and and and experience as another elements how important is the commute in a an employees assessment of their of their job or their employment sure I'll talk about commute first and then tied it with the tra of productivity performance Etc right on the commute you know the late Behavior scientist Dan kman did a study looking at the subjective wellbeing basic happiness at each moment of a life it basic to study cleerly people okay when you're watching TV what's your happiness level when you are having a beer what level all of the 30 activity it track on the top probably you can imagine intimate relationship socializing after work uh watching TV in the top but what's on the bottom the third worst one is evening commute the second worst one is work and the last one the bottom wor is morning commute right so Transportation as a as a profession we occupy two of the three worst moment of people's life so when we comes to much opportunity right sear opportunity so given that whenever I have the opportunity don't need to commute I don't but that's what happened right giv opportunity you don't so to counter that you need to have a such a strong attraction for me to have a reason at work either boss said I will fire you or I have some utility some joyfulness when it come in right that has a lot to say about the design of the workspace and also organizational design on this right so that's first part second part let me tie into the performance right uh um as Ben said there a lot of kind of a contradictory forces they all true but then empirically what dominate uh uh Nick blong from Stanford we've been collaborating on the community side but he did a study just on his own working with trip.com a major corporation in China did uh what I see is one of the best study is a random control trial uh of the different employees what he's he concluding the following hybrid working namely the 3day work at office today at home improves retention without damaging performance the spe number is having this hybrid model reduce the quit rate by one3 without for this group this experimental group hurting any sense of the performance that they can Mar on this this based on RCT about two years of the day that right that's the empirical thing I find interesting but it was the the last thing is this effects most obvious for female employees and those with long commute right that shows also something if you were to track people back what do you need to do what female you care about right that for daycare for their other life shorts Etc on the side of course is improved Community that's we did a PO job so that that we need to do something about so that's kind of a setting between commute versus one of the things that just just to cuz I saw that study I thought it was really interesting for a few different um a few different uh factors one is that the uh title of it was hybrid work from home so to me this is just like this is polarized like politics is and like sports is if you're Red Sox Yankees or whatever it's work from home or in the office is what gets all the headlines and even calling it hybrid work from home is like playing to people's biases but the reality is 3 days in the office and two days at home is not for like many people in the US not all that much different from what was starting to happen pre pandemic that's that's not purely a pandemic thing and by the way when we survey our big corporate clients Fortune 500 80% of them are in that mode sort of three and two and are in the hybrid mode and the Tails if you look at the bell curve of sort of fully remote to hybrid to of some sort to fully in office the tals have are both now under 10% basically everybody is lining up to hybrid so and that's not all that different necessarily from before but the other thing I find fascinating about that study and I think all of these studies are building on each other they're all very important but that study has drawn conclusions from um one company in China in the second half of 2021 can you imagine a less normal time and there's there has been more research since then and I think most importantly we just see the prefer we just see what companies are doing and whether they make and whether they survive so I mean ter it's not so much about asking them whether they're happy or if they measured productivity but just the fact that this is what they opt to do you know and the difference between three and a half to four days a week at the office or two days at the office is a big difference again to an asset that is valued at a 2% cap and that assumes certain types of behavior and the bottom line of it is that the offices are half or 60% or 40% emptier than they were four or five years ago so however we kind of mix it up and whatever we want to tell ourselves along the way there's kind of yeah clear evidence and more importantly we have kind of counterfactuals we have let's say Nvidia for example the hottest company on Earth at the moment that works remotely flexibly people collaborate across hundreds of locations they get to set their own schedules they work in all sorts of weird ways and you know you have Morgan Stanley and other Innovative companies telling you that they can't Innovative innovate unless everyone's in in the meeting room every day while Nvidia literally reinvents the wheel collaborating on a completely different basis even if there's only one company that does that and there's many more it tells you that there's a completely different way that is possible it seems to be a way that is more kind of relevant to the Future and maybe this is the opportunity to talk about the Celtics because we want to talk serious stuff so I want to ask the audience maybe a couple of question questions they're very hard but I know you went to MIT so where is Jaylen Brown from Atlanta Jason Tatum St Louis bonus question Al Horford Dominican Republic right so right they're not from Boston imagine if the Celtics only employed people who were born here and live here would it be a good team no no now when you're in a competitive field if you can you want to tap into the largest possible talent pool now up until not so long ago the most competitive and Innovative companies have done that by moving into the largest possible employment areas whether it is Boston Silicon Valley New York London but at some point they realized that they need to hire from even larger pools to be competitive so even before the pandemic they started opening you know three four not Branch offices to sell to local customers but actually just places to hire from so people started collaborating remotely even though they were in the office already before the pandemic what happened during and after the pandemic is that they finally realized oh I can hire from 30 different locations or 100 so why stop there and the more competitive industry becomes not necessarily just because of a labor shortage but because work becomes more specialized the type of people that you need just like in NBA basketball slight differences in performance can result in huge differences in outcome uh and I think this is the main driver here at the end of the day so so this is where the this is where the panel gets interesting and still about the Celtics L imagine your scenario but the Celtics only train remotely uhhuh yeah so they they come they come from different places that's a good good that was very good right do you think they were hanging Banner 18 so yeah the Celtics don't spend 9 to5 together and basketball is one of the few jobs that you know are still going to be physical in 10 years but even things like brain surgery can now be done remotely and definitely going into a meeting where even if you're physically in the meeting there's people who are not there usually even your boss as well who are calling in anyway way and even if you are all there you are on slack and on Google Docs and looking at a Google slide and looking at a screen so there's a lot of inertia going on again what's important is that we already have proof that you can do you can reach Peak Performance you can be Nvidia completely differently one of the things that's that our clients are telling us which is interesting and I think technology ultimately will help solve this is that um they've all as I said almost all they're in the middle of the curve you got companies like Nvidia on the remote side you got companies like JP Morgan or Morgan Stanley on the 5 days a week in office but nvidia's earnings are holding the S&P yeah but my but my point was going to be what they tell us actually is that for many of the activities that they're um focused on especially around collaboration fully remote or fully in person are in some order number one and two in terms of how it MH how Ive it is and hybrid is actually a distant number three which is interesting and something for I think the world of work to solve when you have people kind of multitasking and some dialing in and some um and that is I think going to be an interesting Dynamic going forward I think the crisis we look at it as a crisis of offices because we're among real estate people but it's a crisis of work it's a crisis of management itself a figur okay and and again the crisis was there even before I was you know in a panel with the heads of property for I don't know LinkedIn and Google and a couple of other companies just before covid and they were asked how do you they were trying different things to increase productivity and then you ask them how do you measure productivity they say oh we just survey and ask the employees you know they have we're not in the Ford factory anymore that we can kind of measure and say okay or even C trip which is kind of like a call center and you can at least measure how many calls per hour and outcomes most work and the more creative and more competitive it is the harder it is to measure and even the people who manage it and even the people that do it don't often understand why did it work this time if I did the same thing a 100 times before they don't know how to replicate it and sometimes they do something in five minutes that is worth much more than what they did all year and in such a world it's very hard to sign a 10e Leist and have any clue what kind of resources you need even for the next six months let alone the next year right or or 10 Hest I would say work from home is a pretty well defined notion work in the office also pretty welldefined notion but hybrid has so much ambiguity in this when we say hybrid as begin I mention at we the job as anchor has three dimensions the temporal the spatial and organizational when we say hybrid work three days at work today at home that's just a very simplified description of one dimensions of hybrid right how do hybrid in ter the spatial set both into different satellite office but also within the same building who sitting Which floor how do we hybrid in the organizational sense right so for example previously in my lab I sit with 25 student but in the Metro I may work with architecture maybe sit together with C so if you combine the spatial temporal and organizational hybrid has different amount of possibility we need to design right so instead of evaluating hybrid as a small notion that's actually lot of complexity we have to both design it experiment and then evaluate each of the variety of hybrid work here yeah um you've all touched on on productivity all right and there's numerous studies Nicholas Bloom's ones you know kind of lead the way on this that productivity ultimately has not necessarily been affected for most part however there's debate onto whether or not the time frame of that is actually kind of realistic but what about other elements what about um what about Innovation what about culture what about employee retention these are all bigger issues can technology play A Part here to help facilitate them as we go forward how do you see playing it yeah so I I'll build on I think Ben made a great point about the Celtics you know how well they would have done if they never played or practice together uh but actually on the other hand they probably would have had better culture more cohesive better understanding of each other higher trust if they were all actually from the same city and they grew up together and played together the whole time so in shifting to that model of recruiting players from elsewhere there's huge trade-offs in that you bring all all sorts of weird personalities you have to make them get along they have different backgrounds maybe they don't expect to be here in a year or two so they have low trust they kind of keep thinking oh am I going to renew my contract or is this guy should I share my MVP if I'm Jaylen brown with Jason Tatum or should I kind of try to pull ahead and think about my next deal you yeah there's trade-offs there and I think going back to the management problem I think in shifting to this new way of working if we just keep measuring it by the yard sticks of the old way oh it's not you know it's not as nice as they old way people are not as friendly they're not as familiar with each other right all of these things are not going to happen anymore but maybe other things are going to happen that are much more productive and again here I kind of defer to what I see happening in in the actual real economy and I'm saying okay certain companies are making certain choices about these tradeoffs so it must mean that this is more valuable for them and again this was visible even before covid when I see stripe or Google or Facebook opening a fifth office and splitting their R&D ity across multiple locations it's not because in an Ideal World if they could have all the best people in the same place all day long it wouldn't have been better yes it would have been better but in our world you cannot get all the best people into the same place all day long and you have to decide do I want them to be here or do I want them to be in five different locations but then hire make the slightly better match that is going to invest invent the next I don't know Instagram or chat GPT and in their revealed preferences I'm saying that this is what they already choose choose to do which is why you know 5 years ago I already said that it will intensify because if they can work in five locations why can't they work in 15 locations or 20 there's basically no limiting principle uh so I I try to come back to to that always to like what companies are actually doing and whether we have any example that it works and even one example is enough because again like with the Black Swan if you've seen one you know that it's possible and that's all you need to know you don't need to see a thousand to know that there's not only white swans and if you see one company managing to create something amazing working completely differently you should look at it and try to think what are they doing that I'm not doing and there was ways to build culture there's ways to build trust there ways to you know to collaborate plus we are the fact that we don't know all the answers doesn't mean that the all the answers are correct I feel that there's a yearning it's natural but it's destructive particularly in real estate people keep looking for okay so the the previous answer is wrong just tell me what's the new answer and I like to it and and let's so three days a week okay let's all move on with our lives and you know we'll build everything based on that but but it's the reality is that there's no answer anymore that the next 10 years everything is just going to get constantly mixed up and we'll just have to build assets and value assets and design Assets in a way that can accommodate this type of dynamism that wasn't there before and if there's no answer you can't tell the experts that we were wrong right no this is an answer but it's not the answer that people want to hear I I think the interesting thing to your question too James I completely agree with what you're saying I'm never wrong by the way I know I know but I think the interesting thing is what will companies or owners be measuring in the future or what should they be measuring so in the past it was maybe about the rent or the noi or from a company perspective a lot of our company a lot of our clients are scrambling to measure um like utilization which I think is probably going to prove to be the wrong thing to measure in terms of how valuable parts of the workplace are whether it's home or or office or um in person somewhere else and I think um figuring out what are those things that matter to the company and that may be different by company and we took a we took a crack at sort of labeling like what are the reasons you would want to bring people together we sort of coined these five C's just because it helps me remember so these are among the things they may prove to be right or wrong but yes that's the six C actually that's a good one Celtics um culture collaboration um creativity which is sort of our way of saying Innovation but using a c a word that starts with c um it's very creative community and and career is the other one where a lot of times you know the the uh learning that you get through iners um and the kind of structure that that creates for learning I think technology will help solve some of that over time but thinking about those are different things to measure then I don't think it's going to be like the the airlines ultimately where like how many seats are filled um and and I was with a client just a couple weeks ago who is actually investing in their offices but they don't care how many seats are filled on every given day um they're they care more about how valuable the activities are how good the experience is when the people are there and um you know so you think about think about you know a vacation home it's not how many days of the year you're there it's how great it is when you're there or the TD Garden it's not how many hours of the day it's filled but when it's filled with people it's magical right so I think our clients are starting to think about not how like put the you know the statistics on utilization to the side although they're still measuring that and think about how valuable are the activities and what do we need to measure to sort of help people understand how valuable those are yeah I completely agree I think that there's a new measurement scheme there that we just we're not sure where that goes yet there is also and now my time to be a little optimistic because I feel like I kind of maybe scared you too much you know in real estate we already have a lot of experience with a lot of what we're supposed to be doing but it's not in office it's in retail you know I once upon a time I used to build and operate shopping malls and when you operate a shopping mall one you have different tiers of tenants you have those that are there popping up for a few days or a few hours you have some that are for a few weeks some that are for a few months some that are your anchors for the next 15 years and you again pric that in build the operating models to take care of that and more importantly you constantly strive to understand every organization and every individual that walks into your building all the time you measure what they do you look at what they're interested in you look whether they walk right or walk left and whether they had coffee before they had the ice cream or whether they bought the dress you try to understand them their aspirations what's driving them where are they coming from how that changes throughout the year and I think this is the type of approach that exists in real estate and that we have to bring now to to offices and to Apartments as well so with we'll call and we're able to do it with with we'll call it the retail apocalypse that happened you know over the last 15 years can we learn from that from the apocalypse I mean it's probably too late to learn now I think for office because we're already in it uh what we can learn as outside observers is that none of what we're talking about is going to change until the next big crisis because retail was already dead 10 15 years ago but a lot of assets just kind of kept pretending that they're worth much more until Co finally came along and kind of put them out of their misery either it it forced them or their lenders to finally let go or it gave them an excuse to kind of say okay let's find okay it's co you know the asset has been underperforming for 12 years but like okay let's blame it on Co write it off and and move on with our lives I think office needs that type of large event in order to really push everyone to adopt whole new assumptions about valuations there are a couple things I think we can learn from retail one is that that the shift was more from necessity where do I go to buy toothbrush to experience mhm um which is harder to replicate in a digital world um and also the retailers that did well and I think actually this is now starting to come back to bite some of them in a certain way um but were're the ones that figured out Omni Channel which goes back to your point about the network of work versus the like you know I go to store to buy this like you you know your your Omni Channel retailers who have the products the digital experience the um physical experience wrapped together where there are multiple options and I say that's starting to come back and bite some of them because I heard someone say this a couple weeks ago if you go into a Starbucks these days and you're trying to like enjoy the experience in the Starbucks and you have the mobile orders and the in person and like it's total chaos now and they're I think they have to sort of figure that out again in a way so um this this blending of digital and physical of remote and in person of productivity and also experience are things that I think will take some time to play out that will be the fun part unless you own an obsolete office building then it's not going to be so much fun um but I think we still have a lot of work to do on those factors if if I generalize from the like a unit of tent level to the whole city level here right I mean the financial district in Boston may be struggling but new new bar street is booming right TD Gardens booming right so that's why you look at what are people coming to the city for here right what what's City about I mean City in a way is the densification of human interactions right we have more fun wom together uh we are more creative wom together we are more sympathetic of each other will move together I think the mixture of this C function will evolve quite a bit of this right this point about technology how will techn facilitate of this right for that I'm open-minded this I would say that two type technology one I call this togetherness technology the other one is a pure movement technology and movement is kind of traditional transportation we can talk about in the second but the together this technology I think if I don't know how many you tried the Apple V Pro uh how many you tried it right right uh this is the kind of virtual reality type thing there right it doesn't work as to to be so you can feel the intimate set on this as it is now I think techn doesn't work to really achieve this human human interaction on that right but look at can it replicate sight uh sound smell taste touch all those things right but in the long future can technology ever do that I'm really openminded to to do but as of now they're not there yet many of the see training basketball player negotiating a deal judging oh is this guy bluffing or Not by looking at this kind of a eye gesture right this thing I don't think I get it on do right so the the critical aspect the human to human interaction is still essential here right when we design how to make this functional but also makeing it entertaining right make it more sympathetic that's the area both C need to think about also the tenant you need to think about this I'm going to put a little bit of pressure on you guys because you know as experts it's great to you know put visions of the future right there but you know even even jll I mean they've been one of the leaders in trying to understand the workplace of the future you know as as you all are trying to to build a out um is it the design of the space is it the reduction of the commute is it health and wellness is it providing a a better experience for everybody in in the building you know is is a bribery for free food I mean that keeps being brought up you know should companies and should even countries and cities should they be thinking about redefining the workday you know we you know we what is Casual Friday is it you know or should we have the you know the big one on the table is should we have a four working week what do you think about those things who wants to be under the pressure I'm happy to started go for it dra it goes back to there's no single answer anymore I think it's about pushing decision further away from the center enabling teams enabling individuals to make their own choices in terms of how they want to work of course thinking at the city level that means that the city will have to learn and adapt in order to accommodate this type of dynamism and I think cities this is what they do best to begin with this is why they're so amazing and they aifi to a large extent over the last 100 years particularly over the last 70 years with you know with zoning laws with traffic patterns of various kinds that basically kind of told them okay this is what you do in this part of the city this is what you do in that part these are the hours where I expect you to move around from this direction to that direction and then those are the hours where you should go in the other direction and I'm going to build everything around those very rigid assumptions force you into them develop all the retail and services based on these exact assumptions and then you just live here and you know figure it out for like you know you adapt to me cities historically were exactly the opposite there are cities full of coffee shops mixed use I think uh Jamie F clamper spoke yesterday about Sienna I think where they can not just mix but basically accommodate change all the time like they allow people and and companies to make choices whether it is every day or across the years that the city can still survive because it doesn't assume that it knows so much about the future it doesn't assume that people are going to do the same thing for the next 50 years so I'm going to base my whole infrastructure and budget and Zoning plan based on that so I think what it means at the city level is again loosening zoning uh enabling people to build more of what it is that they want to build enable mixes to be used the stuff that is being built to be built in order to accommodate flexibility and to be financed in a way that can that can absorb it that assumes that okay leases are not going to be 10 years anymore maybe many people want much shorter things people want all sorts of services to enable that to happen to go back to Adam Newman again and we work they've done a lot of mistakes but we cannot deny the fact that there's very strong demand for that type of product and that it's almost impossible to make money providing that type of product now it's not not just because of Adam Newman's Shenanigans other people that are much more reasonable have tried to provide co-living and co-working and it's just really really hard to make money from it and one of the reasons that it's hard to make money from it is that both our our zoning building codes and the whole financing ecosystem just cannot accommodate these things so it's either too expensive it expects different things of them it takes too long but we need to figure out how to accommodate that flexibility because this is what our economy needs and this is what will enable like cities are cities and landlords are kind of scared of letting go of the old model because it feels like cannibalizing like why would I give up on a 10year lease if I can you know and and go rent something for a month or why should I provide these Services if I can just rent out an empty book so yeah if you can rent out an empty box and sign a 10e lease and it's working for you good but it's clear that it's not working and we have to embrace the other thing fully not like try to deny not like tell tell ourselves that it's about to go back to normal that oh yeah it just trick IR down from like 27% people not showing up to 26% it's you mentioned at the beginning it's been two years since the pic it's it's been four years you know we've people went home four plus years ago and they never came back many of them and those that came back are showing us that they want completely different things because like chinoa said the restaurants are full the hotels are full the venues are full just the offic seem to have a problem and housing seems to have a problem in terms of accommodating people where they actually want to be and the commute is a housing problem as well at the end of the day if people can live where they want to work and we services that are interesting to them then the commute will not be a problem and they will spend more time at the office because it will be close to where they are or to something else that is interesting yeah on that just saying um when we talk about the homeless issue Y in San Francisco Etc we have that at the same time all our empty office building are there this is a bizarre system issue here right about relaxing Z I have a friend who who's entrepreneur running a 200 company person company uh one of his he asked people to come back but he simply said unless you provide daycare I I don't come back fire me on this right he said no let me build a daycare for you right there new newon center but look at the Z he's not allowed to build a daycare right for her to go through the all the procedure ET the employe all gone there right so even though we don't know the specific answer but allow a flexibility for answer to come out that's the minimum thing we can do right instead of imposing social constraints that Al a prior structur into this what we do know I think is that um CBDs that have high density of million square foot Office Buildings that only have like a convenience store at the base of them are not going to work and so I think the most structural issue the most um the hardest challenges will be those how do you reimagine those how do you create more flexibility how do you incentivize mix of use is some of it might be around conversions but um it's the same problem you know that retail had in a way we're we weren't overbuilt we were under high interest rates now yeah it's hard to do so the the places that are more mixed use already um you mentioned like Newberry Street in the Back Bay and you can kind of go you know all around the country and actually in some cases like around the world and you see places that are thriving because they're not dependent on filling million square foot office Towers one right after the other and those are the hardest to figure out how to how to reuse and repurpose yeah maybe just add one data point uh if you look at our average a community Reduce by 30% right but the total VMT vehicle mile traveled fully recovered so where where go people made other trips that's the shopping entertaining socializing Etc yes um you know we started the the conversation by me pigeon hoing you all into different segments I'm now going to turn you all into futurists if that's okay right I want you to paint a picture for for the audience just in a couple of lines what does the office of 2030 look like who will be the the future of office winners whoever's bravest to go first I so I think um I I actually do think that the office that's left and that's made it through this next wave will very valuable I think the transition is going to be painful for a lot of the reasons we've talked about um especially on the financing side and on the capital side and the kind of commercial model but I think once this shakes out maybe a smaller percentage of work that's done in an office but I think the ones that get it right will be extremely valuable and I actually think a lot of money will be made by those who figure out how to do it and I think it's going to be a combination of like I almost um thinking playing off what draw has been talking about and there was a comment yesterday from one of the showcases about trying to get away from mass production and thinking more about Mass customization thinking about the demand side and how do you an AI should help us with this how do you think about creating within a building and within a neighborhood the pockets of spaces and experiences and technology and collections of people that enable people to do their best work and that we can then measure that that they do their best work which again again going back to your point right in the beginning was work still should be and can be something that's fulfilling that creates meaning and purpose all the polarization about work from home versus work from office and all these little things I actually think that is a very common thing for a lot of people who work is to try to find meaning in them to be part of a community to be um so I think the offices that will do it will be in more mixed use environments they will be a lot of our clients are telling us right now they have offices in the right cities but in the wrong neighborhoods and the fabric of the building will be will NE necessarily be more flexible um and the uh way it enables work will be the prime and and experiences for those people will be the prime um purpose of it General and yeah maybe I give example using the Met Metropolitan Warehouse again um again all the different department of fighting oh this is my classroom this is my research lab where I got this you got that uh EZ who's lecture and research at do make the following Point saying how about let let the space have the capacity to evolve let the future user of the space actually design it and own in the space rather than here we try to preempt and imagining 5 years later this will be my classroom or something on this right so allow the capacity to evolve that's one thing but secondly who actually designed it let the actual user to be part of the owner of that space is another I think good point yes so starting at the very micro I I agree with with both of you and with jinu in particular this notion of we call like designing for emergence like empowering people to shape their own spaces and having the systems in place to enable them to do that whether it is partitions or phone boosts or stuff that moves around like assuming that you just don't know and even the tenant doesn't know exactly what they will need in months or in a year but I think bigger picture I feel like we all have certain assumptions that we hold on to really hard and we're kind of trying to think where these offices will be but it's very possible that we're facing a much more radical change there are certain things on earth that used to be the center of the universe one was the farm then was the factory they all still exist they're all very essential to our lives but we don't design everything else around them anymore they don't dictate how we behave how we go to school how we move around they just kind of exist in the background or they're kind of porous and they're kind of spread around in various ways where they they kind of not as centralized as they were before and I think 10 years definitely 20 this is what will happen to offices most work even White Collar work will not happen in an office in the same way that is happening today the offices that will do well a lot of them will not look like an office at all and I think a lot of it's true for corporations as well they're much more poorest they're far less clearly defined find that there once were even on a day-to-day basis as an individual it' be less clear to us am I working now or am I just like effing about and just whatever it is and maybe something useful will come out of it and more and more of our work we'll just be providing attention and services and doing all sorts of things for each other in a way that again will not be very clear like why am I even getting paid for this but I will be getting paid for this and it sounds radical on the one hand but if you look at how we already live if I would bring a farmer from a hundred years ago and tell him what most of us do every day he'll be like that's what you do like you get paid for this like who who's actually working in this society and you know we know that some people are working but most of us we're doing something but it's not very clear to us what of It ultimately creates value but it does create value what we do is important because we're part of some kind of complex system that that generates value somehow and it's only going to get more and more amorphous and harder to Define what how it generates value but it's going to generate even more value than now so I think uh the city and Office of the future will look much more like the the coffee shop in the cities of 200 years ago it'll be much Messier far less clearly defined enable interaction where it's necessary done at home when it's necessary and uh and yeah and and and again and the the better we are at accommodating these shifts the less painful they will be because if we try to resist them and try to force them into the old molds it's going to be painful for the content and it's going to be painful for the mold uh as well and and probably what will happen is something in between we'll have some pain and inevitable adaptation interesting in in the last cycle be exciting I think in the last cycle we had this emergence of the creative office which was this sort of Fringe thing that was not always in a CBD it was funky and where people went to like create or solve problems or innovate and you could um see a place in the future where the only office that's left is the creative office in a way where people are doing more human things and the you know it's interesting the flow of White Collar work in general I think in many cases has been to lowcost lower cost places where labor is more abundant and less competitive um you think of the Sun Belt or you think of offshore locations and thinking about AI which parts of the office Market i

2024-07-16 01:26

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