Phil Kirschner: Real Estate, Futures, Workplace | Work 20XX Ep17

Phil Kirschner: Real Estate, Futures, Workplace | Work 20XX Podcast with Jeff Frick Episode 17

English Transcript

Cold Open:
So I got my notes. So if you're ready to go, you got a water?
I got a water. I got my water.
All right, so I'll count down and we'll go in 3, 2, 1

Jeff Frick:
Hey, welcome back, everybody. Jeff Frick here coming to you from the home office for another episode of Work 20XX. And we got one of the greatest OGs I think in the space. He's been in it for, from an occupier point of view, he was early at WeWork he's now at McKinsey. And they just came out with this huge report, (Empty Spaces & Hybrid Places, the Pandemic’s lasting effect on Real Estate) 64 pages. I got it here. I didn't print the whole thing, full disclosure. But we're going to dig into the to the details. And it's really looking forward and some scenario planning about what might be happening as we get more towards 2030. So welcoming in from New York City, I believe he's Phil Kirschner, the Senior Expert and Associate Partner Real Estate and People and Organizational Performance. Phil, great to see you.

Phil Kirschner:
Good to see you Jeff, thank you for having me. And for the kind words about my jungle gym of a career at this point

Jeff Frick:
It's pretty straight, you know, compared to a lot of them that we see out there. But it's great, its great to have you one, but you've got such a great perspective. But let's dive into, you know, kind of what was happening pre-COVID. And this is kind of, the reports about what, you know, the long term effects of COVID, maybe long COVID could have been the title. But we've talked a lot and you've talked a lot. You know, COVID was an accelerant to a lot of things that were already under play. There was a lot of trends that were already happening. And then COVID basically forced everybody's hands and showed that there is, you know, we do have the digital tools for a lot of knowledge workers that they don't have to go into the office. There is things like cloud and super powerful and sets and all these things that were there, but nobody really wanted to force that, force that move. So as you think about, you know, kind of COVID as the accelerant, you know, are these things that would have happened eventually without COVID and that just kind of juiced it? Or, you know, how do you, how do you look at these trends? Because these are things that were already kind of underway.

Phil Kirschner
Yeah, it's a great question. And I remember saying early on in COVID with one of these like memes on the Internet saying, you know, COVID just accelerated things that were happening and convince me otherwise and didn't alter the trajectory. We just got there a lot faster. It's funny, looking back on reports about what the world would be like in 2030 or 2040, from a workplace perspective across the industry, even from places like McKinsey. When I wasn’t here and seeing elements of that now, like, gosh, this was, you know, 7 to 15 years faster than anyone thought we'd be there. And there were a lot of just preconditions that were like loading Slingshot or led to the straw that breaks the camel's back, whatever your metaphor is, especially in terms of the built environment for the office. Most of us didn't think that highly of most of our offices. Most of our offices didn't provide very well for all of the things that are various employees like had to do. Everybody wanted a little bit more flexibility than they had, or at least to to take the little bit of flexibility that they were taking at the time without an excuse, like just being able to assert that we wanted that. And then in the background, I think you had sort of the experience economy writ large, like making it really great to be in other retail or hospitality contexts enabled by new technologies and mobile technologies. And most of our homes were very quickly becoming smarter and more dynamic than the offices we were going to and spending most of our time in. So all of that was just like loaded. And the only real barrier to employees taking the flexibility that they now are vocally saying they need, it's keeping them in their current jobs or inspiring them to take new ones. The only barriers were leadership, culture, leadership, belief around output and paper. With we still had stuff we put our hands on and COVID just like ripped the Band-Aid on both of those things because there was no more leg to stand on to say, If we're not all here at the same time, the company's going to go down in flames. And everybody just was like, Right, I guess we're not printing those things anymore. And paperless and e-signatures, all those things that we were probably getting to just got pushed through and like, here we were. The only thing now that would get people back is either like mandate or choice.

Jeff Frick
Right? Right. So let's, so let's get into the report, before we get into the details, a little bit of background on kind of the scope of the report. You know, I love I love longitudinal data. I love when you actually get the real data. So this is really focused on you called super cities, right? And then you're doing some scenario planning around the 2030 timeframe. And it looks like it's quite an exhaustive list of cities and a huge crew that put this thing together. Give us kind of the quick summary on the work itself.

Phil Kirschner
Yeah. So just for anchoring and perspective. This report comes from the McKinsey Global Institute (MGI), which is our sort of think tank and economics engine. What is interesting for MGI, anyone who's not as familiar relative to like normal McKinsey is that while we can showcase and do and like bring MGI experts into client conversations, they don't look at client data, right? There's a very hard line there. So this is longitudinal, external oriented, like proprietary research that combined like new surveys that were run around appetite for sort of places where we work and shop and live in the megacities, as you highlighted, but stands on a basis of a group that is regularly putting out predictions about like macroeconomic conditions. We have been for a long time looking at, you know, inflation impact on real estate or sort of real estate’s impact on global wealth and balance sheets. Those are some of the other Hallmark MGI reports that this kind of like sits on top of and the other largest one that probably predates this most relevant for this conversation is called the American Opportunity Survey cited in the report and was around just a year ago with 25,000 working Americans on their sort of not only perception of the economic environment around them, but desire for remote work. It's what we usually lead with and how we know across ages and education bands and race and industry and suburban or urban locations like a real pent up demand for flexibility where people were asking for taking it when it was available and how remote part time working conditions were like affecting their economic outlook. So this is really great to layer on top of that with primary search again on like specific demand for space at the city level across assets.

Jeff Frick
Right, Right. And you start out in the summary is that, you know, it's not going to go back. You know, demand is not going to return to what it to what it was, especially in these kind of super centered you know kind of concentrated use. I would say, you know, like overconcentration of knowledge workers and overconcentration of kind of office only versus more mixed use or even in kind of mixed economy areas that are the ones that are not going to suffer as much or haven't suffered as much. But the ones that are kind of single use central business district, a whole lot of downtown office and not a lot of retail or entertainment or other things, those are the ones that are really suffering the brunt and will continue to suffer the brunt, as you say, even through 2030.

Phil Kirschner
Yeah, you were you hit certain points. So top of the house hybrid and flexible work is here to stay. The daily utilization patterns that we're seeing across cities may, you know make it to you to go up a little bit. But they will remain far below pre-pandemic levels, which is sort of, you know, I think especially from your guests, were never 100% And that has come as a surprise to some leaders that, like they were never even close. So we're off of the base of something that was maybe 80% on a good day. But like, the levels aren't changing. But what I really like were the two additional kind of layered perspectives in the report. One that are like human behaviors and expectations have changed, by which I mean just like me as a person walking around in the world, I shop differently, I eat differently. I may live differently. COVID created a lot of changes like who we are as individuals and families, and we do not expect there to be a reversion in those behaviors. You know, if someone someone used to go to the bank branch to do their banking and like COVID kind of forced them to either force their bank to become more digital friendly or forced them to adopt more like digital banking practices because they didn't want to or weren't allowed to go to a bank. Like that person's not going to not going to go back. We like to buy online and return in store. That's not going to change. We want those That's like multi modalities. And then in terms of individual cities, you're right. Like the there is a makeup difference of both the kinds of workers and the companies and a certain metropolitan area and then just a physical like urban planning profile of those places. So the ones that are kind of more homogeneous from an asset class perspective like this is downtown, nobody otherwise lives here or plays here. This is downtown and cities with higher percentages, as you said, of like knowledge workers. The comment, those two things are the one two punch where you will get, you know, London and San Francisco that have these kinds of elements that will probably struggle more than even in New York as a major city, but is more dense. And even with our like multiple downtown cores, midtown and like World Trade Area and now Hudson Yards, there are still people who live there and we expect that to increase over time. We expect the percentage of sort of office or workplace to exhale a little bit into the suburbs. But it makes it quantifies the sort of structural difference for New York, which is the same knowledge worker population that like a San Francisco or London versus other cities, called out in the report like a Paris or Munich or Tokyo that have like, you know, smaller may have more density of office, but it's not as big. And there is a lower percentage of traditional knowledge working industries that like more mix of smaller companies. Right. So that just creates a different hypothetical future for these different typologies cities.

Jeff Frick
Yeah. And it's and even within like the maps that you had in the report of Manhattan, in San Francisco specifically, you know, even that kind of the micro segmentation within the city was very, very different. You know, if you were in that super dense, you know, kind of downtown office area had a very different profile than even just a little bit outside of those neighborhoods or, you know, even further out. And I think, you know, the other interesting fact that that came up in the report is, you know, when you've got a forced kind of reset, which which Lower Manhattan saw, you know, after 9/11 for a horrible, horrible reason that said, you know, there was an opportunity to kind of rethink that area from a development point of view. And I wonder and I see kind of with all stadiums, when they blow up an old stadium, like, wow, I didn't think it stadium can ever get old enough to blow up. But they do and you're seeing in kind of this modern new stadium it's it's much more of a of a heterogeneous area You know we have here in San Francisco Oracle Park built in 2000 cutting edge baseball park when it came out. Now we had Chase Center go up about a year or so ago and Chase is a complete it's it's a real estate development project that happens to have a basketball court in the middle. It's got restaurants, it's got entertaining, it's got parks, it's got office. So, you know, is this really an opportunity and will will this force things in like kind of second tier or third tier buildings? Because you said, you know, kind of this flight to quality, will this maybe be the impetus to see some significant, you know, refactoring of these places that just aren't going to be able to adapt breezily?

Phil Kirschner
Yes, I think that's absolutely true. So there is a need not only flight to quality, but a flight to like class triple A capital Q quality, right. Where the post-COVID, especially in the office asset class we think is going to force a bifurcation even within the top 1% of buildings. What does it really mean to be a trophy building now in terms of location and experience and diversity of asset mix, topologies, things that you find in the building, and yet you're spot on with the stadium. I was living in Brooklyn at the time when the now Barclays Center was being built. And I'm a born and raised New York City native, so my assumptions of stadiums are like, you know, Giant Stadium, which is actually a New Jersey, Yankee Stadium, Now Citi Field intead of Shea Stadium, when I was growing up, I like Madison Square Garden even as something that feels like old but like when this stadium was new, it's like a neighborhood. It's different. It just so happens to have a stadium as opposed to like being a stadium in one place. It's radically different. So yeah, I think that direction for not just, not just mixed use like asset type A next to asset type B, but more like almost like horizontal mixed use, like asset to asset. Every, every individual building, we sort of expect to be able to do multiple things either intentionally or planning, as we call in the report, for more like neutral use. We may not know what the demand is in the future, but we hope that both sort of municipal code and construction techniques and innovation allow us to build a space that like yeah great office now, residential later, factory later, don't really care. The skeleton of the thing is such that it can evolve over time and that’s going to take a lot of coordination from a lot of partners to make real but in particular in cities like New York and this isn't directly addressed in in this report but in other thought leadership and reports of ours around like sustainability, New York, already a city like New York, has this pressure on oversupply of traditional office stock. But we also have one of the more progressive energy efficiency laws going into effect, starting next year in Local Law 97, where buildings will start to get charged for inability to meet certain sustainability goals. So it just adds even another element to like if you are a single or small owner that's got a building that's not going to make the grade on just overall experience or the neighborhood, and the city is going to start to penalize you for not having, you know, be up to spec from an efficiency position, like where's that money going to get passed on to and hopefully will push the supply and demand reckoning that we can do more of the downtown New York kind of projects without necessarily the incentives that were required at the time for an event, as you said, that nobody wanted to happen.

Jeff Frick
Right. Right. It's interesting what the final incentives are that get the needle to move. But, you know, I want to stay on the experience piece and talk about changes within the real estate world and facilities world. You know, Tracy Hawkins on and she was talking about she was on at Twitter and they got moved from, you know, kind of working for the CFO to working for HR. And you know, you mentioned Kate Lister. She talks often of kind of this this holy try triangle of HR and facilities and IT. Right. Because then IT is the one that has to to put all this stuff in and really thinking much more about the employee experience and what role does facilities and real estate play in that versus it just a cost center. And we're working on simple things like efficiency. That's really changed in a big way in kind of the role of the real estate professional and what they offer now to the company and the organization to help people be more productive.

Phil Kirschner
Yeah, you're right. It was always the Holy Trinity or the three legged stool or some metaphor to say if you want to deliver a positive, let’s simplify, say built environment, workplace experience, take the digital out, You need IT, HR and Real Estate to play nice together. And it was fine even for very progressive programs like when I've been involved with both as a practitioner and consultant to have everyone stack hands on the real estate committee didn't really matter as much who was reporting to who. It would be helpful if, like one of the parties, particularly senior, you needed sponsorship, but it was fine to have it be by committee because it was mostly oriented around the built environment and less the the holistic employee experience or employee value proposition. Those two things are inextricably linked now because of COVID. So there is absolutely a need we kind of recently to shift the real estate mindset from like bricks and mortar to people and places. And I don't think it's good enough to have the the committee anymore. We believe one of the hallmark kind of best practices for delivering a best in class overall workplace experience inclusive of when we are not in the company's built environment, is having not only elevating the real estate function, but having a dedicated executive who is responsible for what it feels like to work here. And we recently did a survey of 50 senior workplace real estate people leaders, asking them for their current of position for their company. Around 12 best practices that we put together based on our most transformative clients, the ones who had the most the highest level of portfolio change while sustaining increasing levels of employee experience or engagement or organizational health, depending on which rubric they were using. But we had asserted that there should be a best practice around that and actually multiple of the few the people were going to participate. The survey who are helping us evaluate the survey itself before we sent it, added the point they like you need to dedicate to an executive accountable for workplace experience who has strong budget influence. That person has to exist also. That's really important. But by having that strong budget influence qualification to the question, I think the average responses went down very quickly. Three seasons like had a role like that. The solely distributed or remote companies would say that's Head of Remote, Head of Virtual First. We're seeing, as you said, some real estate groups as they are migrating into HR now to finance. The CHRO or Chief People Officer is being rebranded into head of people and places or something similar like that. Right. Those roles are so important because you need you need someone who's who is credible enough to say to, you know, the local employee population in Chicago or wherever. Like I if you are willing to like, cut this space or we believe there's an opportunity to cut the space, we we can also assure you that the net experience is going to go up. We almost like like a fortress budget in the same moment this and cut your space in half. But here's this totally immutable amount of money that you can now use for the holistic employee experience. If that's like events in the office or giving people co-working passes where they are or buying that like iPhone application that everybody's always wanted and you've never been able to give them. We don't know what that thing is, but the direction of like less space but higher experience is where we're going. And real estate groups and the employees subject to their policies have just been conditioned forever that this is always a take, always less, it's always more efficient, always smaller. And we need an upswing now with some assurance that we we will deliver you a better holistic experience us in real estate and IT and HR like working together better than ever, even as we possibly rationalize the portfolio.

Jeff Frick:
Right. I love that. So let's talk about data that because you know, there's the data, the obvious follow up is, you know, how do you measure improvement on employee experience? But even just generally in the in the industry, you know, I was talking to Julie Whalen and she says you does still all the Kastle Systems badge-in data. That's still like the biggest dataset that everybody's using. And you talk to to, to Ryan at MillerKnoll is like, you know, there's all kinds of sensors that we can use to tell if people are activating in spaces and using spaces. And now that there's not this kind of 1 to 1 mapping of a person to a chair and to know whether people are effectively using spaces inefficiently, efficiently using spaces in, are they creating great output from the spaces? I mean, the the data challenge is very, very different. And it sounds like the data kind of respect for data tracking data. I don't know what the right the right adjective is has kind of been lagging. So what's kind of your take on on how to use data better to accomplish some of these objectives?

Phil Kirschner
Yeah. So the the best practice, again, this goes a little bit back to the workplace experience survey that I mentioned. In addition to the report, there isn't going to be a fixed answer to what is now a very flexible, retail oriented problem about how we work. Even if I have the same job for the next ten years, my mood may change, my project may change, my coworkers may change, my family needs may change my patterns or preferences are going to change. Therefore, we believe you need to have a workplace program in a physical real estate portfolio that is responsive to change that you could be there with the business or with the employee. Say, I can move about as fast as you can. So like, come at me with your newest and greatest problems and let's do that as opposed to the once a decade hard decisions we have to make for what seem like very static answers. So one of the best practices back in that survey was like, does our workplace experience? Is it informed by a wide range of data sets? And that was one of those questions Where do we start to see cracks in the certainty, even from an occupier set? That was pretty progressive. We went to people who were known to us, which means they are not. This is not their first rodeo firm for real estate. These are people with a real strategies and programs. And even they said, you know, we can connect our badge data to like our head count data, but it's not so real time. And to successfully manage, just like future workplace operating system, it needs to have a couple different things in it. So and nobody has this. Anyone says they do, they’re lying. You need to know kind of like the employees traits, who they are and where they work, something about their work environment, who they work for, their perceptions, something about how they feel about things getting done or things that are broken. Their output. Everyone says productivity, but like it's very difficult to do that in organizational level, especially with knowledge work, but at at least like a group or departmental level, some measure of output as an individual and as a team, you need external conditions. A lot of people now a smarter building say, Oh yeah, it's going to rain tomorrow. We will have half as many people hit it. Like, that's a fact. We know that happens every time it rains. Client perceptions. That's really important for us. Something we study with our science of teams because you know, your average McKinsey consultant, you know, runs a couple of weeks at a clip with a group that was put together for that project. Then like poof, new project, new team, new client context. So we get to test how different configurations of teams and working models for teams not only affect what the teams think, but what our clients think because we ask them, How did we do on this work? So it's like the business output there and then ultimately the space. It's two spatial components are how is the space configured? Like what kinds of spaces are there, how big are they? Are they next to and then how are they being used? So you have all of those things together in a world now where it's not just that we want them in our live dashboards, we want this sort of GenAI accessible versions of this information. I should be able to ask, like when prompted in a meeting on a podcast like Go Hey Siri or Hey Google or whatever devices listening to me and go like, what is the. See what covers a couple of those variables? What's the like? And recent average utilization of the meeting rooms in the sites that were like renovated the last five years, not just for all staff but for our like highest performing female senior leaders? I just think a lot, which is like, oh gosh, what, what, what we have to be true in order for you to be able to answer that question. And in theory, it's not so complicated like that. That requires like planned data, which B Workplace management system requires booking data or use data within rooms requires some connection to your HR data, but not only to find out that, like, so-and-so is is a woman, that there like a certain title that there may be like performance ratings are so high is like nuance. And even in theory, if it's easy, you have many organizational groups whose current prevailing attitude is no

Jeff Frick:
Right right.

Phil Kirschner
No, absolutely not. We could never do that kind of thing, much less in a real time rolling basis so that you could either ask the system that question or one day we want the system to tell us not just what is going on, but like when did something change and what interventions hopefully made that change happen. Hey, did you know?

Jeff Frick
Right, right.

Phil Kirschner
You did. Taco Tuesday in Boston last week and all the interns showed up. So go like, oh, gosh, What, what what was that about that event? It did. Let's try Cupcake Wednesday. I don't know, cupcake. They didn't work up to Taco Tuesday, like.

Jeff Frick
Right, Right.

Phil Kirschner
That's that's how we make a responsive program, which really shouldn't feel that different to anyone who does retail oriented customer analytics.

Jeff Frick
How how much of that technology exist not obviously stitched together, but bits and pieces from your kind of technology. See already. And it's really more of a attitudinal change. And of course you got to stitch it together and get access to the different data sets. But is that is that really a bridge that far? Technically? It doesn't. You know, technically it shouldn't be that far, right?

Phil Kirschner
And I don't think I don't think it is, especially because of the sophistication that's applied. As I said, a like customer retail context. If it's hindered by culture and one with like two other factors, I think one, most real estate groups, historic, are sort of woefully under-resourced. Technically, it wasn't your typical corporate risk group like reasonably small amount of headcount compared to other, you know, shared services are and functions very outsourced and probably not like front and center in your company's recruiting program for interns and associates, that kind of thing. They go to finance or I.T. or banking or whatever, You know, the real estate was always kind of in the middle. I certainly felt that being in a group like that and you, you know, you compete for the same resources, technology, resources as the other people in your company who make the same that your company makes. I used to work at bank. You would compete with the people like to do banking systems to get something new put in and then to forever and even still do now. It's gotten better in the last maybe five years, sort of a broader proptech movement, but systems were all closed. Everything that could be conceived as a real estate or construction or workplace system was built from the beginning and like smoke and mirrors or closed architecture either like they were it, they had no reason to be open or in the case of like location and brokerage sort of systems like deliberately were closed. So even if you had the technical wherewithal to smash it all together was really complicated because the systems weren't designed to talk to each other. Right, Right. But yeah, the whole the whole, like, smarter or more intelligent building movement, even in just the name of energy efficiency or sustainability, really started to expose that issue were like, if you want the lights to go off when the people aren't here, the building to shut down the like, you have to have all these systems talking to each other. There is no other option. All of you have to shape up. And the ones it will like started to win. Like we can be the best system just because we're open and secure and like integrate about with all of your other things.

Jeff Frick
Interesting. So think it's the sustainability pushes the catalyst that finally tips that tip that thing as well.

Phil Kirschner
I think it was the catalyst that started to to like normalize the conversation of open systems in and sort of the built environment and then for the more like earlier steps in the value chain for real estate, location analytics, like more and more people were figuring out like a lot of this is intuitive all from global data and like new entrants came in which maybe caught, you know, brokers or other similar place like off guard, like, oh wow, do you have a shockingly good information about this yet? We saw it in residential real estate first aggregators and new methods for like looking for pricing. It just was like carrying over. And then for the internal environment, like the workplace experience apps that STAIR like API accessible floorplans or like algorithmic space planning, you don't need a planner to say like you should reorient the groups like this. That's better. It's here today. It's just difficult to make a case to invest in. Those are tools for some real estate groups and they offer people who can like roll up their sleeves and say, Yeah, I will do that.

Jeff Frick
Yeah. Interesting. So almost shift gears a little bit and talk about flexibility. And one thing I noticed in the report is even in the spread of different kind of days in the office, anticipated days in the office by industry and by by geography, etc., it was always between three or four. And I was just talking to Julie Whalen from CBRE and we were talking about kind of the two and a half, you know, over under on two and a half since just five days in a week. But but I was caught by ears that everything fell kind of in between that 3 to 4 range. It didn't really fall below two and a half. And I guess everybody's given up on Fridays. I wonder if said, you know, when do you think about variability and flexibility? You know, how long will, you know, days of the week be the right measure versus, you know, it's it's we plan our days and hours, right? We don't plan our days and days and hours are a subset of that. And there's plenty of research to show that, you know, flexibility and in time is more important than flexibility in space. You know, if I can drop the kid off and then go to the office or whatever you did, I didn't see that as much in the report that I did. I miss it. Are people still not thinking that way?

Phil Kirschner
Oh, it's it's included, but it's a broader question. So versus like on flexibility, I think it's important. I hear from a lot of clients, like they want to enter the conversation talking about remote work and like not every one of my employees can work remotely to which I will say like, yes, but that doesn't mean they don't want to work flexibly. That is the primary finding in the research that sort of predates this one. For us, it's that American Opportunity Survey or what was originally called the great attrition going attraction research has become retention trends, research. Anything you see for McKinsey around sort of why people quit or what it's going to take to get them back, not focus on the built environment or any of that stuff which has been updated like every couple of months for the last three years. Like flexibility is the number one, doesn't matter who you are, and especially for companies struggling to find talent. Next to compensation is the very next thing that people are looking for, even for very industrial clients, for teams. Tell me someone who's struggling to get workers into a factory because forever it's always been like, you come and you work in eight or ten hour shifts. As soon as they start to say, we have a model that allows for like slightly more configurable four or six or eight hour shifts, people are like, Oh, you hundreds of applicants. It's not always like I have to work now. It's just like, as you said, I want to configure my day and my week a little bit differently because I see that that is possible now in lots of different arenas. And one company can do it. A one like retail company could do it. Then. Like I expect you can also do that, right? Right. So versus like demand for flexibility. Then when it comes to sort of the remote work, as you said, yes, we are hovering in sort of three and change days, worked in the office at the global level. So it like it goes down close to three and more like knowledge worker centric cities and cities with longer commutes like commute is the number one reason. And then one hurdle you got across. And in broadly speaking, Asia is more like group oriented cultures are places where it is harder to productively work in the home because like either they are smaller or there are more people in them due to generational transitions. It's like, you know, a half a day to a day click higher on average, but like nowhere near where we were before. And I think what that I really translate to, you know, pre-COVID, we were never all in the office five days a week. And I'm generally generalizing now for the sort of knowledge worker set. It wasn't five, it was four like top of the house. And if you asked most people, how much flexibility do you want? And you never told me, it was like, yeah, a day ish, maybe two sometimes. And all the coverage is really down and saying that answer to be like, Oh no, two, maybe three. So the battleground is that one extra day. Like I have no problem commuting or going in twice a week. The third day. I have to think it's meaningful to sort they have to want it right. There's a level of magnetism and you know, while there are differences between industries and companies sizes, as you see in the report, the differences are moderate like they are in quarter, day or half day increments. We're not talking about one month to one one fine, right?

Jeff Frick
Yeah, they're all compressed right in that. And that's what really kind of caught my attention. Yeah, very small differences. And it is interesting, you know, you go through in the executive summary all these different factors, but the number one, the number one factor, right, is long term population trends which which trump everything. And you know, especially in in Western countries where the birthrates going down and, you know, people are waiting longer to have kids. You know, this the war for talent is not going to get easier even with, you know, kind of the current round of of layoffs and hiccups that we're seeing. But let's go kind of back to the experience to make it. I want to go in and to your point, you know, there's some stuff I just can't do at home. I can't do email at home. I can do zoom calls at home. But, you know, you also got a great report about the big three things they like to talk about that you can't do at home. It's collaboration with your team. It's heavy duty socialization, and then it's heads down work for a lot of people, right? You need like library space. And we know in offices there's never been enough conference rooms ever in the history of offices. There's never enough conference rooms, but there's lots of empty desk. I mean, are you seeing a pretty active reconfiguration, you know, around some of these activity based working places? And to really start thinking about how do I make it a draw, how do I make it things I can't do at home? How do I think about, you know, it's a want, I want to go to the office versus I have to go to the office. And the other term I really like is some you know, on sites the new offsite because it's intentional. You have an agenda now, you have planned outcomes, you have different types of time plan together. And just it's just this whole idea of being intentional about the time that people are together versus just sticking them in a row in an open floor plan. Put your headphones on and glad you're here.

Phil Kirschner
Yes. So right, you're back to like pre-COVID. One of the big problems, as much as I said, be in most offices weren't that great. Most things. And unfortunately, that condition was exacerbated by the fact that most offices were trying to solve for all things at once. And that's just impossible, right? You can't have a place that is amazing for experience and collaboration and connection, but also lets people do heads down work, distraction. It was the number one problem forever, even for people in private offices, right? Because you're not immune to having someone knock on the door like that condition existed before. So COVID came along and companies like Miller No. Or the LIESMAN index would say like almost overnight, your average satisfaction for General support for general work went from like a 50 to 60% number to like 70 or 80% number for people living at home, because most of the work that most people do for most of the day is better in an environment that you control without other people tapping you on the shoulder. So you get this disparity of certain certain functions, individual phone conversations and like reading and focus work, which are like unequivocally better in a home environment or somewhere like a wave go workers. And the gap is so I think the office will never catch up. Then the opposite is true, right? You've got for like hosting an informal and learning like a B office is so and by the office I mean like deliberate workplaces are so much better than the home environment. The home will never catch up. The battleground is in the middle for a lot of that, like loose stuff. The more like planned meetings and like individual should work. But the problem, the way to get away from this solving for everything is the fact that almost none of our offices today or certainly part of it, have a clearly defined and authentic purpose. If you guys feel like, why do you have an office in New York? And it's like, well, we have 500 employees in New York. Of course we need an office in New York. But like, we're all really sensitive now, someone saying, I want you to come in any place. Go to do what. And unfortunately, the word that gets called out more than any other is to collaborate. And I have I've slide somewhere comparing recent headquarters announcements from a major global private equity firm, one of the major tech firms, and a fast food chain that's like nearly identical. It's scary how close they are and this isn't good enough. And when you think in one respect to the like functional balance of the office is good for some things, not for others. Companies that want to inspire presence need to. It's like the scales of justice, like you have to you have to keep adding things to the side. That's the office. And it can't just be words like collaborate. The best example we've seen for some of our client work and we wrote about this in an article about making real estate competitive advantage. Gosh, a year ago, the life sciences firm that has a renovated headquarters during COVID and they're kind of head of corporate services defines one of the major reasons for the headquarters existing is to either follow the molecule or to accelerate clinical speed. And in my big list of I do focused work and I collaborate and I learn in the house business all the normal stuff. If I'm a biomedical student who signed up to work for life sciences companies like aligns with my personal values and fulfillment and you plunk another coin in that side of the scale that says like accelerate clinical speed, there's no way in hell I could be sat in my home going, Can I really accelerate clinical speed here? Like better than I can be? Office answer is, of course not. If that office, then the burden is higher. The office is not only designed but like curated and debated specifically for that purpose. Like if I go that says if I go in, you know, the gravity of the of the like innovation, energy in a learning energy should be so strong. It's almost like pulling me away from my desk, like be like, oh gosh, there's a there's a lot to learn and this and that. Scientists and magic is happening such that that same person said the sort of comfort setting that like this is when the book is written for a company about like over the next decade, how we made the next ten life saving drugs or medical devices is I want there to be a chapter in that book about our headquarters, which is a radical departure from that. The preference of most people in the AEC industry, real estate industry to write coffee table books about the building like look at my big new tower. Right? It is located in the great place. It's sustainable, it's beautiful. It has a restaurant like they talk about the thing, not the outcomes and even the people in it.

Jeff Frick
Yes.

Phil Kirschner
Yeah. Even though it feels minimizing at first brush to say, Oh, we've gone from writing a book about the headquarters to writing a chapter in the book about the company that's about our headquarters. The burden of proof is so much higher to deserve that chapter. How can you look the CEO in the eyes say, I can prove that this place helped develop the next ten life saving drugs, but that to make that kind of thinking is so different and it's what's required. Because once you know what the purpose is, then you design the thing and you activate the thing and you advertise the thing around that and you say, if you're doing something that isn't in this little category, we would love to have you here. But understand we have like a triple plus quality around five cooler purposes doing your spreadsheet work like you're welcome here. But do not complain to me like you're not sat next to the person who exactly who you want. Like that's not why your cheer. You can do that work somewhere else. You're in your home. Or maybe I support you doing it in some kind of a third place.

Jeff FrickI love that. I mean, you're such a big asset, right? Why don't I put it to work in a positive way instead of just having it be this kind of boat anchor call center? I mean, nobody nobody wants to be a call center anymore. Nobody. It does want to be a call center. Nobody can afford to be a call center. Everybody wants to sit at the table. And how do I help the company be more productive, which in an office kind of environment is making the people more productive? You know, you had this other article that came out a while ago. Is your workplace ready for flexible work? And I thought it was really interesting. You had on the far left, you know, 84%. Was everybody making their proclamation of how much they wanted people to come in or out? But all the way to the right at the lower end of the scale was they had, you know, written processes and clear documentation about the way they're going to work. And and it's just like, oh my gosh, talking about getting the the cart before the horse have been the story that you just told is such a polar opposite of that to really get the objectives out front and then work backwards into the space.

Phil Kirschner
And we could substantiate that actually. So I've been really excited about this. We're increasingly trying to interrogate the role that not just the built environment, but choices that we have about flexibility and the conditions that make that possible. Influence what McKinsey calls organizational health. We have a big banner asset called the Organizational Health Index survey. It's been running for over 20 years now. It was written by all the people years ago who wrote all the books on change management that I used to cite as an occupier and as a consultant in every job before this. It is not a workplace survey, not in the least in sense of like, do you like the thing you work in? And it's also not and engagement survey in the sense of like, do you like your manager? Do you trust the leaders? You know, are you likely to stay? It's not it's not at that sort of departmental group level. It is a measure of frequency of organizational practice. The the the work that you do with the result is truly like how the company is wired. So I'm excited that we're starting to explore the role that the flexibility has on that because higher organizational health we can actually afford correlate with higher business performance companies that score highest on the I have a three times higher likelihood of like positive returns shareholders. So it's a big deal. We've just started doing this but in early studies trying to see if employees who believe that they have flexibility say I have flexibility in where or when I work are one and a half times more likely to agree that they believe their work culture is positive. The culture of the company has a lot to do with like open, transparent, trusting. Again, it's not Do I like it here? It's measures of like organizational culture. So one half times more likely, which is great. People who agree that when they are asked to be on site or when they have to be on site, that that site and I say site, not office because we surveyed, we include people like mining and industrial context. This is not a workplace. So work. If you agree with the reasons why you're asked to be on site or you believe that that site you're going to enables you to do your work productively and well. It goes from like one and a half times more likely to more like two and a quarter two and a half over two times more likely to agree that your work culture is positive. But the real icing on the cake is that employees who say that the teams that they work on have very clearly established sort of norms for not just where you went, but how the work is done. It gets exactly to that question from the from our workplace survey that you point out kind of clearly documented ways of working. It's over three. It's almost three and a half times more likely to agree that your work culture is positive. So I say now it's not that managers should be responsible for letting their employees work flexibly, it's IT Managers in the organization at large have to be responsible for creating the conditions, for doing the work, about the work for rewiring the organization so that you can work in a more remote virtual, digital distributed and asynchronous fashion. Even if you're sat right next to the person that you're doing work with, because then that means that time you're together can be better and more meaningful and more authentic and more like connected and not the day to day nonsense that we used to say, You have to be in the office for. And COVID created two real problems for organizations they're trying to modernize and digitize. And what does that talent like? The best talent wants flexibility, period. If you take that away from them, they will fight you on it. So you don't want to be in that condition because you need better talent than ever. But to companies like McKinsey, you're telling you you got to go fast, even faster. Jenny I like new tools are here. You have to move, start and a barrier to speed is coordination, problems and hybrid. Not knowing who is where and when is inherently a coordination problem. So if you can't break the work down into little chunks and have more of it happening continuously and asynchronously, instead of waiting for the meeting and then the committee and then the approval to do every little thing like you will stop, you have to do this. It is good. Not only good for the company, allowing you to move its speed and be more agile, but it lets your employees feel more positively about your work culture and gives them the flexibility that lets you ultimately reduce your space consumption and save a whole bunch of money and be like really good for the planet.

Jeff Frick
Or for Darren smiling from wherever you might happen to be

Phil Kirschner
Yeah, we talked about that.

Jeff Frick
Yeah. My one of my favorite science writers is asynchronous work and communication, right? Tapping on the shoulders. You know, all those things are good for all companies. You know, all this, you know, you're your line. Digital first. You know those benefit everybody to to get good at those types of behaviors to free up the wading in the tapping in the in as Kate Lister would say, nine floors, nine time zones or nine countries. You know, most people haven't worked even in close proximity to their immediate team for a long time. Anyway. We're globally distributed world. If if you're in the same building, you're often on on different floors.

Phil Kirschner
So critical the companies that like, have it right are the ones that I think are the hit, the virtual first, but not least less model for real estate. The Atlassian the Dropbox is even like Andreessen Horowitz. I could come out early. I would say like, Yeah, yeah, we're remote first, but like, we will, we will have places so that we can quickly, rapidly and with incredible experience, show up in the same place at the same time in places where we meet. But like, no, we don't have to be there for a reason. So these are companies that give employees extreme choice, but do choose selectively to continue having not even offices. Almost none of those offices. No, those companies call them offices. They all have some other brand. It's a thing with a purpose. So we go there and if you want to go there all the time because you live in New York and you got six roommates and two dogs, right? You're welcome to go there. That's on you. And that's a real sign of like trust and insurance. And those kinds of companies also tend to think about nuanced but like importantly, different kinds of metrics than the normal real estate groups. And like cost per square foot, where they're thinking more in terms of profiling people and cost per visit and something much, much more transactional and much more interesting, by my opinion. Yeah, I can't I can't think of Steve Todd. You know, he had a great a great line where he talked about, you know, if people what he did, he was smart. When people want to go flex space, he said, I'll let you go, but you got to tell me where you went and why he went there. And, you know, it figured out really quickly. If I got to heads down work, I want someplace very close that I can just go. If I want to do some team work, I want to be on a on a transportation hub so we can all get in together and do our thing and then go. And if I want a big client or, you know, a big showcase, that's when I want the beautiful downtown, you know, high ceilings, showcase space. So, you know, to your point, average average doesn't work, Average never has worked. And, you know, kind of micro segmentation around activities is going to give a much higher, you know, kind of return on that investment because people are going to be able to do what they want to do well in those spaces that are designed to support that activity.

Phil Kirschner
Yeah, I love those examples. In your culture on top that encourages people to share because you want, you know, the head of marketing to say, Hey, you know, we just did our, you know, quarterly brainstorming things like in this place, maybe it's an office or maybe it's a third place, but like we did it there and this is sort of how we sequenced it. We had like breakfast and then we did a great workshop that was maybe facilitated by a third party like neutral facilitator. Then we did a lunch and then we all went to an escape room like we this is like our little recipe of places and things that we did. And if they go like, this is what we did in my team came out of it like, want to just like brush the next month. Been like, yeah, we were like charged and they share that in the company Slack or teams that someone in some other group you know like accounting is like who can I like can I have what she's having? And not to have that choice, be hard if they say I want that and then some combination of workplace experience, team real estate, someone goes, Oh, I can like curate exactly what just happened for you. I'll put you in that place. I will order the same event, I'll get the same facilitator will do the whole thing. You just show up easy breezy. They're like, Yeah, a million times like. And then you mention the output and like that. It's hard, but that's like how retail works. I went to this a TripAdvisor, I went to this hotel. It was amazing. We go, great, I want that great. Like, right, I need to work version of that's great.

Jeff Frick
All right.

Phil Kirschner
So let me get.

Jeff Frick
To the end of our time. At this basis of hyper places, what's going to happen in 2013 is going to be less space.

Phil Kirschner
But three, 23, 24, 30, 20, 30.

Jeff Frick
2013, we're going backwards. It's like like back to the future. But give you give you the final word. It's going to be less space than people have traditionally had by traditional measures. But there's a real opportunity, and I think you end on a positive note to rethink it and use this as a catalyst to have better spaces for people to be more productive. That's kind of your final takeaway because, you know, if you're just looking at the vacancy rate, it's not it's not so positive, but, you know, it is a real opportunity to rethink. And you know, you've seen it before.

Phil Kirschner
Where, yes, this is like this is about placemaking. And therefore we give advice at like a concentric circle of levels. Right. For particular with office, like, you know, at the floor level, like we need hospitality, we need experience, we need digital like retail oriented use, like multi channel flexible, like at the floor level, right? And then you go out to the building aiming at the developers more mixed use like neutral use hybrid buildings that can be different things. Conversion where we have mismatches. So from like office to residential or to industrial or to urban farming or whatever it has to be to correct that of balance and really sort of stress testing the portfolios that we have just against, as you said, these like macroeconomic and population patterns to know what's going to work. Then you get to like the streetscape and revitalizing neighborhoods. We asked you, you're in advance of this. A 50 minute city is like that is 100% true. We need greater diversity of things and services and experiences within like walking or e-bike or whatever it is, distance. You know, the planet needs us to do that. So more green space thinking ahead to, you know, the impact of like autonomous vehicles and all that. Then you go out to like the neighborhood level, mixed use neighborhoods, new zoning, different ways of like financing, interacting with the city truly sort of experiences you there. So what are some examples of this around the world that people planning like whole communities and the last one is the sort of the public municipal aspect, like public service around accessibility, different like sources of funding because of like tax based shifts. Right? Do cities like New York need people to want to live here and to be able to live here affordably, even if the person they're doing most their work for isn't here? And the challenges that all of that has to happen, like together, which it's terribly complicated, but I try to be the optimist. I'm very excited about that future in a city like New York or otherwise.

Jeff Frick
Yeah, well, I love it, you know. Jeannette City, can you talk about briefly you work for Bloomberg and help convert New York into a bicycle city and she converted all those kind of random spots in the middle of of intersections into Parklets. You know, we know in in Holland, you know, there wasn't always a bike city, you know, So change can happen. You know, it can happen. It takes a little effort, but it's not impossible.

Phil Kirschner
It is not impossible. Yes. And now I see, like every time I cross a you know, a streetscape in New York that is like become car free, my brain is just like, oh, but was like, what? What if it was just like, one block, one block more that way? One by like we keep doing it so close, like, you know, fingers crossed. So I said, we have to, but we'll continue to study as much as we can and hopefully our perspective again, from the institute side, which is not like informed by our current work and also we are not a real estate services provider. We don't do a picture architecture facilities, which are the things we serve companies in the business of developing and investing and operating and even disrupting real estate. But like we don't do core real estate services. So hopefully this report what some of the core messages you said is similar, like it's accretive to the industry at large because we are independent from some elements of this where there's always like a Oh well, you know, of course the designer wants it to be bigger. Of course the broker, you know. So I hope this helps for everybody in their own agendas inside the real estate company, inside an occupier. That's what we want to be like moving towards this positive direction.

Jeff Frick
Yeah, well, it's good. What is good when a lot of the original research kind of lightens up, you know? So Brian Elliott in feature form, he's got his research. Ryan and the work they do at M.A., they've got their research with Julie's research. So it's, it's good. I mean, there's a lot of very easy to identify patterns that people can embrace to try to get out of this little bit.

Phil Kirschner
Yeah, we got like box in the executives of it. You go, Oh, but, but this you say oh well McKinsey said that you know CBRE said this like force them to then have to look for and they're like let's let let's evolve and not try to go back the pandemic's a bit of a portal. We got to get through it and how many reports it takes from how many people to like get that momentum. We are just thrilled to be part of that trajectory.

Jeff Frick
All right. So empty spaces of hybrid places check it out online. Feel it was great to finally meet you in person or virtual in person. I guess this counts.

Phil Kirschner
And next time.

Jeff Frick
Really? Thanks. Really. Thanks for the time. I had two kids up in Brooklyn, so next time I'm out that direction, I'll give you a ring.

Phil Kirschner
Amazing. Amazing. Thank you, Jeff.

Jeff Frick
All right. Thank you. He's Phil, I'm Jeff. You're watching Work 20XX. Thanks for watching. Thanks us. And on the podcast, we'll catch you next time. Take care.

Cold Close:
And oh, all right. Awesome.
How many monitors you got in front of you right now?
To many to count one, two, three, four, five.