(183) Proptech

On this week’s WB-40 we talk with Antony Slumbers about the commercial property market and the way that the pandemic might change who provides office space in the future.


The Automatically Generated Transcript…

Intro

Chris: So, hello and welcome to another episode of WB 40. We are here today with as Matt said in the intro, Anthony Slumbers. And we’re going to be talking about property trends in how people are going to work. It’s been, it’s been a bit of a theme for us recently and about prop tech as well and what that means and how that’s going to change in the next few years.

So, Matt, how has this week treated you?

Matt: Well, I had some time off, which is very exciting to spend more time with my children, just what I needed at the moment. It was half term, so that was it rained basically for most of it. So the, you know, the lovely ideas that I had in my head about going out on long cycle rides and.

Painful walks in bushy path from whatever amounted to now. So we just sat in and the kids just nacked about bumps, play computer games all the time. That is being a 21st century parents where I was, I can tell it’s about how long do you go before you go? No. All right. Then it’s usually about 25 minutes.

Chris: If it wasn’t right. It would have been before that was TV, right? Isn’t it’s the same thing.

Matt: Yeah, exactly. But other than that, I had a a very nice time of the weekend where I caught up with a mate of mine. I went for a long walk down by the Thames in a socially distanced, not stopping for RefreshMints kind of permitted way.

And I’ve taken actually. Because having actually got my fat ass out of my chair for the first time in weeks, having had a little break from work, I’ve decided to start experimenting with standing up whilst doing meetings. So I’ve written myself up with my iPad on a microphone stand so that I can stand up for meetings and I have done it for one day.

I feel invigorated. And much refreshed already, but by day two, we’ll be seeing whether I can manage to keep it going or not. I I’d forgotten for my days of training, standing up all day. It’s actually bloody hard work, even if you’re not actually walking anyway. So it feels like I’m doing myself some good.

And yeah, you know the news today that the, the lockdown time today, well, I refuse to call it a roadmap is being widely. Publicized and, and seeing people talking about that. And some people seeing it seems to be terribly slow, Mizon happening more quickly. And other people saying it seems to be how many terribly fast and why isn’t it happening more slowly.

So yeah, nine days left before the kids go back to school. How’s your week

Antony: been?

Chris: Well, likewise it’s been after and therefore I’ve been at home with the children, although I only had one day off. In the week. And I there was a reason for that. I went somewhere. I had to something to do. I start my car for service.

So that was exciting obviously

Matt: a day out

Chris: as is. Yeah, that’s right. Yeah. But it’s it’s but of course, with all the messing about and, and coronavirus and things like that, it was, it was a bit more of a hustle it needed to be. So yeah, I mean, that was my exciting week and Oh, it’s been, it’s been it’s been fun, right?

The kids are, as you say Not really moved out the house because it was whether it’s been filthy. Although today I had two, this one came out, which I was really grateful for because was, as I have detailed in some, in some depth on a, on a signal group, my boy that did fail this morning, moved me to go into the garage this morning and find water all over the place and the whole thing in a sorry mess.

So now I’ve got a few days without heat or water, so hot water. So that’s I’m very glad that it’s going to be 10, 11. 12 degrees for the next few days. If it happened two weeks ago, I’d have been an extremely grumpy man trying to keep warm in the, in, in the Sub-Zero temperatures. But but yeah, and I did an event in Austria, so that was exciting.

Of course I didn’t move. But that was, it was fun on the list. Nice to meet you see some different people and yeah. And that’s been pretty much it. For me. So Anthony, what’s the week held for you? What has your week been? I think it’s

Antony: all been all been pretty similar, actually love laundry, been hiding away in my house or in my office at the end of the garden, promoting the weather that we have in February.

Same as same as every year. Main, main moments where it’s and it’s rainy and it’s. Gray and it’s depressing behaving like a spoiled childhood. So not, not, not, not going anywhere. Well, I did do though, was I actually bought a travel Haldol. I bought a 24 hour away. We can sort of weekend away back. I was like, Oh, this is a.

His email came, came through and they had this lovely week. We, we can back out, it was 50% off and I just looked at it and thought, well, I can’t actually go anywhere, but I’m going to bloody buy it anyway. And I’m just going to leave it out. So as soon as it can go, it’s going to get filled up. I’m going to be built the off, but, but in the, in the, in the meantime, in the meantime, actually I see the last five weeks I’ve been running, I run an online.

I’m online real estate course. And we had a cohort started in January, so that’s been running for five weeks. So it’s actually been rather a lot of fun. So it’s all online. But on Thursdays we have a two hour big group zoom session. And there’s people from everywhere from New Zealand to San Francisco to bring us ours.

So it’s actually actually quite, quite funny now in a weird way, as long as you forget the externalities and just try and concentrate on. Something, something else.

Matt: Was that something you did before the pandemic?

Antony: Actually, I see it. I’ve done it with a friend of mine. He lives in lives in New York. And we started working on it before Christmas.

So we started working out before Christmas 2019. And it just happens. So we were working, working on it. So Jen March and funnily enough, it was ready to go. The day we went into lockdown, which was extraordinary, extraordinary, same, just really lucky. And then we didn’t do anything for two months because remember back in March, every March and April, no one knew what the hell was going on.

But we’d probably be launching in. In may. So it was actually, I don’t know,

it was hot half clever, clever thinking and half really lucky to decide to do an online course given, given the timing. So it’s it’s well, it’s worked really, really well.

Matt: That’s interesting. It’s going to be interesting to see how The flexibility and the ability to be able to reach people and the ability to be able to fit it in around other things more easily.

It’s going to what it’s going to do to more traditional. Learning, which was, I mean, a lots of learning and development work had shifted online anyway, although lots of it was crap, but actually now with the ability to better bring diverse groups of people together from across the world, actually, there’s a huge bunch of opportunities for that for making a much better than more traditional delivery models.

Antony: Well, I think, I think absolutely. I mean, what’s been so, so interesting about this is that we didn’t know who was going to go to sign up, sign up for it. But as it happens, I think we’ve had 27 different countries. And North America, South America, Africa, Asia, or Australasia it has been, it has been fascinating.

But I’m a huge, I’m a huge believer that business or. Get very aggrieved with this whole, you know, you can only innovate if you’re face-to-face and then what is that? We will also call a moments or, you know, or nothing ever happens. And I just think it’s complete completely nuts and nonsense. And this has given us an opportunity to actually talk to talk to people in a way we’ve never, never done before I talked to more people the last year.

Then I’ve I’ve ever met. I mean, I’ve always been a huge Twitter user for years, and I find Twitter the most amazing networking tool. There’s a most extraordinary networking tool. I mean, my partner is drawing in New York. We met on Twitter, I don’t know, five years ago or something. And we didn’t meet in real life until three years ago.

And I think we’ve only met. Three or four times, but where the hell it sort of can start a cost cost together. You know, you can, you can do, you can do these things. And I think there’s a, I think there’s a mindset change, which is the upside of the pandemic that there will still this idea that. You know, the way things work was the way things worked.

And they worked like that because that’s the way things worked. And that was the best way to do it. But we have so many habits have been broken because this has gone on for so long. But I think the, the, the change that is coming is actually much more significant than people think it is because, you know, I think if you know that little story about the, what’s the difference between a rubber band and they and the safety pin that, you know, if you pull a rubber band and you let it go, it just says mind straight back to, as it was before.

But if you get a safety, a safety pin and you pull one of those one of the bits of metal up and you let go, it mowing, it, bounces back. But he doesn’t go back to the way where it was before. And I think, I can’t see how certainly amongst the smarter companies there is any way on earth. They are not all of them reconfirm me thinking how they work, where they work, who they work with.

Howard. And all of this stuff, what tools they use and everything, because you see that there are so many upsides to being distributed, but it only, it’s only going to work for people who we can figure out how their businesses work. You know, I think there’s a huge, a huge problem coming with companies that are blindly going, Oh, well, let’s go hybrid where have some people working in the office and some people working at home and it’s just going to be a disaster.

You know, if you have, if you have some people in the office all the time, and some people are home, that’s an absolute recipe for disaster. The whole process of moving. To back into the office is going to be a big jump. It’s it’s different now because everybody is out of the office. We’re actually all working fully remote.

So if I want to get in touch with them, anyone, anyone, it has to be virtually, no one has an option of going in and Oh, I can schmooze up with the boss today. I can’t, I have to do it like that. So at the moment we’re working in a completely different way. So when we go back, essentially, we need to try and keep, keep that sort of thinking and then enhance that thinking rather than, rather than drop back into, or some of us be in the office and some of us won’t, but the ways of working the ways of working will change.

I think, I think a lot, because simply what’s the point. I mean, I mean, so much of this obviously depends on what type of company you are, what job role you have and where you live. These are where they all offer offices. But funny enough, I was talking to a friend in Stockholm this morning and he was saying, well, he said about half an hour or something from, from the office.

So, and he still doesn’t think he’s going to go and he’s not going to go about five, five days a week, but it’s still only a half an hour. So he’ll go in and out now I’m only 35 miles South of London in Guilford, and it would still take me 90 minutes to get into the city London. So it’s three hours, three hours a day.

So I never did. I I’ve worked basically either had an office at home for 20 odd years, but I’m, but I’ve gone into London generally try twice a week. Because I can do everything I need to do in two days and meet everyone and do well, to be honest, I think the way I I’ve done it for ages, this is the way most people are going to do it.

Similar situations of, you know, nine, 19 minute plus community. It felt like, you know, if I live 15 minutes from the Apple, Apple headquarters, I think go in the office five days a week, but I don’t. So. So, yeah, I th I th I think it’s really interesting. And in a press, you just mentioned that it’s lots of decisions are kind of, had to have to be made, and it is sort of make your mind up time now, because we now know probably about from September onwards offices are going to be okay to go back into.

So you’ve got all the people with real estate are now in a position to go. Hmm. Right. What are we going to do last, last year, people were just mulling around ideas because you didn’t know when you were going to look at it back now, is it that there’s a, there’s a deadline at some stage we’re going to convince, so what should we be doing?

And to be honest, I think, I think there’s also, it’s a problem for companies. Cause they don’t know. And they really starting to, the wheels are starting to spin now.

Matt: Well, let’s, let’s hold that thought because that’s what we’re going to explore in more depth in the rest of the show. So let’s get on with it.

Main Interview

Chris: So we’re going to goodbye. It’s those things that we’ve just been mentioning around how people are going to work, we’re gonna talk about, about prop tech and what part that has to play in it, because it’s one of those rather PR terms for a whole bunch of things that some things are very, very dedicated to property.

And some things are a little bit just a bundle of. Related services and Anthony, your background is, I mean, you’ve been in this market for a long time. Now this is something you talk on and you, you, you you’ve, you’ve got a long history and so may, maybe you can help us to define PropTech and what it, you know, what it encompasses.

Antony: Well, I had, I probably have 15 years doing PropTech before the word wordings actually existed.  Essentially, I mean, I started, I started in 1990, 95. I actually started with nets, the Netscape browser, not 0.9, four Netscape browser. So, but I’ve always, I’ve always been the stuff I do has always been for commercial real estate, mainly the, the office market in one way or another, but the sanctuary on the top takes really been a thing for.

Seven seven, eight years, something like that, but it’s really, it’s really developed as a marketing handle. So talk about any technology that was related to the built environment in the same way as FinTech is any technology that’s related to money in, in, in the widest sense. So it obviously encompasses all the different asset classes.

And it encompasses everything from residential estate agent software to commercial agent software, to investment agent software to how do you run a building? How do you design a building? How do you construct a building, how you operate a building and all that sort of thing. It’s I think it’s a term that is there this past itself sell by date.

I actually wrote a blog post, I think, in. December, 2017 for new year’s resolutions for 2018. And my number one was to kill the term PropTech by the end of the year. Because it’s limiting in some ways it’s learning it’s limited. It has served a really good purpose for the last, for the last number of years.

So it’s folks to focus the mind on technology relating to whatever you do within, within the built environment, but the trouble is it then becomes. It then becomes limiting because people talk about, or what do you do? Oh, well I’m in real estate. No, no, I’m in prop tech, but really I was using the argument about Amazon, Amazon doesn’t have an it department as such because it is diffused through the whole.

The whole business. It’s part of it. It’s part of what you do. It’s like the companies who have innovation departments, so well, you know, everyone else can sit on their ass because we’ve got an innovation department there. They do the interesting, interesting stuff as opposed to being an innovative, innovative company.

So it’s sorta it’s so it served its purpose. But it’s, it’s, it’s, it’s a. It’s time, it’s time to move on and it’s actually time to move on in the sense that in in our every cloud has a silver lining way. COVID is there absolute making of the PropTech industry is absolutely the making of the PropTech industry for, for two absolutely fundamental reasons.

The first is that we’ve known for ages for years, for decades. The importance of air quality and the impacts on air quality on a, on a cognitive function and B how you feel, you know, your health and wellness, but it’s never been no one’s really ever paid that much attention. It hasn’t been a, well, how healthy is your building in a, in a lease?

I mean, yes, there’s been all the, like the world standard and Fitwell and, and all that, but that’s sort of. Relatively neat as an industry. No, one’s really cared that much, but now we have a situation where we’ve had a pandemic and we absolutely know the saying, staying in indoors in the space with lots of people in bad ventilation can kill you.

Now that’s a pretty good lever. Start to stop pushing technologies that improve the, the environment, environmental conditions. So anything to do with the indoor air quality and the environmental conditions within the building is now a really big thing, because if you’re going to go back to your office, whenever it is, if you don’t actually ask the question, is this office safe?

Then you’re, you’re, you’re making it. You’re making a mistake. Because we know that we know buildings can be, can be ready. It can be really toxic. So fr my landlord’s pond, there’s a, there’s a fucking a feature at the office, but the bug is, we now have spend money to make our buildings safer. So we have to invest in new technologies, have to upgrade HVAC systems and all this sorts of stuff.

But the feature of it is that it actually improves your building. It makes it, it makes your building a better building and a better place and a better place to be. So there’s that science side of things. And the second big, big driver around pop tech is that it’s demonstrated globally that this remote working thing well, actually works.

Remote working works, you know, the, the whole, the world has been functioning. Most companies have been functioning, but no one in the office and funnily enough, there’s an awful lot of companies that have been doing really, really well. So you know, now that you can function without an office, so this has been something that’s been boiling up for a long time, but the whole office market is turning from one where previously it was an industry based on selling a product.

To one that is going to be based on delivering a service, but more fundamentally it’s been based an industry based on a customer who needs you, right. Product, historically companies needed an office because that’s where the computers were. That’s where the desks were. That’s where the people were. That’s where everything was nowadays.

And the last year has really, really proved the point. We don’t need an office. Now, that’s not to say we don’t want one, but as an industry, the, the office industry has to change tack from working on the basis that it’s customer needs needs us. You know, it’s a bit like Brexit, isn’t it. They need more than more than we, we need way meet them to going up.

I now got to prove to you, Mr. Customer, why you should. Take my office, why you should come into the office? Th that’s an interesting LinkedIn, because as Mark kind of alluded to. Earlier, one of the things that I’ve been I’ve noticed certainly from, I was worked in various property management and FM type businesses over the years.

And all the technology was very much about the building. It was about money managing the assets within the building. How often does it, you know, does this air conditioning unit break down or is the lift okay, or when are we going to replace those carpets or whatever it might be. All of your systems were, were tuned to that.

And one of the things that I’ve talked about is, you know, actually build executive serve communities that they down there for their own purpose. They’ve got, they’ve got a reason to exist and that’s for the people that use them either long-term or short-term or whatever. But what you’re talking about really is, is, is PropTech liking that live link.

Now that leap, rather than being focused on the building, because it was, it was the thing we needed. And that was the thing we focus on. Actually, it’s the people and the, it is this fit for purpose. Is it, is it going to add value to what you do or is it going to add to the sum of the sum of your organization as a, as a building?

Because if it’s not, you’re not going to use it, but that’s absolutely the whole, the whole way the real estate industry is it sets up the office market has been set up is there’s actually been two customers. The primary customer of an office building has actually been the institution funding it. Or the investor buying it, but I’m buying an asset for, for my pension fund.

No one is a, has had really any interest in who’s in the building. What’s it doing? The, the interest has been, this is isn’t. How good is this bond that this lease? How long is it? How strong is the covenant and what sleep and how guaranteed is my income? End off that’s the way the industry has been set up.

But that is in, that has been slowly moving. It’s still a big brick wall within the industry. There’s that essentially a, a huge, there’s a huge area of denial within the industry in terms of the institutional industry that still says. Yeah, this is all very interesting, Anthony, and people like me to talk about this, but I don’t care.

I want a 10 year lease. Otherwise I’m not going to fund your building, but it’s getting to the point where there’s not any customers for a 10 year lease or there’s very few customers, but for a 10 year lease, you know, leases are getting shorter and shorter and shorter. So the, so the focus is, has been moving much more to a people thing.

I mean, there’s something fundamentally daft about the way the industry works, because there’s a, there’s a phrase that started there with the world. Green building council uses that you pay three pounds for your utilities, 30 pounds for your rent and 300 pounds for your people. So what does the industry concentrate on the three and the 30?

And no one cares. We’re moving to a world where it’s the 300 is, is what we need. And I, I always use a phase that within the industry, we, we sort of operate under a bit of a category era that will, because we building offices, we think people want offices and no company wants an office. And that company has the slightest interest in an office.

What they want is a productive workforce. And the industry has to start setting them productive workforces, but where, but where the PropTech thing and coronavirus comes into all of this is that the pandemic is forcing us to make our buildings healthier. Otherwise people aren’t going to come in or if they do come in and we kill them, then, I mean, this is the interesting thing in America.

You look at the, how far out. The big American companies are saying before they bring anyone back. And it’s not a real estate issue. It’s a legal issue because in America, you’re going to take that. Someone’s going to Sue someone as soon as I wake up all night, if I, if anything happens. So you’re going to, you’re definitely going to see in America cases, you know, you, you may meal because of, because of this.

So we have to solve that problem. But the, the interesting thing is in solving that problem. It’s actually gonna go a long way to solving the, the, the bake in commerce productivity problem. Cause people talk about, well, how do you measure productivity? And they say, Oh, well, you can’t measure productivity in an office building, but you in a workplace, you can measure it if you relate it back to cognitive function.

So if I put Chris and Matt in an environment that. For some, the right environmental conditions, such that their cognitive function is operating to the maximum of their abilities. I’m making the, I’m an Mo I’m enabling them to be as productive as they can be. But if I put you in an environment that’s too hot, too cold, too noisy, whatever it will impact on your cognitive function and you will be less productive.

So. The interesting thing in real estate, I really real estate cannot make a bad company. Good. Put it back company in a great workplace. It’s still a bad company and we can’t affect that. But what we can affect is putting the people in the right environment, in the right In the right spaces with the right environmental conditions to enable them to be as good as they can, as good as they can be and to solve the air quality problem, we solve that problem.

And also the triple, the triple bonus of this in doing these two things, we’re also pushing a long way down the sustainability issue. Because a lot of, a lot of the impacts and the, the FM and how the building works has implications for sustainability. And, you know, you’ve you chillin a building properly, it’s operating in a more sustainable manner than the building.

That’s not true. So taking a absolutely glass half full look at what’s happened over the next year. But potentially for the, for the smarter operators, there’s going to be a real opportunity to brand themselves as well, come to our space because a we’re sustainable and we know. More and more people actually want to know that they’re working in a building that’s sustainable.

We’re going to get put you in really good environmental conditions. And we’re going to pay attention to your health and wellbeing. And that build that build a brand. There will be a number of new, either new brands or existing listing brands, which were really co-op to list the where, where the company.

But is concerned about making you happy, healthy, and productive. And those spaces, those buildings I think are going to do better than they’ve ever done. Before. I was saying to Matt earlier, I was talking to someone today who was telling me about three or four new city office buildings that have just received.

Planning permission. And they’ve been funding funded and they’ve been financed today. And you’d say, would you go build an office building today? Well, you would. If the calculation is the winners, even in a declining market, I’ve going to be the best buildings, the best buildings operated in the best way, paying the most attention to who’s going to make us happy, healthy, and productive.

That’s that’s the theory of where is the successful real estate company of the future? Because if you don’t do that, as I say, well, why the hell am I going to come in? Would

Matt: you think if you think about the people who operate buildings today, and if you compare them, say to a hotelier, because what you’ve described there, it sounds like if I compare the world of residential landlords, and particularly in the realm I work in, which is in a social landlords as opposed to hoteliers, there’s a massive difference in the whole approach there, because actually for for residential landlords, the focus is all on the property.

Because, you know, you’ve got a captive market, you know, that you you’ve got more demand than you can possibly service. So that the focus goes on to efficiency within the management of the property and then customer experience of that might not necessarily be particularly great in many cases. If you look at the world of hotels and certainly outside of the realm of Especially now, even if you look at the budget chains, they’ve got the idea that actually you can’t have a budget chain.

That’s a really unpleasant experience. You need to be able to provide a good quality of experience for people to want to go there. And so it strikes me that hope tele is a much more focused on the customer experience. And of course, the way the hotel industry works is that the people who manage the buildings, aren’t the hoteliers.

There’s a layer that sits within that is managing the experience. That is way more than just. Some building and some space and they offer a bunch of things that are adjacent to the management of space because you’ve got restaurants and you’ve got, you know, whatever other services it is that is deemed to be necessary if I’m running, running a hotel.

I guess we work started to go down that route, but it was also. In, in good tech company, funding models, completely open inflated and losing money, hand over fist. And my personal experience of it, wasn’t the, you know, the customer experience was it wasn’t that great. Everybody was trying to rub against the magic pixie dust of startup by working next to people from Accenture or whoever it was, you’d be sat next to in your office.

But from what you’ve described there, that sounds like this. This middle there of people who were actually starting to think much more holistically about what is it to provide spaces for working or, or to provide collaborative environments. That would be a logical extension asset

Chris: that, yeah, it would absolutely be logical essential.

There’s that? There’s an increasing overlap between, between hospitality and office in the sense of, you know, what, what, what, what is a hotel? What is, what is an office? I mean, you remember, you know, pre pandemic, you’d go into any number of. Central London hotels, and the whole ground floor is full of people working.

And that was that. That was a big thing, but absolutely there’s an, there’s an operating layer. And then it’s quite interesting. If you look at Matt Marriott, Marriott used to own all their hotels and they’d run all their hotels, but I think it was in the, in the nineties, they split up and they, they, they, there’s a Marriott wheat, which looks after the.

The real estate. And then there’s a operating company, interestingly, with Marriott, there’s also then a brand division. So, you know, you can that they might build you a hotel or buy it or buy you a hotel and then Marriott my, my operate it themselves. Or, or you can just license the brand. But the point, the point is that absolutely that there is this operating layer, which makes the difference between.

Which activates a space. So the, if you like the, the, the, the, the real estate is just dumb. We want to say he’s dumb. It needs is this of activation and hotels are definitely the way to look at it, particularly to do with brand because you made the, they made, they made the point that there’s great budget brands, and there’s very top end brands.

And there’s middle brands. So, you know, premier Inn is fantastically good at what premier does for its particular customer. And the four seasons is equally brilliant at what it does. They’re completely different animals, but they have a different customer, different value proposition, a different brand, et cetera, et cetera.

And what you’re increasingly going to find. In the office market is that is going to be this opera operational level. And you mentioned, you mentioned we work, but then, you know, you think of the, you know, the office group or industrious or uncommon or any number of brands, which are aimed at particular types of people.

And, and a lot of it’s going to be around. That brand is aimed at a particular type of customer and understands the wants, needs, and desires of that customer. So what type of space do you need? So see, you’re starting to see coworking spaces set up for particular industries. So there’s ones to do with, with music or fashion or finding it finance or, or women, and they, and they have different needs and on different, different configurations and the trick.

The trick for the real estate industry and the difficult thing for the real estate industry is working out who is going to do that operator level. So you have a few of the biggest real estate companies. Trying to do the operator operator level themselves. So sure fans have story. Land securities have myo tissue, inspiring America zone, et cetera, et cetera.

There’s a number of them, but it’s a really hard game to play, to move from being a real estate product company to a service company. I think today CVRE, a number of years ago started their own flex brand. Cool Hannah or Hannah, H a N N a. That has actually just been, that has actually just been taken by a third party brand is a, there’s a big co-worker flex operator in America called industrious.

And CBRA had just invested $200 million into industrious and are merging their Harner operation into industrious as well, which is essentially saying. We are CBRA, which is a massive, massive political company. Well, we can do it. We’re going to have our own band and they’ve gone down the road and live with us or they can’t make this call make a success event.

So they’re pushing it in into some something else. So, yeah, this is why the, the, the market is so interesting at the moment because. But the fundamental value proposition that is changing and that operator level is becoming super important. And also the asset itself is becoming more important, you know, used to be.

I don’t, I don’t even care what your building looks like. Is it, is it BCO, BCO, specification? Yes. In that case, How much is it I’ll buy other you’ll need to look at it, but now the type of space is becoming really, really important because is it the type of space that you can create within that, within that four walls, the title, the type of spaces that people will be interested in.

So physically can you create the right, you know, an exciting place to be, and then who’s going to operate it. And. The interesting thing is, as I say, I think that the best buildings define best in many different ways, but the best buildings for the best operators are probably going to generate more revenue than, than an office building has ever generated before.

But that doesn’t matter. That doesn’t mean that’s a good thing for the landlord because the landlord might be the building might be generating more, a huge amount of revenue. But who you are having to pay to help you generate to help you generate that. So it’s big. It becomes a really difficult, difficult game that is going to involve the industry changing dramatically, dramatically over the next.

Hey, Hey, X number of X number of years, because you’re going to find it. You’ve got to work out. You’ve got to work out a model that works. I mean, I don’t know. Yeah. I mean, we work in many ways have completely transformed the industry, but we weren’t. As big as mistake is they had too much capital money we want to say is not an industry suited for.

For venture capital software. It’s funny, you put venture capital because you either crashes or you make, you make an amazing return. You know, your margins are huge in real estate, your margins, and never go, never going to be huge, but we work got push. I mean, obviously they went with it, but they also got pushed to do too much.

And you can’t just keep, you’ve got to be a little bit more plotting in, in, in, in real estate and take your money from, from different places.

Matt: What do you think we’ll see organizations coming in from other sectors. So again, thinking about what you’ve described there, could you see, or are they already say, you know, the big consulting firms getting into this.

Management of space game, or

Chris: I could see that as becoming possible because they’re going to end up doing a lot of it themselves, you know? Cause I think th th th the big consulting firms. Absolutely bullseye for pushing the remote distributed work and button post pandemic. Cause they, they did a lot of remote working anyway.

I’m a big, you know, the KPMGs and the PWCs of the world. And now they will all be dispersed and they can work. They can work all over the place. So they’re going to, they’re going to become pretty good. At, at operating these places. So they’re, they’re all, they’re all they’re definitely going to be new entrance is interesting.

They don’t, again, talking about the financing. How do you finance this stuff now with an institutional industry that sets out that wants 10, 10 year leases with, you know, they want Google on a 10 year lease and that, and that doesn’t happen. Isn’t even Google by their own self. You can’t mostly, he can’t have Google as a tenant because they think $15 billion of their own real estate.

It’s massive. But. If you look back to when ball games was fun, was funded for broad gate. At that time was North of the city. It was beyond what was considered the city, the city of London. I mean, it’s now very much as almost the center of the city. But it was really was beyond the pale, the eighties.

It was right up there. The institutions. The obvious institutions in the eighties did not, and would not from bull gate, the Japanese funded bull gate. And what I think you’re going to find here is there is, there is so much money in the world sitting, earning. Next to nothing in terms of interest rates and some of them, I was listening to a webinar with a chairman of an investment company.

So you just to two acronyms, you need to pay attention to Tina. Good old Margaret affections. Tina, there is no alternative, you know, where am I going to put my money? I’ve got billions, I’m sitting on billions, where am I going to put it? And not negative interest rate policy, which is exists. I mean, I think there’s supposed to be something like $15 trillion of, or Donald’s of, of money sitting on negative interest rates.

Where are you going to put it so surprising in America? You see all these new SPACs turnout, these special purpose acquisition companies, and they’re just raising hundreds of millions to go to go and do stuff. So you’re, you’re gonna find new entrance in, in to the industry who prepare to move up the risk, the risk curve.

Because I mean, even if, even if I could get Google on a 10 year lease, well, what’s it going to earn me 1%, 2%, you know, nothing it’s safe and secure, but I’m not going to earn any money out of it. How do I actually earn a decent return? And, you know, pension funds and well, all investments, they, they need more than one or 2% interest.

So how do that, how do they do it? So you’re going to have to become more risky. So there’s going to be more money going into, into more risky ventures, but they didn’t like hotels, hotels are riskier than offices. Typically. Traditionally you have essentially the cap rate, as I say, a hotel. So hotels might yield.

Six to 8%, you know, so you pay, pay a hundred million for it. You get six to 8 million a year in rent. Whereas a prime office might be two to four. So, but office is more likely to move closer towards hotels. So they riskier. But if you operate them in the right way, you might be able to generate 10 to 30% more income out of the building.

So that the game, the game is changing from. Being designed for passive places to park your money, your pension money. And you said, societaly, it’s a problem. You know, cause pension pension is obviously a really important and they’ve got to park them somewhere, somewhere sensible. You don’t want them sticking it all on Bitcoin and you know, hoping.

But that’s become, that’s becoming a harder, harder. So yeah, it’s It’s an interesting, interesting, interesting, interesting market, very, very entrepreneurial, which is, I think, you know, which the real estate industry always has been, but it’s now there’s a different type of entrepreneur coming into the market for, for

Matt: organizations who are the, the clients of all of this, the customers of all of this Obviously it’s a time of is going to be a time of transition.

It’s not going to be any, any great certainty, but for organizations who are trying to work out what their flexible working mix of office space kind of thing, what are the sorts of factors? I don’t think you can, you know, open up your crystal ball here to be able to tell people what they should do, but what are the sorts of factors?

The sorts of dimensions that people should be thinking about when it comes to their own commitments around, you have to

Chris: commercially, you have to, to, to still fund Steve jobs, start with the customer. I’m thinking of all your employees are all the other customer you accompany has to understand. The, the, the needs of each of it, of each of their employees in the sense of for instance, how do they, how do they use space before the pandemic?

What do they do when they were in the office? What were they doing since the pandemic? How have they been? Have they operated? Okay. Has it been all right for them? What’s worked for them. What’s not, not work, not work for them. And then what do they want when, when they, when they come back. And it sort of splits up.

If you look at the best research, all this is done by a company called Leesman or they’ve done 170,000 interviews with people work at working, working at home. And the, the, the bottom, the bottom line is roughly 70 for roughly 70% of people working from home has been okay. It’s been okay to very good.

And in fact, the, the, are you more productive at home or in the office? It’s, I’m more productive, but for 40% of the people it’s been really bad because they’re not set up leads to, you know, they haven’t got the space and all the, all the obvious reasons why, while it’s really, really bad, so that that’s almost like a starting point to understanding what it is your, your individual needs.

And then, and then how long is that committed? You know, there, there is an absolute correlation between the number of days people want to work in the office and that, and how long they, how long they can, like they commute. And then what are you going to do in the office? Why do you need the office? Well, everything works for me at home, but I need to speak to see my team.

Do I need to see my team five days a week? No, probably not, but I do need to see my team for one day a week, two days a week. One day, every fortnight, two days before, like what, whatever. And in what type of space do I need to see them? I don’t need to sit and sit them all over the desk. We need the right environment.

So you actually have to, every, every company should, should start with talking to its employees about how thing, what did they do before the pandemic? What, or how have they been since the pandemic and what do they want to do to the pandemic? And that will provide a huge amount of data. And that’s your, that’s your starting point to understanding, understanding what you need, what you need to do.

Outro

Matt: Fascinating stuff.  And I’m sure this is a theme that we will come back to, again, as the, the myths of post pandemic, start to slowly lift into the worlds of more office spaces going to be like and how it will be used. So that’s it. It’s it’s towards the end of yet another show we have.

Another seven days ahead of us before the next one, Christopher, what’s the seven days of your diary looking like for the week ahead?

Chris: Well, we’re hoping that I’ll get my boiler fixed is going to occupy quite a lot of it, but and the, the nuts pretty much just in this is the same every week, pretty much doing what I was doing last week.

I wish I could say something different, but I’m looking forward to a mild week for various reasons. And as you say, and, and then, and then our next podcast with another blink guests where we’ve got an embarrassment of riches this year has

been

Matt: great. We’ll talk about that a bit more in a moment.

Anthony, have you got anything exciting on the horizon in the next weekend? I’ll try.

Antony: I have, because what we’re doing at the end of this week, Is where having a first zoom session,

Matt: which is open to all the alumni of our

Antony: online course. So we’ve run about five, five or six cohorts now, and we’re doing a big event at the end of end of the week where everyone’s invited to them.

And we’re going to have but doing a fireside chat with someone who’s a big, big fish in the market. And then we’re having people from all around the world doing updates on how’s things in Asia, how’s things in South America and this sort of thing. So I’m actually really looking forward to that. And then after that, where we’re looking to build a new course, so.

So I’ve got some, some free weeks just getting stuck into my big pile of reading books here.

Chris: What about

Matt: you, Matt? I have got the first stage of whittling down the applications that we’ve had for property, asset management and repairs management tender that went out a couple of weeks ago.

We’ve had 17 organizations. Being able to respond to that. So the rest of this week is going to be spent going through those and working out how we get down to a shortlist of potential suppliers. So that will be. Entertaining, although by probably number 15, I might be losing the will to live as I stare endlessly into yet another spreadsheet, but I’ll show it will be fine.

And the the, the, the moderation sessions that we have to have, where we were not allowed to have averages the way that the whole. Set up, which is going through the the digital outcomes framework. You have to come to a consensus on the assessment panel about what the marks are, rather than just taking an average.

So those actually turn into quite interesting sessions, as you try to then have to remember why it was you marked something a one or a three Which once you get to number 15 of them might become a little bit challenging. We will see. So yeah, that’d be good. And obviously watching what would continue their ascent on the the wonders of the the automatic promotion places.

For the time being anyway. So there we go.  So we wish you a wonderful week between now and then, Anthony. Thank you again for for joining us this week. It’s been an absolute delight to have you on and we will speak to you again this time next week.

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