197. Dave Cairns on The Future of Brokers in the Commercial Office Sector

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197. Dave Cairns on The Future of Brokers in the Commercial Office Sector

00:00:02 Dave, Karen, thanks for joining me today. I have to admit, I was picturing you walking down the street with your phone in front of you while walking your dog, since I'm used to seeing your video, and then you showed up in you're in an office and I was like, Oh, perfect. And in a coworking space, you're going to spaces.

00:00:20 Yes. Yes. It's nice to be here. And I have become known, I guess, for those videos, they're sorted by brand, but yeah, no, I'm in a, I'm in a flex office space now. So suffice it to say I'm a supporter. Totally. I also have to admit, I've been a little bit envious of the free spirit of like coven hair,

00:00:43 like windy, whatever I have to like, you know, straighten the hair, put the makeup on. I don't think I could be as off the cuff as you it's my, my, in my next life, I will be more relaxed about my videos. I think. Well, I can't be the counter-culture real estate broker unless I truly embody it.

00:00:59 Right. Good point. Excellent point. Totally. I love it. So speaking of who you are and what you do, so senior vice president of office lead, leasing at CVRE, you also founded CVRE forward, which I'd love to hear about and right. You're sort of the, as you put it, counter-culture futurist of the office sector. I know you from LinkedIn,

00:01:23 which is when we first started on our video, I was like, Oh, we have not ever actually encountered each other before live. So I know you from LinkedIn. I love LinkedIn as a platform because it's professional, it's less distracting. And I find, I build actual relationships with people. Absolutely. And a lot of asynchronous collaboration occurs there, which I think is something that our sector needs to embrace a little bit more to understand that collaboration and innovation can happen actually outside of four walls spaces,

00:01:54 but that's a separate issue. Yeah. So I'll just, maybe I can recap for you. I'm a office leasing broker based in downtown Toronto, and in Canada, you cover a cross section of, of stuff, the markets big on a relative basis, but compared to some of the, the major us cities, it's a little bit smaller. So I will work with like startup companies,

00:02:15 looking for a coworking space for like two people all the way through to representing CIPC for all of their real estate needs across Canada, you know, managing their 5.5 million square foot portfolio with another partner of ours called a Blackwood partners. So, and everything in between. And, you know, I focus a lot on the tech sector and then I have gotten really entrenched in the workspace as a service sector space as a service flex office,

00:02:39 whatever you want to call it, maybe we need to narrow that down and just agree on something. But I find myself doing the same thing forward slash like hyphen forward slash forward slash everybody happy with the terminology. Yeah, for sure. So, so in that regard, you know, I've, I've gotten the opportunity to help a local Toronto based sort of like innovation hub that really also had a,

00:03:03 a flex office component to it go to London, England. That was really eye-opening for me to help them go there and open up another one of those types of locations. I've gotten involved with a number of different enterprise co-working type deals, flex deals. And then also I've done a little bit of stuff with convene or at least trying to get them to come into the Toronto market.

00:03:23 So, you know, I've learned a lot about this sector over the last probably four years. And I think that it would be naive to deny its critical importance in the future for both landlords and space, opera and tenants, but more importantly, in facilitating the choice of individuals to basically do their best work wherever they may be deemed that to be. So how did you,

00:03:50 you mentioned sort of for the last four years, you've been kind of in deflects and serving the operators and how did, was there something specific that kind of drew you to like this different way of working and this idea of kind of hybrid model, because that's all pre COVID, what was it that like you said, yeah, I think this is right.

00:04:10 I think this is where things are going and I'm going to spend some time on that. Yeah, it started, there's a, there's a guy in Canada. His name is John roof and he's actually a venture capital guy. He, he started, he founded a company called OMERS ventures, which is Connect. It's really interesting. It's connected to OMERS,

00:04:26 which is a really large institutional pension fund in Canada. They have a, they have a landlord or sorry, there, there, they are a landlord under a banner called Oxford properties. And then they have this VC arm called OMERS ventures inside of it. So this guy, John Rufallo is a visionary. He founded this place. I just mentioned called one 11,

00:04:47 which was a really niche and curated flex office product for software service companies that have like up to 5 million in revenue or a certain amount of funding. And the idea was to like curate a group of founders in an ecosystem that could really help each other along. And so I talked to John about getting involved with one 11 and it was there that he started to explain to me what he thought was really important,

00:05:12 which is layering service on top of the physical infrastructure and trying to find a way for a landlord like Oxford properties. Who's got, you know, triple a class office buildings in the, you know, the best and greatest cities in the world, but how could they find a way to like take a startup company along a journey, you know, from one 11 through to becoming an anchor tenant in one of their new developments,

00:05:32 right. And you know, that maybe involved a strategy of like purchasing assets with a specific tenant in mind or, or, or a niche of certain types of tenants. And maybe it starts in B quality assets and moves its way up to AAA quality assets. And so he just really opened my mind with that kind of thought process. And it was really interesting to listen to somebody who had knowledge of the real estate sector,

00:05:56 but wasn't sitting of it and perhaps like, you know, be Holden to the way that we all think. And so that really blew my mind. I'll never forget sitting in a room with him, white boarding, he was white boarding, this whole thing for me. And so obviously it makes sense to still get together in person. Yeah, totally.

00:06:13 Yeah. All in all great visionaries are big white borders in my experience. Yeah. Yeah, for sure. So anyway, that, that sent me down this path and then I actually even tried to help them open a location in London, England. We did actually open one and then I just got obsessed and that led me to kind of getting involved with convene and I'll,

00:06:31 I'll spare the story behind that, but I got involved with them and I met Ryan Cincinnati and I was just so enthralled with him and his vision and the way they design spaces. And I walked into New York and I'm like, wow, this is like, where I want to work. Like I want to come to a place like this. And then where I really,

00:06:46 really struck a chord with me was when I was working with a really large enterprise customer of mine in Toronto. And they basically came to us and they said, look like, we think we need 80,000 square feet of additional expansion space in Toronto, but we only really have visibility on about 15,000 square feet that we know we need today, Like 15 to 80.

00:07:06 Like we think we need this, But we don't really know. And like, do you have any ideas on how we can try and like solve for a solution that doesn't have us taking all 80 and basically carrying all this dead space? And so this is where Seabury has got an amazing group within C it's called the agile advisory practice group. And they focus on helping customers solve these types of problems.

00:07:26 And what we did is we RFP several flex space operators in advanced faction, going to a landlord to talk to them about space options. And this just blew the lid off for me because we were, we were going to them with the operator in tow and we were basically going to take maybe 15, 20,000 square feet. And then the balance we were going to either separate out and the flex operator could just lease it directly from the landlord,

00:07:50 but more likely we were going to indemnify that entire 80,000, sublet it for simple terms to the flex space operator and then have predetermined dates where we could call chunks of that space. And in the meantime, we would allow them to sell it to the market, provided that like, Okay, I see that The layout of the space sort of generally made sense where there wasn't too much costs right.

00:08:13 To, to modify it. And so the deal never actually happened. It didn't, it didn't happen because the deal structure wasn't one that excited the client, they just elected to not expand. But What I saw from that though, this was where I was like, okay, here's a customer trying to solve their own flexibility needs for themselves. I'm like,

00:08:33 this is never going to fly like 10 years from now. There's never going to be a world where customers don't start to put more pressure on the owner side to facilitate this stuff for them. And then I just like started rolling. Like I just started becoming even more obsessed with the sector. Yeah. I mean, cause the right, the tenant takes the liability right there.

00:08:54 Uncertainty is their own liability and there's a huge gap between 15,000 and 80,000. And so, you know, right. What is it? And like everything, like, it's just not how any other sector of like our economy works. It's just not how customer service works like in any other sector. So I was just like, this is a huge gap.

00:09:15 Like, and then, you know, the great players are all trying to basically sell to landlords when we, what me and my friend, Kayla Parker called full-stack commercial real estate, which is, you know, an activated building from the minute you walk in the door, all the amenities, all the event and meeting space and then, you know, a full suite of flex office products,

00:09:32 right? Like if all that lives inside the building, you can do such a better job of helping a large company like Salesforce determine what they want to do with the remaining footprint that they want to take long term. So that was just like where it all kind of started for me. So you had a couple of unique experiences that kind of puts you in this mindset.

00:09:52 So where do you sit sort of relative to most brokers in about start with the Toronto market? Do they think you're crazy or are they people That maybe think I'm crazy, but I don't want to put words In there and they might be right. But do they think you're crazy, you know, about your flex office view, do they, you know,

00:10:13 are they starting to realize that there's opportunity to serve their customers in that way? Or tell me about your mindset versus kind of the, the average broker mindset? Yeah. Yeah. Well, look, I think that I'm lucky in the sense that I've had those experiences, right. To start with somebody outside the office sector, but with a really intimate knowledge of real estate opened my mind to like what a lucky,

00:10:38 you know, I helped create that outcome for myself, but that just sent me down a different path. There's ton of organic. Right. And I have been earlier and you had some time to buy into that. Yeah. And then I flew over to London, England, and I got to see like the premier flex market in the world. Right.

00:10:53 But truthfully, look, I'm going to, I'll Pat myself on the back. I mean, I've always been looking for holes and I've been like, I've been interested in where things always are moving, not where they are. So that's just like how I am. So naturally I think I was always going to be this way, but to go to your question,

00:11:07 like where are most brokers out? I mean, I think that they generally understand things like, you know, the predictions that every brokerage is making around flex office becoming something like 30% of like inventory, major cities around the world, you know, they might be able to cite the stat that like in 2019 half the least new leases that got done in the 50 largest cities in the world were from flex office operators,

00:11:28 not traditional tenants, like they know these things, but I don't think that they can really truly wrap their heads around the importance of like, you know, being proactive about how to help these customers integrate flex into their strategy. Right? Like there's a huge opportunity for, you know, global and multinational companies to do this. There's also a big opportunity for these small and medium sized businesses.

00:11:55 But I think going back to my example about how the full stack doesn't live inside the asset, I think the problem is a lot of these small, medium size companies. They do want their, some of their own dedicated space. And so, because they want some of their own dedicated space and there isn't like a flex off offering in the building. They can't really wrap their head around how they would separate out something.

00:12:13 They want private versus like what they can lease flex, but enterprise it's like a no-brainer and there's even with premiums, some significant savings that they can, they can take on. Right. Like it's really not complicated to realize that if a company leases 80,000 square feet for 10 years and only needs 15,000 to start that they're paying rent on a lot of dead weight.

00:12:32 Right. Exactly. Yeah. And furnishing it and keeping the lights on and heating it or whatever yeah. Or sitting on it and waiting, but Yup. Yup. So, yeah. So then, you know, like everybody knows generally the importance of it and, you know, announcements like industrious and the Seabury partnership, or I think really great for everybody.

00:12:51 Like, they're great for you. They're great for the operators. They're great for educating brokers, but there's a long way to go. And then look, there's definitely a lot of people out there that I think are fearful of the flex office sector and think like, Oh, well, is this disrupting what I do? And you know, yada, yada yada.

00:13:06 And like, I would argue that on some level it is disrupting what we do this, there's no way of getting around that. But I think that if you are really good at what you do, you'll always find a way to add value. And I think there's, there's human touch element that I think isn't going away for quite some time, whether transparency creates the ability for some of these transactions to just like be done digitally or with no broker.

00:13:29 Like, look, if that happens, that happens, I'm, I'm ready for that possibility. But I, I'm also trying to find ways to swim upstream and help some of the biggest companies in the world. And I think that there's, there's going to continue to always be need for a broker for the foreseeable future, with any transaction that's meaningful in terms of its like obligations,

00:13:49 Good brokers, well-informed Rutgers who strategically understand how to make recommendations. So tell us about you posted on LinkedIn earlier that your, your kind of, what, how did you word it earlier? Your, your disruptive nature on LinkedIn sort of won you some attention and a client. Can you talk a little bit, some of it may be, you know,

00:14:12 confidential, but sort of the overall project and what you're doing for them as an example of your role as a broker in helping a client understand their real estate options. Yeah, for sure. So yeah, it was a company called soft choice and it was really cool. The, you know, this was serendipitous that the guy who's running the workplace for software.

00:14:32 So he used to work at Collier's his name's Jeff Gwinnett, shout out to Jeff. He's awesome. So he was in the sort of like workplace strategy division of Colliers. So he had an intimate knowledge of the brokerage business and he then moved over in house to soft choice. So he started following my content and I liked it and that got us to talking and responding to their RFP.

00:14:54 And it was for a North American mandate to, you know, help them with all their locations across North America. I think they currently have around 25 or something along those lines. I think they might've already Jeff it up to confirm it. I think they might've gone from 40 down to 25 already. Recently. Downsizing is definitely part of their strategy as,

00:15:12 as is the case for many occupiers out there right now, something that I also believe on the brokerage side we should acknowledge is happening and not deny and embrace finding ways to help companies do that. There's a lot, there's a lot of logical reasons why they would, and there's environmental impacts that are potentially positive from that by people maybe having less office space and distributing the way their workforce Or 15 to 20 minutes city would be great for the environment.

00:15:37 For sure. Yeah. So, you know, they have an objective of definitely downsizing their footprint, but it's, it's not all a cost related thing. You know, we need to help them bring work to people, not people to work. I think that that's a big part of what they're trying to do. So they will definitely maintain hubs that they lease themselves in,

00:15:57 in key markets, you know, but then maybe they're going to look to do things like little mini, regional standard chartered bank IWG partnerships, right. Where they, they have a stay of a hub, but they also allow for their employees to be able to like tap in to a wide variety of, you know, flex office options. So whether we go down the road of like a partnership with IWG,

00:16:18 whether we talk to Mark Gilbreath at liquid space, you know, all those kinds of options are on the table. And then, you know, as a broker, like we used to be able to get away with like, just off the back of a napkin, being able to tell occupiers, like, you know, Oh, if you want to be dense,

00:16:32 it's a hundred square feet of person. If you want to be in the middle, it's one 50. If you want to be, you know, liberal it's two 25, you know, those metrics are just basically thrown out the window now because people aren't even using space anymore for like dedicated. We're not talking about a debt. Yeah, exactly. It's like,

00:16:47 well, what type of work do you want to do? Right. And how many? Yeah. Yeah. Yeah. So I think it's going to be really important for us to be able to advise customers. We need to be really deeply connected to the workplace strategy divisions of our company. We need to be really deeply connected to the agile advisory practice groups that can help facilitate deals.

00:17:06 Like I just mentioned before. So we have to like look for all the resources inside our company and even outside of our company, like I was just talking to these guys at a company called fast office and they they're really cool. They already have like a beta version of like a hybrid workplace where like we can be sitting at a desk in a soft choice office,

00:17:28 like across the table from one another with like our real life faces, talking to one another as if we're sitting there. So the idea is like, if I'm working remotely, I could be sitting at a desk in our virtual office. And if someone wants to like serendipitously, tap me on the shoulder and say, Hey, come into this meeting, that's already in the works.

00:17:49 So like, we gotta be like, thinking about stuff like that as brokers. And then of course there's applications to that, helping them rightsize their footprints as well. So like it's very dynamic, like all of a sudden in a year, like it went from just like trying to find somebody, a space in a market with no vacancy to like having to think about all this stuff I just mentioned.

00:18:08 Yeah. So I fit, I understand. And most people understand the I'm a broker and my client needs space and the market's tight and I'm going to find the best space I can get. And then I'm going to get paid, you know, for making that transaction happen. And I'll get paid by the landlord in the case with soft choice where maybe they're downsizing their portfolio,

00:18:30 you're putting people in flex your ho how do you get paid on that? What does that look like from a compensation standard? Yeah. Well the only one I'm confused about, I got to talk to Mark Gilbreath about this. I don't know. Like, do you mind gift aid Mark? I haven't asked him that yet. I'm just like so obsessed with his vision that like,

00:18:49 I don't even know. Maybe I'll just do it for free Mark. Mark has that effect on people. Yeah. But look, I mean, I mean, anything other than that, you know, like taking our, as an example, they're super broker friendly and so they, they pay obviously, and then with downsizing still comes deals. You know,

00:19:10 obviously if you were running a global account that had 10 million square feet that you were managing with a growing real estate footprint with, with head count, right? Like now head count growth doesn't necessarily equate to the same amount of real estate. So I think what I, what I think would probably happen is like growing companies are still going to grow their real estate footprint.

00:19:31 They won't grow it at the same clip. And then the, and then there will be others that genuinely downsized because they just had way too much real estate to begin with and they weren't utilizing it properly and blah, blah, blah, blah, blah. But there's, you know, those companies, if you, you know, if you had them for 10 years and then they're going to downsize half their footprint,

00:19:49 well, you'll make some money along the way. But then you know, that the value of that customer just went down. If you sort of snipe them away from another broker. Well, you know, you don't have to worry about the fact that it got smaller because you're just getting it where it is. Right. And you're going to make some money off it.

00:20:03 So there's traditional leasing fees that are still very much available. And then there's flex office fees that are still available and will a day come where flex office operators are not really paying brokers anymore. I don't know. We'll see. I think that there are definitely some smaller niche flex office operators out there that aren't very collaborative with brokers that may, I don't think that serves them today in the,

00:20:26 in the world that we're in today. I don't think it serves them. If there's a completely transparent marketplace dynamic out there with digital transactions and simple contracts and yada yada yada, well then maybe they don't necessarily need us in the same capacity anymore. But today I still think there's lots of fees out there. Yeah. I and I, to your point about,

00:20:45 you know, will we ever get to sort of totally frictionless digital? I mean, people are still, these are still human decisions, right? People are making big decisions about their space needs and someone like you is agnostic in the market. Except that I would argue to all of our operators listening that Dave will be favorable to those that pay. So,

00:21:07 you know, our niche members of a local market that don't want to interact with brokers or don't understand. And that's one of the reasons why I was looking forward to talking to you is I think there, I think there is a gap out there around brokers, understanding how to work with coworking spaces and get paid and coworking spaces, understanding how to be friendly and have broker programs.

00:21:28 And we've had Kane, I know, you know, Kane will not have been on the podcast and he shared how he worked. I mean, he, you know, yeah. And he, and it makes sense for him, you know, he, and that's how he feels his spaces and he was a broker. And so he has that great,

00:21:44 you know, two-sided approach to the problem. So, so yeah, I was curious about your perspective. And I think, I think brokers, good brokers like yourself who are strategic and forward thinking and customer cankers. I mean, that's a little bit of my takeaway from your description. I was like, is Dave not thinking about how we sending his kid to college?

00:22:04 Is he not worried about this? Because your immediate response, I can tell you're thinking about how do I serve my client? You know? Well, let me give you an example. Like, let me give you before I give the example, You should call Mark by the way, but How do I get paid? No brokers are salespeople. So there's so many annoying salespeople out there.

00:22:26 I'm not going to like generalize just brokers, but like salespeople get a bad reputation because there's a lot of them out there that aren't so great. And aren't so customer focused, whether it's real estate brokers or people selling software, right. So it's understandable that a flex office operator might not be, they might've had a couple bad experiences with brokers and that's totally fair,

00:22:45 but I would encourage them to like, try to see the forest for the trees and just recognize that as we sit here today, these partnerships are still relevant. Even if you have to deal with some crap, but I was going to give you an example, like, you know, I've been talking to a lawyer recently and the person is just so textured with their knowledge.

00:23:04 Like, you know, I could go to a commodity person, a commodity lawyer that could maybe get the job done, but they probably wouldn't get the job done for me as well. And also the human touch element, like this lawyer is I first conversation I'm having with him. He's like, well, you know, we need to do this and we need to do that.

00:23:23 It's like, he's like part of me or something. And I'm like, I love this guy, like my team. Right. And so like, I, even if it was like the most simple thing ever, which there's it's life still, isn't simple. Like technology has not made it that way yet. But even if it was like, I still think there's a good role for a human service provider.

00:23:42 The, the unknown for me on the brokerage is like, how will the compensation structure get changed? How will maybe the roles and responsibilities of certain types of brokers change? Will some of them become obsolete? Maybe. Yes. Probably when, I don't know. So I think if anything, in the near term, the compensation, do you want to send your tournaments maybe 10 years,

00:24:04 like the compensation structure and some of the deals just might get disintermediated, but I don't think that brokers just evaporate like that. Doesn't I can't see that happening anytime soon. So I'm sure everybody loves to bring this up and I can't resist because my audience doesn't know it. Can you talk about what you did before your brokerage life? I assume that that's not your plan B,

00:24:25 but who knows? No. So yeah. Well, I was, when I grew up, I was a competitive ski racer and so I really, I was really attracted to individual competition. I, I never really was much of a team sport person. There's no, I in your team or there's no witnesses. Yeah. I don't know. I just think,

00:24:42 I don't know. Maybe like, I, I think I didn't get, like, I'd never got on certain sports teams. I remember in grade four, like, like one of my teachers like cut me from the grade four soccer team and I'm like, why are you like now as an adult? I'm like, why are you cutting grade fours from the soccer team?

00:24:56 Just like, let them play. Like, what is this? So anyway, maybe I had some bad experiences, but then I got into skiing and maybe that's also because my dad, he was a competitive water skier. I didn't know. That was even a thing. Yeah, no, he was like one of the best. I think he was the best in Canada or something.

00:25:11 Anyway, he, he got into snow skiing, which then led me to that and I competed at a pretty high level. But then when I went to university, I stopped and that just sort of naturally coincided with me getting involved in poker. And so I was able to like take this competitive spirit that I had for individual competition from skiing into poker.

00:25:29 And then at university, I basically skated through university. Like I don't even know how I graduated. I, I spent the vast majority of my time playing poker online and partying. And I ended up in my fourth year winning a tournament with about 8,500 players in it for 260 grand. And it just charted me down a completely different path in my life.

00:25:52 Like when I graduated from university, like as didn't need a conventional job, nor did I want. And so, you know, I remember that I had a lot of certainty at that time in my life. I had more certainty than, than I've actually ever had since like, I was obsessed with poker. It's all I wanted to do. And I did,

00:26:10 I had enough money that I could kind of go down that road, but I had the foresight to know that, like, I didn't want to be playing poker when I was 40, 50 years old. Like the lifestyle didn't really seem even appealing to me. So I felt, I'm glad I had that self-awareness but also what I like is it, it didn't seem very scalable.

00:26:28 Like the only way to scale your income was to play at higher stakes, which meant more risk. And I'm just like, okay. So the only way I can make more money is that, and then I have to sit at the table, like, unless I become a backer myself and invest in other players, I literally have to sit there like,

00:26:43 and just raise up in stakes. And like, I'll still be 50, 60 years old and I'll have to do that. So I was like, that doesn't seem like a life I want to live. So I took on an investor because of that, those thoughts that I had, I could have just done it, my own, my own, but I'm like,

00:26:57 I probably want to get out of this. So if I want to get out, I'd rather have somebody like, be able to get me into the biggest tournaments in the world and try and take a shot. And so I took on this investor or he took on me and I, I had that relationship going for like three or four years. I,

00:27:13 it was predicated off my interest in playing really large buy-in live tournaments. Like in-person, cause there's a lot of risk associated with those kinds of tournaments. You can't play a lot of them because they require travel and all that. Like, you know, to give you some, to juxtapose it, if you traveled the live online poker or sort of the live tournament circuit,

00:27:35 you could maybe play a hundred events in a year and that's like really onerous and taxing. Like you're traveling all over the world to do that. Right? Yeah. You could do a hundred tournaments like on your head in a week. Like that would be like an easy week playing online. Right. And so the volatility of a hundred games is actually quite a lot,

00:27:53 like in a, in a hundred games you might really stand to lose more often than you would when like you're going to make more money over a thousand games or 2000 games. So when you pair the limited amount of volume that you can play with the increased risk in money that you're putting up, like it's, it's really very risky venture and it could take like 10 years to actually make a profit at it,

00:28:14 even if you're good. Okay. So that's why I took the investor because I knew that was the world that I wanted to be playing in. And unfortunately I never hit it live. I was always paying off losses from live tournaments with online winnings. Cause I was able to kind of mitigate risks a lot easier online. And then in 2011, I got sort of steered in a different direction because of the DOJ in the U S they indicted the two largest online poker websites for tax evasion,

00:28:43 money laundering, wire fraud, all this stuff. And yeah, it just, it just, just, it sent me on a different path because the player pool in the U S was torched overnight. They were no longer legally allowed to play. And if a, if a tournament, it was paying like 20 grand at first, all of a sudden was paying five grand the first.

00:29:02 So I was like, this is not a world I want to stay in. And then I kind of got into real estate. Like from there, It's a great story. So you might be sick of telling it, but I, I couldn't, I couldn't resist. So I'm looking at running through my list of questions. So if you were to give flex operators advice,

00:29:36 how can, how can flex operators do it? Can be know any, anyone from industrious to, you know, the local boutique space to help occupiers and brokers kind of better understand flex as a part of a multi-pronged real estate solution. Like you're super proactive. This is your thing. You understand this strategically, you know, do you recommend what Cain is doing?

00:30:04 Sort of the road show, he's really investing a lot of time and local education. What would you advise? So sort of like in the spirit of making the pie bigger for everyone, right? Like everyone should be in the workplace that fits them. If that's the outcome and everybody gets paid the right way, like how, how I feel like there's still like a knowledge gap,

00:30:27 right? Which is part of your role and why that's not going to go away anytime soon as it is. Right? Like you have information and you understand who the players are. If you were to give advice to somebody else in another market and say an operator, how can they help both occupiers and maybe local brokers like get more educated about what's possible?

00:30:48 Yeah. That's a good question. It's a tough one. Funny as you ask, what can we do in the brokerage side? I honestly think the most important player to educate and get in bed with is the landlords. I'm, I'm such a firm believer that these large landlords that have millions upon millions of square feet should be integrating space as a service into their lease up and retention strategy.

00:31:14 Like it should no longer ever be an afterthought. Right? Cause I actually think the biggest barrier is the one I brought up earlier. Like I'm, I'm out working with a customer, there's two barriers and I'll start with this one. They want some of their own dedicated space, right? Like I'm not gonna be able to convince them otherwise, like they will not go into a spaces for their entire footprint.

00:31:34 And it's for several reasons, I think whether they're right or wrong, they, they want ownership over the build-out and they want it to really be their space. And I'm sure there are lots of people in the flux office sector that will say, I can go deliver that for you. Don't worry. No problem. Some of them are right. And some of them are not,

00:31:54 they're talking to their butts, but that's a distinct reality that companies still want some ownership of their space. So if the buildings had more of an integrated flex solution in the asset, it would make it a lot easier for brokers to be able to advise on, you know, Hey, like keep, why don't you put this XYZ into a flex office operator or that,

00:32:17 Hey, there's a convenient there. So like, you don't need to build these meeting rooms into your space. Like you can purchase those on demand. Like this to me is the biggest fundamental problem. So it's really, I think educating the landlords and if you're a niche, a flex office operator, I think that's going to be really hard for you without actually having a broker partner that understands the flex office sector.

00:32:38 Because some like someone from CVRE who knows what they're talking about coming along and speaking to a landlord with you can legitimize that conversation. If you're convenient, if you're industrious. And like you have like, you know, real estate finance gurus that like live inside your organization that used to work for landlords and they know the vernacular and everything, they can kind of go have a lot of that dialogue on their own.

00:33:02 But whether you understand that stuff or not yourself as a niche player, it's going to be really hard for you to create that legitimacy without maybe a banner behind you at this point, such as CVRE. So I think that that is important. The challenge will also will become, especially if you're doing management agreement deals is how do you actually pay that broker?

00:33:22 It'll either. You know, I think it makes sense if you're going to partner up with a broker that you agree upon some kind of fixed fee that that broker will get for helping you take on a new location, whether that's related to the size of the space that you take on, or it's just fully fixed. Like those are all points to negotiate.

00:33:40 But I think the broker needs to know that they get paid, whether they get paid by you or it can get built into the deal. Like that's a negotiable, It's still a lot to figure out there for sure. Yep. So that's, that's sort of the thing I would say first is like, it's about the landlords having more inventory in their footprints and that then makes it easier for brokers to advise the education piece is tough.

00:34:06 I mean, because you're going to go sit in the boardroom. Maybe it's been fun. This has maybe better to do virtually. So you don't waste your time, like sitting in the boardroom of like a bunch of brokerage firms where like half the people are eyes closed ears shut to what you're actually saying, and they're there for the free sandwich, right?

00:34:24 Like, so maybe that's better done virtually. But I think if, if we can focus on landlords getting more inventory in their footprint, the restaurant just solve itself. And then the other thing is, is finding ways to make the pricing in the flex office sector more sustainable. Because like, what I've noticed is a lot of my customers will pick a sublease over a flex office option.

00:34:47 Even if the, even if like certain terms are more favorable with the flex office, you know, like maybe non-financial terms because they're just like, well, I can go and move into this other space for like 30, 40% less, you know, especially in a market like we're going to be in for the next couple of years. And there's a guy,

00:35:05 there's a guy I want to plug in Toronto, his name's Mark go G O H he's a company called clear space. He is unfortunately for everybody getting out of the flex office game. And he is really more of like the most efficient design build construction guy that's out there in the market. But what was really interesting to me about him, he's only local in Toronto.

00:35:28 He has about 80,000 square feet. You should interview him by the way, he's, he's phenomenal, but he's got about 80,000 square feet of inventory in Toronto, all of it on traditional leases. But what was wild is if Notel was in our market or we work as in our market and they were charging like just, I'm going to talk in dollars per square foot for a second.

00:35:49 If they were charging an enterprise customer like a hundred or 110 bucks a square foot, he was doing it for like 75. And the reason he was able to do that was the efficiencies of his design and build. He was controlling that entire process with no intermediaries in between, which is like, he's like this anarchist. And like, he, he was basically leasing office space at like seven,

00:36:12 eight, $10 higher than like the rental rate directly with the landlord. It was insane. So it, he never had a day of vacancy before COVID because of this never had a day on 80,000 square feet. He was only doing private suites for like sort of whatever series they companies or whatever. We never had a day of vacancy. And that's why,

00:36:33 because he just found a way to like control the entire design build process. So I don't think that everybody's gonna be able to do that, but there's a lot of like costs to actually design and build out the space. And then there's maybe too much overhead, you know, the, that the flex office operator has on their balance sheet and all those factors.

00:36:51 I don't know if greed's a factor, but like all those factors end up making the pricing sometimes untenable. So it's Yeah, they have to value the service does is Marco or Marco spaces serviced? Are they expensive suite? I mean, they're serviced, but not necessarily to the extent as like, you know, like there's a great guy at spaces here,

00:37:12 his name's, Purveen like, I call him and I'm like, Hey, like there's no parking spot for me. Like where can I go? And like, he's delivering my, like my, I just ordered like Uber eats today. He brought it up to my office. Like there's not any of that going on, but it's. Yeah. Yep.

00:37:29 So one last question. What does the industrious investment mean for CVRE kind of across the portfolio? Well, not like in the meetings, I guess it has to be like high level. Yeah. So high level, I think it's phenomenal. It validates a couple of things for me. One, it shows that it's not easy to do this. Yeah.

00:37:53 You know, Seabury has made a big investment in the HANA offering. I can't comment. And I don't know. I'm, it's not a matter of like, whether I know, I don't know whether Honda will remain its own brand or it'll get rolled in. I've heard that it's going to get rolled in, but I don't know. So I think it just sort of says,

00:38:10 look like even a CVRE, you know, would rather potentially acquire then continue forward with that plan. And so that says like, this is not some business, like snap snapping your fingers, right. This is operationally intensive. It, you know, it requires, you know, an acumen that's analogous to an amazing hotels service provider. Like this is not just some like,

00:38:33 you know, white, you know, anyway. So I think that's really great validation for what all you guys do. And then I think it just legitimizes this whole thing substantially. Like, it, it, it is a major, you know, they're waving at all the landlords saying, Hey, like make this part of your lease up and retention strategy.

00:38:57 This is not an afterthought anymore. You're going to have to find a way to build this into your portfolios. So I think that is incredible for everybody involved. I don't know if there's anything else you want me to cover on that, but Yeah, no, I was just curious about, yeah, kind of your perspective. I think our, my audience certainly thinks it's a great sign and,

00:39:18 and agreed validates on a lot of fronts and gets the brokerage community, you know, presumably more engaged and more educated. Right? All the folks in Seabury who were referring folks to industrious locations, presumably that picks up in some way and they'll understand, you know, the broader flex offering better. So I think it's great. I promised I, well,

00:39:41 I didn't really promise myself, but I keep getting, thinking that I might make my episodes shorter, but I have guests like you and I have lots of questions. So I appreciate you taking the time. No problem for your perspective. And you know what you're up to in the marketplace and, and give us a little kind of inside scoop on what some of the more forward-thinking brokers are,

00:40:02 are working on. So thanks for joining us today. No, my pleasure. Thank you for having me.

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