EP024 - The future of the commercial real estate with Francis Saele
About the episode
This episode focuses on the future of the commercial real estate. What happens with the offices if most of us work remotely? What drives the back-to-the-office movement? How to create engaging offices in the future? What is the distributed office trend? Among others, these are the topics we will discuss with Francis Saele, a veteran real estate expert.
About the guest
Francis Saele is an accomplished senior-level corporate real estate and workplace executive with a broad-based global background. Designed and implemented successful portfolio services programs for two global service providers and hundreds of clients. A thought leader in the emerging world of remote work and the transformation of the workplace as well as its impact on corporate real estate and the built office environment.
About the host
My name is Peter Benei, founder of Anywhere Consulting. My mission is to help and inspire a community of remote leaders who can bring more autonomy, transparency, and leverage to their businesses, ultimately empowering their colleagues to be happier, more independent, and more self-conscious.
Connect with me on LinkedIn.
Want to become a guest on the show? Contact me here.
Quotes from the show
The current offices were designed for everyone in the organization, whoever lived in the region, to be brought to a central place where they would all work together five days a week. That was the business model, and the buildings were designed that way. They were located in places where that made sense. That market really has died.
There will be demand for office space near employees. This is what I call the infrastructure supporting remote work. These places are where people will meet and come to them as opposed to the employees driving or taking the train to the office. It's going to be smaller than it was in the past, but it'll be newer, more agile, and adapted to the use it will primarily aim at.
The distributed office will emerge, but it will emerge over time as the flex market can build out more space. And it will become a much better environment for everyone working in organizations.
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Welcome everyone, yet another day to talk about the future of work and the future of leadership. Today we'll discuss the commercial real estate issue because it is utterly important to understand it. It moves the needle when it comes to the future of work and how we will think about the concept of the office in the upcoming years. To discuss, I have Francis Saele managing Principle of Morte Vita. Hi Francis, how are you?
Hello Peter. I'm just fine. Here in the States. I hope you're well.
Oh, everything is amazing here. Glad that you can join. Tell me a little bit more about your background and why the audience should listen to you in the commercial real estate topic.
Well, that's an important question and I'm happy to do that in a very brief format. I've been in the corporate real estate and the commercial real estate business. Really all of my professional career right out of college joined a financial institution and wound up for some reason I was a psychology major, but I wound up running real estate. They were early adopters of having the right workplace but that led to a second career in the real estate development business, which is the work of building, designing, financing new speculative buildings basically in four, four or five states and leasing those to tenant. Then after that the bulk of my career since then has been in what's known in the business as corporate services, where I was providing myself initially as a sole provider. And then built a company which ultimately was sold to C B R E the major real estate firm. And then later with Newmark and Accenture delivering these services to clients who all have portfolios of properties.
So you've worked more multiple decades in the, in the corporate real estate and commercial real estate and...
Right. But what's inter, what's interesting about this though, is it was at the tail end of that portion of my career when the pandemic hit. And I did note that it's almost exactly three years ago that the message went out for everybody to get home because you weren't gonna be able to go anywhere. And I flew out of Dallas, Texas back to Cincinnati on Friday the 13th, which was a really interesting experience for me. But I'd made the decision that this was going to be something big and this was gonna have a major impact. Not only how we worked, because we really hadn't gotten into the, you know, the panic of everybody working away from the office. But, but also it was going to be an opportunity to dramatically change potentially corporate real estate and how it worked. So, and that's all begun to emerge, and we've seen some great progress there, I think in three.
And I think we cannot. Sure. And I think we cannot ignore the historical facts as well. I mean the historical trends as well. Because you tapped into this industry correct me if I'm wrong, but like in the early nineties, mid nineties, right? 1990s.
In the Portfolio Services parts yes. Yes.
Yeah. So, and, and that part was, you know, I mean, come on, like, business is booming. So those, so that was when we had experienced really great growth and in all aspects, in terms of office design it was one of the pinnacle of the cubicle office movement and stuff. And then you still were in that industry in the two thousands, early two thousands. And that was when everyone started designing open air, open plan offices. And it was still businesses booming. Right. And around in the end of two thousands, like, you know, the financial crisis and afterwards There was a decline in the real estate, but then all it went up again and now you, you see like a pretty much a go going into the bottom trend. So you experience. Pretty much all size of the waves and the trends that we saw. And we just, you know, read it.
I don't go back a full hundred years history of the office business and the office market. And I remember seeing a slideshow once that showed office space, you know, back in the 1930s, 1940s, fifties. And you can see pictures of how it evolved up until this current point.
And it's so interesting, by the way.
Well, it is, and what happened in that business was it went through cycles where there was a boom and then there was a recession and you know, there was a depression in that period too. The Great Depression in 29. But since then there were, you know, recessions, but the market always came back. Yes. The only question was how long was it going to take the vacancy rate to drop from 18% to 15% to 10%, and then it would go down, and then we'd have, you know, a period of really tight markets rents would go up and then there would be a recession for whatever reason. And that's been the, that's been the trend for over a hundred years. What's different about this experience is that, Properties that are up for lease now. Okay. Were designed in similarly and all pretty much the same way, namely they were designed for everyone in the organization, whoever lived in the region, to be brought to a central place where they would all work together five days a week, 40, 45 hours a week, whatever that meant. That was the business model, and the buildings were designed that way. They were located in places where that made sense. That market really has died. There is no I mean, the number of organizations that work together five days a week, 40, 45 hours a week is minuscule at this point. And everybody knows about you know, Mondays and Fridays in terms of how many people are coming. And even in, you know, many of the very large firms which are primarily office oriented you do see that that fall off on those two days. And then the rest of the days, you do see various levels of hybrid or remote. It just really depends on the organization. What's interesting now is that over 60% of occupiers really are in some form of hybrid or remote program. The percentage of the overall market, which is, you know, fully in the office is very small. And you know, depending on how you count it and the way you count it 10, 20, 30%.
But these, that's very strong, strong statements, by the way.
Yeah. That's a very different, that's a very different marketplace. Yes. Than existed before. And the, the impact on office buildings and the ownership of office buildings, the financing of them, the expectations for growth or now shrinkage are profound. And you're beginning to see the financial fallout where some of the major occupiers, some of the major landlord. The well capitalized funds are just giving back properties to entities that have financed them because it doesn't make any sense anymore to own them and in most cases, the individuals behind them don't have any personal responsibilities for that debt. So they just really walk away from it. And we're seeing more and more of that every day.
This. First of all, these are really, really freaking strong statements, I think. And I usually don't hear these bold statements from major news outlets because usually it is super loud about the back to the office movement. But before we focus on that, I think, and we also discussed this on the pre, pre-recording that you mentioned that there is a financial crisis that we might see or see to evolve that most of the trends in commercial real estate in the last, well, not just years, anytime previously always connected to financial growth or when, you know the trends went backwards it was also connected to financial crisises. But now in today's world Real estate went to rock bottom, not because financial reasons are a financial crisis, but because of the pandemic, of course there are, you know huge blue whale events on the stock market anyway, which we can take into the account. But still it's, it wasn't connected to a financial crisis. Now we have this situation and on top of everything we will have a financial crisis as well. Or we might have a financial crisis as well, shall we say, and that will even, you know worsens the picture for commercial real estate. So how do you see that as well?
It's a great question because if you recall, we've been expecting a recession for at least 18 months. Yes. It's always going to be six months from now, six to nine months will be a recession and almost continuously with a couple of months that, or a couple of months that didn't do well. I forget when those were last year. We really didn't dip into a recession. Yes. We tiptoed around it and then came back. And if you noticed, at least in the us the job creation numbers are still very high despite interest rates being up. Core inflation continues to be higher than everybody would like to see it. And now the Federal Reserve just recently announced indirectly, they never tell you exactly what they're going to do, but the signals coming from the Federal Reserves is that they're going to continue to raise interest rates stronger and maybe more quickly than they had in the past. And that has the stock market panicked. Of course, everything is way off today. That will continue for you know, the while until there's another meeting, and then I think you get a, a clearer picture from the Fed. But to the point we have an economy which seems to have been continuing on its growth plan, spent those little couple months last year of going up. Even though everybody was expecting there to be a recession of, you know, minor or major impact depending on who you listen to. There has been some, you know, some layoff activity, but it's been primarily in technology, which became very bloated.
It's because of the over-hiring.
Yeah, they really did hire way too many people. And certain things have, you know, kind of evaporated in terms of their potential. Where you don't need you know, thousands of people to support a metaverse, which doesn't appear to be going anywhere. So sorry, that's a pet peeve. I had to mention that. There'll be some listeners maybe who'll say, I knew he was gonna say that at some point. And also, you know, crypto if you think about it you know, a little over a year ago and this was after I remember this was a big deal during the Super Bowl. Not this year, but last year. Yeah. So yeah, in January. You had crypto dominating the advertising, crypto was going crazy. The interest and the expectation and the metaverse was going off the chart and then sort of reality hit in both of those areas. So yeah, I think we need a little more responsible tech and I think we're probably gonna see that with AI coming up. So and AI is such a huge, has such a huge potential and everybody seems to be getting into. And that's gonna be really interesting to see what happens, how.
That's gonna, that's a new shiny thing. It depends on, it depends how it'll influence the, the overall economic numbers. Because as the way I see it right now, and you also mentioned that too is that we see a certain type of growth in the financials. Yet we still experience rock bottom commercial door estate, which was previously connected to. So no, if the, if the market goes up, usually, you know, more offices, right? Commercial real estate is flourishing. Everyone is winning. Everyone is working in the offices. But for now, this time it's not the case. And by the way, FYI, pandemic is, well, I wouldn't say over, but like, you know we don't have the lockdowns anymore, so.
Correct. Pretty much over, I think. Yeah. Yeah. At least in people's minds it's over. And when you talk, you know, the workplace and the office for a long time. Really the last a hundred years, those have been the flip side of the same coin. So if you were doing work, we're doing work in an office primarily, you know, maybe you did a little bit of work at home the night before something, but you really had to be in the office. You would have a dedicated desk, a room of something that you would go to today that's really all pretty much blown up. And people are looking at the office as people, places where people are going to get together to collaborate, to do training, to do other things in person that are better done in person, and that makes a lot of sense. The problem is in the office space market is that that space is really not very convenient to most people who work in those offices today. And, and that's...
What do you mean by that? Non convenient.
Well, I mean, the biggest issue associated with the legacy office markets of today, which were designed to be very large and centralized, so that people could get there from wherever they live. Okay. Is that those buildings generally are in places where the commutes are the longest for the people who work in those buildings.
So it's, they're in the central usually. Correct the downtown. Sorry.
And, and I do remember when I lived in Dallas, you know, there were people who came into our office there, we had about 50 people at one point. There would be many people who would be driving over an hour, some over an hour and a half each way. And there's a, the interesting story there about how we began to get into the remote the Agile format you know, well before the pandemic and how we found out that it did work pretty well. But no one wants to make that community. So my sense is that what will happen in the future, there still will be a need for places for people to meet in person that when they live in the same community. And you can do that in a restaurant, but that's probably not the right place for a lot of activities that you wanna have. That place where people are go to, to do the collaboration and the other in-person activities are going to be in offices that are distributed around the community. So the distributed office will come. It's not going to come right away because today no one will finance an office building. But as the older, as those older buildings begin to disintegrate in terms of their financial viability and ownership and all that stuff, then there will be this demand for office space near employees and those, that's really the, what I call the infrastructure supporting the remote work. That the place where people are gonna meet is going to come to them as opposed to the employees driving or taking the train to the office. It's going to be smaller than it was in the past, but it'll be newer, more agile and adapted really to the use that it's going to be primarily aimed at. And I think we'll have a much better operation there for everyone doing knowledge work. I mean, knowledge work is basically, there's two components. There's the component of heads down, focused work individually, and that's done pretty well at home or in someplace like home remotely anywhere. But then there's this collaboration component, which is generally know, 10 to 15 to 30% maybe in some cases of the work. So most of the work is heads down, knowledge work, not collaboration, but when you wanna collaborate, you wanna do it in the right place. And having that convenient to those people will be very important.
I think there are two major questions around the future of office, shall we say? And you frame it really well. But we haven't addressed one of the questions, the two questions are, I think is a, what will it means to have a distributed office? And I think it's really important to discuss that because Some people would say that it's co-working, right. It's a co-working space where people can go, it's a WeWork, whatever or hotel hotel lobbies will be turned into partially offices. Some of the hospitality industry and and restaurants and cafes will also serve a little bit, you know, like a, not a cubicle, but like parts of the working environment for people who are just popping in and so on and so on but the problem with those, and I think that's a major flaw and major point that usually people miss, is that they are also in the C B D, they're also in the central of the city. So you need to commute that there anyway. And why would you go to a co-working if you need to comu commute anyway when you can go to the head office that still exists for free or whatever. So that's the main question. And I think the, some startups are already addressing that question because as you said yes, banks are not financing commercial real estate building, but they're financing startup or at least the VCs do. And there will be some offices or like shared offices in the suburbs because that's, that will be big as well. Like Codi for example, there's a gray startup there I forgot to mention, out of our Radius Pro also, they are doing that too. So there are many names. But the second question, and I think that will be addressed because the market will sort itself out. So if there is a need to have distributed offices in suburbs without without a commute there will be solutions to address that. I'm a hundred percent sure, especially in the US by the way, where you do have this huge commute anyway or in major European cities as well. One more thing on that. By the way, don't forget that that you live in the US and in the US most of the homes and the houses are much, much bigger. Meaning that even though if you have family or you know, kids or whatever at your home, You can still have a little sacred small little space in the home, which you call home office or something. But in, in Europe and also in us, for example, in the major cities in the central, you have tiny little spaces. So you are actually need to go to the office just to get some heads down work, right?
Yes.
But the second part, and that's what I wanted to address with you first is that what happens with the corporate real estate that is still existing right now? So that's the main question. There will be huge empty offices in the central because people are not going there. Half of them will be empty, you know, even though if you are scheduling in a hybrid solution there or something there will be huge spaces vacant or even closed down. I dunno. What happens with the legacy. So what happens with the, with the old offices that we.
Those are really good questions, by the way. How much time do we have that? Well we have as you want.
there's a lot there. But on the case of spaces in homes. I'm always amazed at, if you look at Japan. Japan has a very high office occupancy rate and did all the way through the pandemic, even though the technology existed and it was well distributed for workers to work from home. But then I saw an article with pictures of what younger Japanese knowledge workers were living in, and they were basically living in closets. They were that small. And it was like a two, two level thing. You slept on the upper part and you had a desk on the lower part or a something, something that was designed as a, as a dresser, you know, where you would normally put clothes and people would put, nobody wants to sit, you know, in solitary confinement to do work. So I could see in Japan why people would wanna get out of that environment and go to, of course. But you are right in the us homes are much larger and you know, where I'm sitting today is was designed as a bedroom in a four bedroom home in suburban Cincinnati. It's always been man cave, really. And I grabbed down, I'm glad I got this one. We bought the house because it's, it has a walk-in closet, which is really nice. And it's the only place where I had, couldn't have clothes because my wife was taking over every other closet now that our children have left. But anyway, two of the questions that you asked the important questions. Well, when I talk about the distributed office, okay. I think we also have to look at how that office space is contracted for. And that is a big component of why the distributed marketplace makes a lot more sense today, I think for organizations. Yes they give up the fact that instead of having one centralized place, they may have two or three. But you know, they aren't gonna be that difficult to get to for senior people and managers who need to go there or people to present, but it'll be a lot better for employees. Second thing is you can contract for that space. In the old days, in the traditional office environment, you would sign a lease for one year, five years, 10 years. And of course, landlords the longer they lease, the better it is for the building and there would be inducements to sign longer leases, commit to that space course. That goes to your other question about all the space that's not occupied today and what's gonna happen to it. There are major leases from significant corporations who have credit who can't do anything with that space today. And that's almost everywhere in the nation. So what's going to happen in that space is, we'll talk about that in a minute. I think. Let's go back to the re remote infrastructure of office.
Sure.
There the flex space type and whether it's co-working or whether it's spaces of service or, I mean, there are a lot of different variations of this allows the occupier the tenant to use only the space that it needs, when it needs it, and it doesn't have to pay for space when it doesn't use it. Now, that's kind of the extreme example, but I think you can create an environment where you have more suitable space in a better location, which in aggregate compared to a lease space, will be lower cost. So that's very attractive, I think, to occupiers today. In particular you know, the two components of cost and flexibility. Because there's going to be changes that we know in how people work and what they work on and where they're going to be living on a continuous basis. And that's changing much more quickly today than it used to years ago when traditional leases were in vogue. So it's an opportunity for organizations to lower their cost, get better space closer to people who actually need it and not be concerned trying to pull them back into a centralized environment or a use case that no longer exists. My own view is that, you know, most of the mandatory hybrids that are in place today, where employees are required to, even though that many don't show up, but they're required to be there on Tuesday and Thursday or Tuesday, Wednesday, Thursday, or Monday and Friday, whatever that those are contrived and artificial environments for those employees because those employees are coming and they're still having to do the knowledge work component of their work, but now they're in a place which is noisy, which is not as convenient for sure. Requires an additional hour, two three of commute time and lost time for them. And you know, there's a big concern last year. This came from Jamie Diamond and it came from, from others out in the, you know, the blogosphere. Productivity is going down. We need to get people back into the office. Well, if you track the lines of productivity measures to the return to work initiatives that really started last year you see that they parallel. So as more people went into hybrid environments, productivity went lower. The hybrid environment really doesn't work that well for almost anyone. It does provide some comfort to both organizations that they can still see their people at least once or twice a week. And to employees who don't have to make the trek every day. So it's a compromise, but it's an artificial compromise that has no basis in benefit to actually do what is designed to be done during that period of time. So my view is that over time, the hybrid, the mandatory hybrid, Will begin to devolve in a more appropriate balance between going to an office, whether it's all the way down to the C B D today, but maybe a few years from now will be less necessary to be there because people recognize that knowledge work component, that heads down component can be done anywhere. So there will be that balance. Also organizations who have made major commitments to office space, you know, kind of feel embarrassed that this space is sitting there and nobody's there. That is an embarrassment. And CFOs today are, you know, there's a keen eye to cut costs where, where possible. And when they walk into a space where they're three people, they say, why do we have all this?
Yes.
And there's a whole sidebar connotation on why there's so much space, but so I think that's the distributed office is going to emerge, but it's gonna emerge over time as the flex market is able to build out more space far more space. And it that that will become a much better environment for everyone to work in organizations.
So just to sum it up, you, you are saying, sorry, you are saying that the demand is really high for flex and distributed office spaces, but the supply is not there yet?
Well, I think, I think it's coming there are some operators who are aggressively building that, and you mentioned a couple earlier that are finding the financing to get in the market. And once you're there, I think there's a good potential there will be growth. If occupiers wanna spend more money, keep in mind the occupiers now are still spending money on that those vacant spaces, Uhhuh, and that's real estate cost. If they go into, if they expand into flex space, they still got the base cost that exists in the leases that they've got. So what that will mean is on the financial statement, the cost of real estate real estate cost goes up and that doesn't look very well. So cFOs are managing that within each individual organization. So it's more difficult to get the money for flex, but eventually that would be a lot just question.
And also by the way, it's per per leases, so obviously people are, you know, sometimes kinda like locked into that leases anyway.
So to your next question, your follow up question was, well, so what's gonna happen to all this? You know, I've answered this question several ways. I think the safest answer. I really don't know. I mean, I, I'm kind of intrigued by vertical farming. I don't know how much you've looked into that.
Yeah.
But the office buildings in many cases do provide a pretty good environment for some elements of vertical farming. And that would, could be a productive use if they have the right elevators and that sort of thing. But I don't think that's terribly attractive and particularly if you have cattle farming, that would be a big problem because, the methane problem, they have to have come up with special exhaustion. Well, okay. I think the residential opportunity is much bigger. And we've seen some of that happen. I mean, there's been a couple announcements of projects that either are approaching completion or have started New York City. So that's, you know, there's a lot of really interesting buildings in. New York is not a, you know, Manhattan is kind of interesting. It's like a multiple C b D environment and a lot of people who live in Manhattan. So that's an outlier really when you look at the traditional CBD arrangement in major cities. But. It's good to see that that's happening. There are issues with residential conversions and office space primarily associated with the design of the building and the depths of some of the spaces. To be able to get apartments or condos to have enough light coming in from the outside is the challenge. It can be done in certain cases and actually some of the older buildings, particularly like those are, that are in lower Manhattan, Generally have narrower footprints because they were built at a time when there was no air conditioning. So the, the distance from the outside wall to the back of whatever the space is fairly short. Those you know, potentially have more potential as conversions, but I think we'll see conversions.
Also sorry to jump in as the European to the conversation is that, it's also interesting to see that, how this is so different in Europe, by the way. So mostly the office, the dedicated space within cities for office spaces in major European cities are usually outside of the central.
It's kind tough to move Buckingham Palace, I guess, right? you're not gonna do that.
Yes, historical elements are really hard to tear it down in Europe. But I'm just stating that, that this won't be like one size fits all solution to turning into these office space. So it'll be, for example, Europe will react really differently in what to do with the office spaces that are not occupied.
Yeah. And one, one thing that we should mention, I mean, when we're talking about residential conversions, I think most people think of, you know, mid to high end re residential conversions. What, what it seems to exist almost everywhere is low to moderate income residential housing. That is a challenge. I think there's a huge potential there in the states, I suspect the same as in Europe.
Yeah. That totally.
How, how is there a way to subsidize the cost in some of these projects from government to get them at a level where it can be used for subsidized housing? Now, many owners and current residents of the area may oppose, you know, lower income housing. That's always a political challenge. But we have to find a place to get people, you know, off the streets certainly I'm not recommending them to go into downtowns, but that is a real problem in America.
From a future of work standpoint, by the way, I don't want to sound cynical here a little bit, but but it's, The question comes to my mind that should I as a someone who is into future work and and how the workplace is going to transform in the, in the upcoming years, should I care at all what happens with the existing office spaces?
You're familiar with Peter Drucker, who was a management mind of the last century. He, he said at some point, he's a pretty good visionary in of what's gonna happen and understood the technology that was developing, I think. And he said, you know, down the road our children are gonna look up at these buildings and, and marvel at the beauty of some of these office buildings. And then they're gonna ask the question, what did they do in them? You know, because things will be so different 20, 30, 40 years from now, and I think that'll happen. But to your question, I don't know that you necessarily need to worry about, you know, individual buildings. There are some very attractive older buildings that people like, and they, they would like to see maintained. It's almost historic in nature. But there are many, there pretty much plain Jane properties and yeah. Those ultimately are gonna wind up in whoever is holding the bag right now on the financing, I think. There, there'll be many pension funds. There'll be some municipalities with municipal bonds and things like that. And it will be a distributed pain. It's probably not gonna be to one or two individuals, although there will be some who will take it on the chin there. Major developers who kept and held their properties. So I don't think you need to worry about that. I think more the, the more bigger concern. What happens to cities going forward and how are they going to be revitalized? Because there's been such a loss in, in activity primarily in the office sector and related retail activity, restaurants and street clubs.
Yes.
And all of that, that energy that you, you sense in many many downtown corer did up until the pandemic. A lot of that's gone. So what our communities going to do, and I think there's a lot of really good research going on in terms of how to get that changed. You know, how to create these 15 minute communities, maybe. And hopefully some of that will emerge as a positive step, but it'll be the next phase of cities.
What I also think is that some parts of the cities will be devitalized, right? So it's like, I mean, this is going throughout a little bit but other parts of the same city will be revitalized. So for example, the suburbs. So again, just mentioning that we discussed this before, that some of the distributed parts of the office trends it means that some smaller, maybe just meeting rooms will pop up in suburb areas where, you know, people just slept there pretty much. And, and that's it. Right? But now they have some small spaces and obviously if you have the smaller little space where 10 people come together and, and meet or do something, whatever. Obviously there will be a restaurant which will pop up next to it by the time and grocery stores.
An aggregate in the metropolitan area it may balance out the issue.
Yeah.
At least in the States is that many communities in the US. Are designed around municipalities that are discreet and you have a lot of cities, which the city boundary is relatively small, including the cbd and, you know, some regions around it. But the suburbs, the suburban communities are all separate municipal entities. And the tax base, yeah that the city had probably will be shrinking. So that's a problem from a financial perspective to provide the basic services, police, fire, all those things. That the money to come and to fund that is getting smaller and smaller. So that is an issue. I think it can be fouled a lot by going to a metropolitan format. But again, there's a great political resistance doing that. For obvious reasons, I guess.
We saw that trend by the way in the valley before, so mm-hmm. Right. So like San Francisco downtown, some of the small little villages around the city became super rich just because of the tech sector and and yeah, and super insane in terms of population and whatever. So we saw these trends before, I guess in small scale. We might see it in larger scale as well.
Indeed.
Yeah. Oh I think you might be able to give some insights for us on on how should we, or can we, can we at all create a little bit better office environment for the future? So you mentioned a lot currently listed large office spaces special older ones they're not convenient for knowledge work or collaborative work. But the distributed workforce will also need a distributed office. And if we will get there what do you think? How the new type of office will look like from a pure, I don't know, physical space perspective, for example.
Well, I think there's a lot of good initiatives now underway to describe what the new office future looks like. I think it's much more collaborative space than heads down works stations, for example. It has different size rooms. It has rooms that can be reconfigured pretty easily that are designed to bring in others with technology, which, you know, at some point, you know, will be moving to some type of hologram that's convenient and easily done and will be very real. There'll be facilities like that for sure. And traditionally the only thing people talk about is how we can make the office component of work better, because that's traditionally what is done. There's no industry that supports remote workers in their homes or in some other place. So you don't see anybody coming out and saying, Hey, this is be another better way to do remote work at, you know, wherever you do it. So that, that industry doesn't exist. Maybe a few cottage industry type firms, but I think there's brain power in the design, the interior design community with good sense of where things are going to be able to design in continuously improved interior plans for office space, wherever it may be. Whether it's distributed or whether summers, it still remains in a maybe a smaller, but a downtown type location. There's a lot of people doing that, and I do think it'll be a lot more collaborative and welcoming and inviting. And maybe free coffee would be good. I know they got rid of that but free coffee does a lot, particularly when you're coming in the morning. I think where I think there should be a new focus, frankly, is on the remote worker, what things can be done to help the remote worker. Do his job or her job better, easier, more efficiently? Are there new technologies that can help support that activity beyond Slack and some others that have been around for a while now? And I think that would be an interesting area to investigate. And whoever wanted to break out into the remote workplace world. I think there are opportunities there in terms of providing, you know, good equipment you know, the right kind of lighting, if it's a visual video situation. The right furniture you know, how to provide health and wellness activities as well. All that I think is an important part of maintaining and supporting the remote worker. We don't see anything about that, so let's start doing that.
Perfect. Yes, totally. And also by the way, when you have a big office as a company and and you expect people to come in, you have a, and this is, I think it's an interesting concept and idea. You have a standardized experience, right? So you come into the office, pretty much all the desks look the same, same chair, same whatever. You get the same computer meeting rooms are the same. Now how can you take that concept of from the big office to your home office? That's also an interesting concept. So let's say you have, you have a bigger corporation, which, you know, can, you know take on the money issues and then the financing of that. And they have like, I dunno, 70% of the people working from home, working remotely. And they help to standardize their workers home office. That would be, I think, a really interesting idea to have, maybe not that won't happen, I dunno. But but still, companies need to be a little bit more involved in how people work at home because the boundaries are, you know, there is no limit now. Anyone who talks about work-life balance in 2023, please stop it. There is not, it wasn't there anyway. But now it's, it's totally fluid.
Indeed. I do think we could make some major steps for people. I do remember early in the pandemic days I was talking with one of financial officers at the company I was with at the time. And she was working at home and this was in a New York apartment, which was, you know, fairly small. She was working, I think, at the dining room table, and the only monitor she had was on her notebook computer, which when you're doing financial work with Excel sheets that are very large, very difficult to do that. And I remember I asked her, you know, why she didn't have, you know, more screens? She said, well, you know I don't think I can get this covered by the company. So I think and I, I'm sure there was, that's, that's changed over time. But I think organizations need to look to make the investment that they used to make, you know, in offices quite rapidly and freely to put some of that out in the field where it really will benefit the workers.
Indeed. Yes. One last question. I think it's important to discuss and we are quite short on time anyway, so we talked a lot. That's, that's fine.
We did. It's been a good time.
I enjoyed it. Right. So 1 last question that on the media outlets we see. I mean, Jesus is so strong in terms of of a topic back to the office movement. So, Why do you think we have that why do we see that many articles around executives trying to pull people back into the office? And if you would have a crystal ball what would you see what will happen with this movement in the, this year and, and the next year?
That's a great question, really. I mean this whole return to office movement, I call it, you know, it's RTO and my correlator RTP returned to the past this initiative to try to get back to the old normal has been underway since the very beginning of the pandemic, and there were many who believed early on that that would ultimately happen. I mean, I can remember in the initial stages of the pandemic the question was, this was in March, April, 2020. Well, you think we'll be back by August? You know, that sort of thing. And we know that you know, we really dragged off another year and a half before any meaningful effort to get people back happen. And over that period of time, You know what emerged was, of course that productivity went up because we had more remote work. And people eventually decided, well, I don't really want to go back to that. That led to everything that's happened so far. But the reason I think why you'll in the press, all you see is what how, what is the success today of the R T O R T P movement? You know, we have this castle index, it basically measures swipe card swipes in major buildings, in 10 markets in the us So there's a few hundred buildings and it compares the number of swipes today to what occurred, you know, just before the pandemic. What that data shows is that, of course it fell away off from like 90% or a hundred percent, 95%. That was, the beginning was a hundred, I guess, whatever it was at the beginning to, you know, about 10% pretty quickly in the spring of 2020. And over that time from then until now, that index has gotten back to about 50. So Castle would tell you that office spaces are occupied about 50% as much as they were before the pandemic in 2020. Now a lot of people will, you know, throw that out as being ridiculous. It's not really validated statistical. It's only an indicator, a trend or, you're right. Yeah. Yeah. And there was an article recently that I commented on where someone tried to to get a similar index out of how many water coolers were sold, you know, the new digital water coolers. And they tried to, they tried to make some sense out of that, which was kind of funny. But I think what, what the question the people who were at risk financially, which would be cities, owners of buildings, financier of buildings you know, the big banks, the investment firms the people who have a vested interest in maintaining the status quo or going back to what was there before. Have big clout with newspapers, magazines and all the press, you know, other than maybe Twitter, where they're equalized there. But in terms of driving stories you'll get you know, things in Bloomberg, well, actually you'll see all the press talks primarily about you know, someone is coming up with an edict, so the, you know, they're gonna get people back to the office. I think the message there is, the government and business bureaucracy those invested really have a vested interest in getting people to go back to where they were as opposed to trying something new. I mean, it's not anything that's unusual in this kind of situation, but those with a vested interest and particularly the cities, you know, want people to go back to where they were. So that's why you see all the press, of course, and I actually raised this point with a couple reporters within the last week. Why, you know, why don't we see more stories about companies that have gone to voluntary hybrids or voluntary hybrids in some remote format which seem to be working very well. And there are good examples of it, but you never hear about them. You have to scrape to get the information. It's not publicized. And I think we should see more of that and hopefully we'll see more of that because there are some really good stories out there. So I think that's why the press is oriented the way it. And that's why we see more about people trying to get back to the past as opposed to people trying to create something new. To continue to improve what we have, which is actually better than it was when we started.
It makes total sense.
Well, you know, change, change is, change is always difficult. And there is great resistance to change because it's not comfortable anymore. I don't know what's going to happen. I'm unsure about it. And You know, the best, best, the best example of this I don't know if you've seen it, and you, if you anybody can find it, it's on YouTube is the story of Bertha Bens the, the wife of Mr. Benzs who started Mercedes-Benz in Germany. This was mid 18 hundreds. And how in, I think it was 1887 or something like that rode a car a hundred and plus kilometers from where she was with her husband to her family home and drove a, you know, a very primordial vehicle with just her and her two sons. It's a great story. It's on YouTube, Bertha, Bens the drive that changed everything or something like that. It's worth seeing. It's about three minutes. Mercedes developed it's really well done. I would encourage everyone to take a look at that and you can put that same mindset that you see along the way in that video to where we are today in the office discussion.
That's so interesting. I think we are fighting the good fight and again, Thank you for your time to allocating this to this movement. This was a truly inspiring conversation and I think it's really rare that we can discuss this topic with someone who have like a really great historical knowledge and historical perspective on all things consider. And I think it was really great.
Peter, thank you very much. It's been great to be with you. I did enjoy the conversation and look forward to future.
And thank you. And also, I almost forgot to ask this question. This is the last question. Where can people find you if they want to pull you into the movement and ?
I'm easy to find on LinkedIn, so no one should have any difficulty there. That's probably the best place. And there's some other contact information on LinkedIn.
Perfect. I will link everything down below in the episode transcription and episode post. Okay. Thank you very much again.
Thank you, Peter.
