Podcast S1: E2 – Resilience in Real Estate

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Welcome to the Corporate Real Estate Roundup podcast, with your host and former CoreNet Global CEO and CFO Peter Holland. He meets with CRE thought leaders to discuss some of the biggest questions industry-wide. CRE Roundup starts now.

Peter Holland:

Welcome, everyone! Welcome to our most recent thought leader interview. Hello, I’m Peter Holland, co-founder of BenchCore, now acquired by RefineRE. This Dallas-based prop-tech company makes sure that smart people and corporate real estate departments have smart data to work with and build data foundations so they can make better, faster decisions. So anyway, let’s get started. We don’t have a lot of time today, but I’m very excited about the conversation.

We have Professor Paul Thurman from Columbia University with us, who is in management and analytics. So obviously, very apropos for the kind of work that we do. And we want to plumb insights with Professor Thurman about decision-making in the corporate real estate industry in a broader sense and see if we can come to some helpful, actionable ideas for people at CoreNet and beyond who may want to listen to this. So why don’t I turn it over to you for a second, Professor, and you can give us a little bit more of a background on your curriculum vitae.

Paul Thurman:

Thank you, Peter. And good morning, everyone from New York City. It’s a delight to be here with you and to be working with BenchCore and RefineRE. Great to be back also speaking to many of our listeners with the CoreNet organization and in the CoreNet network. It’s been a delight to be with you at various summits, also doing some teaching in the different programs that CoreNet offers to its members. My background, as Peter mentioned, is in management analytics. I grew up first in investment banking, then management consulting, and turned all that into a career now in academia. I’m happy to be on the faculty at Columbia. I’ve been there for a little over 20 years in various schools, whether the business school, international affairs, and public policy or public health, and have had a chance to take some of that knowledge and research that I’ve done and apply it to lots of different areas, whether in finance, pharmaceuticals, healthcare, or corporate real estate. So, Peter, great to be talking with you after many years of having a chance to work with you in many of your various roles that have been focused on management and analytics. And hopefully, we can come up with some good insights, especially given the signs of the time that we face today. Thanks for having me. 

Peter Holland:

No doubt we are in times that demand the kind of work that we’ll be talking about. One of the things that I wanted to posit here is that I think the general theme of return to work and the locus of work has been widely covered. It’s difficult to open up popular press from the Wall Street Journal, New York Times, etc. — somebody’s commenting on this. No doubt, the major service providers, Colliers, Cushman & Wakefield, Newmark, and so on, have been researching this area, as well as consultants and architects, and of course, corporate real estate practitioners themselves. So, I’d like to dig a little deeper and not necessarily discuss that specific topic, but what I’d like to explore is what is required on the part of a corporate real estate executive as part of the decision-making process? Well, how can they have the right information in front of them and make the right decisions at the right time, the right way? And I’d like to just kind of chat about that for a second. Can we maybe just start with some general observations in that regard and then get a little more specific? 

Paul Thurman:

Of course! Let’s start with the more general sort of trends and thinking out there. I think, you know, given the past year or so of the pandemic, there are a couple of words that keep coming back in the vocabulary of business, agility and resilience. All of us were caught off guard by the pandemic, and many of us thought that it would not last as long as it has. Or it would not be as severe as it has been. So many of our tried-and-true business models and ways of thinking and ways of decision-making have really been tested because there wasn’t a playbook for this. So, being able to be responsive without being led by only that response and trying to be proactive and try new things during this time has been a bit of a challenge. And it’s not just corporate real estate. IT organizations have struggled to get access to folks. So, they could be more mobile in terms of their workplaces, supply chains, whether there’s a ship blocking the Suez Canal, or shortages of these little, tiny things called semiconductors, which now make an automobile market hard to satisfy. We see lots of disruptions and corporate leaders trying to do lots of different things to move around that. Corporate real estate is no exception. It’s interesting that literally over a weekend, corporate real estate went from managing large blocks of people and places and large budgets with very long-term timeframes to suddenly micromanaging individuals in hundreds, if not 1000s, of different places and spaces with very small budgets. So, we all went from being in these large offices to being in our individual homes and workspaces to conduct work with the expectation that we would keep things moving at a reasonable pace. That’s a significant management challenge to figure out how to do that. And now we’re seeing the back end of that challenge. If people have been working remotely, how do we get them back into the workplace? When do we get them back into the workplace, and who needs to come back to that workplace? So to your point, a lot of stuff has been thought of about that. But from a corporate real estate leadership standpoint, how do I manage that? When is the right time? Do we make a corporate proclamation around returning? If so, how do we create that infrastructure? Even articles that have made headlines recently: you mentioned the Wall Street Journal talking about, you know, what do people wear when they go back to work? Apparently, it can be anything. So corporate real estate has become a hot topic very quickly. If it wasn’t on the hot topics list before the pandemic, it is obviously one that is hugely important now as corporate real estate has made this shift from thinking big, big buildings, big employee masses, and big budgets to thinking very small. And that transition has been easier for some versus others but continues to be something that stymies that resilience and agility in this day and age.

Peter Holland: 

I think that’s a wonderful overview of what’s been visited upon us and been visited upon the corporate real estate director. And I think many people who have ascended to those positions of responsibility in real estate have historically gotten to those positions because of their superb operational excellence. They know how to negotiate deals and get space built out. They know how to do that effectively. Make the space as efficient as possible. I mean, deciding how many people can get into the space. All that’s changed. So, I think, what you are pointing out is this shift from the macro to the micro is rather fascinating. How can a corporate real estate director make sure they’re equipped now that they’re at the table, right? So corporate real estate leaders have long aspired to be “at the table” to have interface with the C suite. And corporate real estate leaders have long felt perhaps, you know, stepchild or neglected in the hierarchy of the taxonomy of a corporate real estate leadership. That’s not true now. So now that they’re there, they’ve achieved their aspiration. What do they need to do?

Paul Thurman: 

Great, great question. And I think you’ve hit on exactly sort of that main pain point that’s in corporate real estate. Suddenly, a corporate real estate executive who wants that seat at a table, but has been focused on the present tense, meaning execution delivery tactics, has almost instantly had to shift from being a builder, if you will, to becoming an architect. Meaning before, when things were quote-unquote easier, we had employee populations and infrastructure and large spaces to manage, equip, and optimize. A lot of that depended on relatively stable data, relatively known quantities, and processes that had been battle-tested. We knew how to move people from place to place. We knew how to outfit a space to have all the necessary infrastructure needed to make work happen. So, a lot of it was tactical. So, you know, negotiate the lease, bring in the right people to do the right fit-out or build-out, and so forth. And then monitor compliance and changes as they move forward. Very much a builder attitude, “Hey, I need you to build a house here. Here are the specs, go build. All of a sudden, we’re asking corporate real estate executives, not only to now, enter the C suite, but also lead the discussion and be very future-focused. Because if you want to be agile and resilient, you have to do the Gretzky thing. You have to figure out where the puck is going, not where it is. So, not only are we asking corporate real estate executives to tell us where to go as opposed to what to do, we’re also asking them to do that with data that historically has not been utilized as much as it should have been. So that means that a corporate real estate executive not only now has to become more of a leader and visionary but more of the architect as well. What do I want the house to look like? Not just how do I build it? So, that visionary needs to decide what is it going to look like, but he also needs to use data and information and benchmarks, which comes back to your sphere of influence, Peter, that has probably been underused in the past. In the past, we see a lot of trends where the sellers have all the information. So, if I’m selling you the space, I know how much space there is, I know what the price is, and I know what my negotiating position is rather well. But now on the buy side, where I’m trying to figure out where to put people and how to equip them, I actually need more of that information to use myself. I need good benchmarks. I need to know what space actually costs, what those trends are doing. I need to know what leases look like because leases today don’t look anything like they looked like a year and a half ago. And there’s a lot of information that I need very quickly because the chairman or CEO is going to invite me in to talk to the cabinet of essentially the C suite. And I need to be armed with information very quickly, very relevantly in ways that I haven’t had to think about it before, and that is in the future tense. That’s a big challenge to happen quickly. So, not only do we expect our companies and our leaders to be more resilient, but we also now have to have a real estate function that operates more as a visionary architect, as opposed to a just-in-time builder.

Peter Holland:

We have excellent observations. I think that’s precisely what we’re seeing. I don’t mean to describe it in this way, but I’ve often said that. Real estate’s not badly managed, and many corporations, most corporations are smart people. They’re managing it properly. It may be, to some level, undermanaged. And now the challenges. You use the Wayne Gretzky example. I used to say the Yogi Berra interview, you know, you can’t get there if you don’t know where you’re going. Now they’re going someplace new. So, you see a lot of industries and a lot of functional areas. And you’re not just dealing with corporate real estate organizations in your view of the world. Is this a similar problem that you see in other functional areas? Everybody was caught, I suppose, flat-footed. But could we suggest that perhaps this challenge is even greater for corporate real estate? Are HR departments, IT departments, etc. running into the same thing?

Paul Thurman:

I think you’re absolutely right, Peter. This is not a problem that is unique to corporate real estate. I think any support function or quote-unquote, back-office function, of which there are many, all of which are critical, will suffer the same challenges. Right now would be a tough time to be a Chief Information Officer, Chief Human Resource Officer, Chief Corporate Real Estate Officer, CFO, and certainly a CEO. When you aren’t sure where your assets are, you’re not sure if processes are standardized. Your information technology has to meet demands that it’s never had to before. How much have we focused on retention and training in the past year? While we’ve all been struggling just to keep things going, many of these back-office functions have suffered from the same challenges that we’ve just talked about. How do I move very quickly from being tactical and managing something to now thinking about what the future of that something needs to be? What does IT need to be as we automate more and come out of this work from home or continues to support it in some way? How do we manage talent? How do we get people to continue to get training? How do we manage our capital and our operational expense, since a lot of those have changed now in terms of where we’re placing our bets and placing our money to keep our businesses going? So, I think many of those infrastructure functions will have many of the same challenges, and I think there’s a couple of common denominators. One, how do I get good data quickly for decision-making? And then, once I make those decisions, how quickly can I either unmake them or pivot from them as circumstances change? So, not only have we seen this pandemic happen, and if you look at the Deloitte reports and others from other consulting firms, these types of shocks are not only going to continue, but the speed at which they affect us will increase. So, we will see more shocks like this in the future, and we have to be able to not only respond but lead quickly. And I think what corporate real estate and many of these other functions are discovering is these are not things that you can manage yourselves out of: “We actually need to lead ourselves out.” And that means I need good forward-thinking data; I need a good sense of what the environment looks like and that you know what’s going on in my neighborhood and other neighborhoods that could affect me. And I need ideas on paths forward. So, that’s much more of a strategic mindset than an operational one. And that pivot has been easier for some and difficult for others. And, you know, even companies that you think of as very responsive and agile, like the Amazons, the Walmarts, etc., also face those challenges. So, I don’t think it’s constrained to corporate real estate. I don’t think it’s constrained to only companies outside the Fortune 10 or Fortune 50.

Peter Holland: 

Yep. Everybody, I think one of the things that this brings to mind is that another one of the aspirations of corporate real estate has been a better integration with information technology and human resources in particular, but also integration with other functional support areas within a corporation. And the pandemic has delivered that reality in ways that it wasn’t done. So, this aspiration, not that it was accomplished because of design, was accomplished because it was dropped at the doorstep. And, for example, one of the things I think corporate real estate people need to pay attention now to talking about productivity, recruiting, retention, and employee collaboration because you’re collaborating over space and time. In some instances, employee satisfaction and the war for talent seem to have accelerated, and I think there’s going to be a greater focus on environmental sustainability and reporting and compliance on these areas. But I don’t know if you have any additional plots to some of the things I just expressed. It’s an interesting trend that supports what you’re putting forth about thinking in more complex ways and having data available to think in more complex ways and make better decisions here appear.

Paul Thurman: 

I think you’re right. I think the proof of your hypothesis is relatively simple. I think BenchCore and RefineRE and other folks in the sort of knowledge and information space, whether it be corporate real estate or other functions, are now starting to get unusual requests. You don’t just have corporate real estate partners coming to you asking you for information. You have those chief talent officers or human resources officers or CIOs coming to you and asking you about footprints and costs and trends in terms of labor movements. Those folks weren’t asking you for stuff, you know, even a year ago, right? You’re starting to get requests from an unusual but quite welcomed set of inquirers, right? So, if those folks are interested in that type of information, that must mean that this information that you possess and that benchmarking organizations have must be of great utility to a much broader range of functions and parts of the organization. In fact, it wasn’t that long ago that the role of a chief executive officer or president was really focused on leading an organization, communicating a vision internally, and getting people aligned to move forward. But now a CEO, who could have a microphone put in front of her on a moment’s notice, will be asked about voting rights in a particular state or will be asked if is it really fair to force employees to be vaccinated or to require them to come back to the office? JPMorgan Chase, for example, is requiring all of their staff to come back to their offices, and they’ve been applauded for that. But they’ve also been criticized for that. So, all of a sudden, a CEO, much like a corporate real estate executive, not only has to run something but also has to be a bit of a Secretary of State, Secretary of Treasury, or Secretary of Health and Human Services. If you think about the employees and if you intersect that with some of the trends that we see around civil and human rights, a big point that’s out there now is the human capital space. Those are discussions that corporate real estate traditionally was not really involved in. They simply took the results of those discussions and deployed. Now, they’re actually being asked for their opinions. Yeah, and there are two ways to form an opinion. You can either make it up or have it informed with some data. So, I’m actually excited to see the types of people asking you for your data and how you’re serving, you know, a group of constituents you didn’t have a year ago.

Peter Holland: 

Yes. And, of course, there are more companies all the time. And I guess we’re proud to say that we think they only are some of the finest companies that we have, and they’re curious people by nature. Forward-thinking people. That’s why they engage in the kind of work that they do. I do know that they do struggle to integrate disparate data sources across some of the spectra of enterprise departments that we’ve just been discussing. And, as you know, there are companies that make a very nice living helping companies integrate ERP systems, but then, you even get down into systems that deal with managing the talent and some of the other things we’re talking about: how to get that information put together in a coherent way that it starts to reveal the truth. And that truth can then be embedded in your decisions. And, you know, that’s a good day where the data request is no longer “Let’s run around with our pants on fire, you know, for the next three days trying to cobble together an Excel spreadsheet” but is a structured approach to having data that is instantaneous. And in a visual way, it even helps companies realize how to get to the best conclusion. So I think we’re just about burned up the clock here. I know you’re a busy guy and need to get back to other things. Any kind of final comment you’d like to share with us? I applaud the work you do because you take the work of the academy and translate it into a practical reality that is of use to the practitioners, the people who get out of their bed in the morning and their feet hit the floor and they’re off and running to do the work they’ve been charged to do on behalf of their company. So, that’s a very valuable exercise. And the separation of the two, I think, is probably endured far too long. So anyway, thank you for doing that. And I’ll let you have the last word because you probably would be happy to do that.

Paul Thurman:

Well, thank you, Peter. First of all, thank you for having me. And it’s a delight, as always, to speak to you about these topics. And I think you’re right. This bifurcation between the academy and the practitioner has gone on for far too long. And if anything has accelerated the integration of those two things, I think it’s been, unfortunately, this pandemic. I’ve even had colleagues tell me, you know, it’s kind of interesting, the way we’ve been able to apply some of our learnings in management and public health. And it’s good that we didn’t let up a pandemic go to waste. We were actually able to use these as ways to move things forward. And I think in discussions that you and I have had, you know, outside of this podcast, we’ve talked about the broader ecosystem that corporate real estate and these functions live in. Corporate real estate is kind of like the word strategy. You can’t just pin it down to be one thing. Corporate real estate is a bit of consulting, a bit of finance, and a bit of being involved with professional associations like CoreNet. It’s part data analysis and being a statistician. It’s also part leadership and nuanced motivation to get people to move in different directions. And I think what we’re seeing is that it’s becoming a much bigger strategic piece in this ecosystem, because right now, there is confusion. We’re not quite sure where we’re going to work and how we’re going to work to continue to do the things that we need to do. And you look at these various perversions that have come across in the past year. People who are working at home are actually burning out more than when they were at the office. Yet, we used to complain about the commute. Well, we don’t commute now, but we’re complaining about since we’re always at home, I guess we can always be at work. So, and again, those are things that might have in the past been handled by a human resources officer or an operations officer, but now, real estate is coming into the picture saying, “How are we going to address this?” And I cannot think of a time in history when a corporate real estate executive has had to think about the mindset of workers beyond the atmosphere that they work in or the infrastructure in which they work to be productive. So, I think that requires a new or an extended mindset for a corporate real estate executive, probably more of a focus on the executive part and less on the corporate real estate. And I think what’s great about the work that you and your colleagues are doing, Peter, is that you’re actually arming them with forward-looking information that will help them make better decisions. Not that information is, you know, the answer, but it helps inform an answer. And I think just like any function, the more data that a marketing organization has about its customers, the better job it can do delivering products and services to them. In the same way that the more armed real estate executives are with true, you know, forward-looking information about employees, places, spaces, and time, they can do a better job of taking advantage of that new found seat at the table and actually helping shape the ways we work in the future. In fact, a lot of consultants don’t even call it the new normal anymore. They call it the next normal because we’re going to have another one. And we’re going to have another one. So I think in, in the hottest of fires, the strongest steel is forged, and corporate real estate is taking good advantage of that, thanks to the data, and information, and insight that BenchCore and RefineRE provides. So I applaud equally the efforts that you’re doing to arm a historically, not terribly data-focused function with a lot of data that will help them make better decisions and help lead us out of this in a true leadership fashion. So again, Peter, thank you for having me.

Peter Holland:

Thank you. Well, Professor Paul Thurman from Columbia University in New York City, thank you so much for your time and sharing your thoughts with us today. And duly noted that the requirement to be an executive in corporate real estate probably requires a renaissance woman or renaissance man. And I attribute the “Next Normal” to McKinsey. I think that’s where I first thought we need to get. We need to prepare for the Next Normal. So thanks, once again. Please join us for the next thought leaders interview and I think there’s enough here. We’ll revert, and I think we should check in some months’ time and see what’s happened. And then we can see where we think it’s going from, you know, a new point in time. So thank you again, Professor Thurman. Have a good day. Thank you all for joining us. Thanks, everyone.

Thank you for listening to this month’s episode of CRE Roundup. Join us next month as we continue to discuss the trends defining the corporate real estate world in 2021. This has been CRE Roundup.