ABOUT THIS EPISODE
Jonathan Wasserstrum, CEO and co-founder of SquareFoot, talks to Frank Cottle about building a one-stop-shop for growing companies, and how workplace flexibility helps companies thrive by operating more efficiently, cutting costs, and building a stronger team culture.
Frank [00:00:17] Welcome to the Future of Work podcast. Our guest today is Jonathan Wasserstrum, and he’ll be discussing with us flexibility in the workspace. Remember, you can also tune in and subscribe on Apple Podcasts, Spotify, Google Play, Stitcher, TuneIn Radio or Podbean. So. Jonathan, welcome.
Jonathan [00:00:40] Thanks for having me, Frank. Great to be here.
Frank [00:00:43] Jonathan, you and I have known each other, really since your very first days starting your company. And it’s been very exciting to watch the growth and the changes, the evolution that’s gone along. Can you tell everybody a little bit about SquareFoot and how it takes a bit of a different position than many of the other systems within the flexible workplace?
Jonathan [00:01:10] Yeah, it’s been quite the ride so far. We’re just getting started in a lot of ways, which is a little sobering considering we’ve been at it for eight years now. It’s been fun. SquareFoot helps growing companies solve their real estate needs. We do that in several ways. We have a listings platform which brings transparency to our clients. We have an in-house brokerage team that is that trusted advisor that they want and need next to them, in every step of the process. And finally, we have a couple of flexible space offerings with PivotDesk, which is essentially like Airbnb for office space. And in the middle of last year we launched a new product line called Flex by SquareFoot, which helps our clients solve issues around term. I want to be this one-stop-shop for these growing companies as they go from 2 to 20 to 200 and beyond.
Frank [00:02:10] Well, you know, I was just at the Future Offices Summit in New York last week or so, and while coworking is really a hot topic, everybody that was there or the great majority of people there were really large companies trying to figure out their own flexible workplace strategies and how to use those strategies to be competitive in the talent war. How do you see SquareFoot being that one-stop-shop and, I’m not asking for an advertorial here, I’m asking for a perspective based on your experience at JLL, where you would had seen a lot of this as well, based on the needs of large companies — not just small solopreneurs and what we think of as classic coworkers — to attain flexible office space?
Jonathan [00:03:07] You know, it’s interesting and it’s one of the things that we’ve seen firsthand here in everything we do and also more broadly in the industry. I actually think the number of companies that don’t want flexibility is smaller than the number of companies that do. And, clearly it’s no brainer and like no questions asked, if it’s you and me who have our own startup, two people like what are we supposed to do other than sign a short term lease? There’s no way we’re gonna commit to a 10 year deal, but we’re seeing that desire for shorter term and more flexible deals across the board. When we say growing companies, it’s not just startups. It’s far from just startups. We work with law firms and financial services firms. They’ve been around for 20 years. Those companies are probably also still growing. And the way companies get built, regardless of their stage, has completely changed. The way that the real estate industry provides solutions for that has not. And we do, for average deals, 5000 square feet, some of those are for a single location — this is me and my company of 30 people. We also do those 5000 square foot deals for kind of satellite or branch offices for some of those Fortune 500 companies. And now we’ve seen that continued desire across the board, regardless of age, regardless of industry, want more flexible options. And more interesting than that is that it’s not a one size fits all from a flexible perspective. You might have a headquarters location in one city and then a satellite location maybe within that same city, because you don’t want people traipsing all around town. So one of the things we’re just starting to think about is when, your solution to a client incorporates all of those different real estate solutions.
Frank [00:05:10] Well, let me reference something specifically. I chat with a lot of CFOs of large companies, and I’ve been working in the flexible sector for 40 plus years myself. One of the things that comes up when you say people don’t want to sign long term leases — we understand that — some of the motivators are having a flexible workspace plan for their employees so they’re competitive in the talent search area. But also some major adjustments that large companies in particular are making to their balance sheet. And interesting numbers came up the other day and I’d like your comment about them. One of the numbers that came up was the average employee lifecycle within a global Fortune 1000 company is just under seven years. That’s how long the average employee stays with the company. So they’re looking at their employee churn. And one of the comments that several of the CFOs had agreed upon is they wanted to reduce their overall lease liability for their fixed assets space to match that churn factor on employees. So they wanted to take their average lease in their portfolio down from about 10 years or 11 years down to six and a half or seven. Is that something you’re seeing or are you just seeing things, more on a transaction basis? In other words, are people doing this strategically or tactically?
Jonathan [00:06:48] I’m not sure that employee churn is the right metric to be benchmarking the amount of space and the length of that space to.
Frank [00:06:57] I agree with that, I think utilization is a lot more relevant.
Jonathan [00:07:02] Yeah
Frank [00:07:02] But that was a number that had come up and one of the metrics that people were looking at in terms of a very high level.
Jonathan So if, I need 100 people and if I have to cycle through those hundred people four times in the next 10 years or everybody stays start to finish in 10 years, I still need 100 desks. So again, I might be missing something there. But at first blush, I’m not sure how the two are related. Separate apart from that, people are looking at flexibility both from a strategic perspective and a tactical perspective. It’s interesting you talk to big law firms and they’re thinking about it the same way, too, which is… law firms are an interesting group because they typically have pretty high cap ex when they move in because they customize the space a lot. They tend to be more office intensive than the traditional, the new traditional layout you’d expect, and because of that, they need to sign longer term leases. But the law firm industry is also growing in the sense that like any given law firm, generally things are going to be bigger tomorrow than they were yesterday. So how do they take those growth assumptions into account when they are trying to sign a lease, especially if that lease has to be a much longer term.
You know, I mentioned in passing we have Pivot Desk. We haven’t really tried to customise it too much for the enterprise yet. But that’s the problem that we’re trying to solve there, which is, even if I knew I want to be in my space for five years, because, by the way, the thing that a lot of people don’t talk about as relates to flexibility is not just that I don’t want to sign a long term lease, but people don’t think about the costs of moving. Right? And that I don’t think gets talked about enough. So the nice thing that Pivot Desk does for somebody is it helps them right size their real estate costs within the envelope that they’re in today. So I can go inside a 5000 square foot lease because I believe that in four years I’ll need all 5000 square feet. And then I can offset some of my costs today by putting 10 of those desks on Pivot Desk, which decreases my costs today. More importantly, it makes it so I don’t have to move every two years. And if you think about the time and effort and distraction that every move is and then somehow figure out how to factor that in, I think that a complete solution set should try and solve that, too.
Frank [00:09:39] Yeah, it would seem that migrating over to Pivot Desk that, that type of solution is good. But I wonder, how do you match up the compatibility between the two companies? I’m a law firm, let’s say. Do you, try through Pivot Desk to encourage another law firm or an accounting firm or a marketing firm? How do you manage that compatibility there? Because there could easily be some cultural conflict between companies sharing space.
Jonathan [00:10:10] Sure. The short answer, not to be too flippant, is we don’t care. So the nice thing about Pivot Desk is that It’s a marketplace. It’s not high touch on our side. And it’s our job to essentially fill up the supply side with people out of extra desks and then fill it with people who want those desks. Then those two people come to an agreement, not on pricing — that gets done through the platform — but on, hey, is this a roommate I want to have? So, this gets back to… I don’t think the notion of transactions happening purely online without tours ever really happens, at least in any short term future that I can see. So let’s say that, a law firm posts something on Pivot Desk and then tomorrow they start getting inquiries and they have five tours. You know, part of that tour is like a matching process and he can decide, that law firm can decide which of those five people he wants to room with. But we’re never saying, great, you’re a law firm, you have to work with this like sales oriented, high growth startup.
Frank [00:11:19] Okay, Jonathan, with Pivot Desk, you’ve got a wide variety of space types. How do you curate that space versus just take anybody, so to speak, that wants to get their space utilized like it would be with Airbnb? How do you curate the quality of the space and make sure it really is a proper working environment?
Jonathan [00:11:41] We haven’t had issues. And until we start having issues, I don’t think we want to get too much in the curation business because what you and I might think is a great workspace, two other people might not, and vise versa. So we’re not trying to maintain that everything on Pivot Desk as a fit for everybody or vise versa. This gets back to… like I’m a free market economist in general and as relates to office space too, I guess, and we’ll let the individual users, the guests and the hosts decide what’s the right fit for each other.
Frank [00:12:21] Right. OK, so it’s pretty much self-selecting criteria, if you will. One of the things that we’re talking about when we talk about flexible workspace, is, often times it is by definition, remote. I know you run some offices remotely. We run offices in – gosh – 54 countries. So we’re very used to remote work and remote teams. How does SquareFoot help with its experience in this regard to help advise or set other companies up to have a better experience?
Jonathan [00:13:01] I think if a company opts to do something remotely, I think you have to do it deliberately and probably that’s a statement for anything you do at the company level, but especially as it relates to remote. So we have in Belfast, Northern Ireland, a 10 person office and we are very deliberate with how we incorporate them in everything we do here in New York, at headquarters. Well, we’ll do bi weekly all hands and on your big screen is a live feed to them of us and us to them.
Frank [00:13:40] Okay. So you’re well invested, I say, in the video approach to daily meetings and all of that so that the team has a sense of continuity. Just before our call here, I had a meeting with our team in Monterrey, Mexico, in London and in Lexington, Kentucky. So it was all done on video as well. So I get that. Do you think that when people are looking at flexible workspace, having their own system in or having a system that allows that, how do you look for bandwidth? How do you look or those types of capabilities in placing somebody in the flexible work system?
Jonathan [00:14:30] The remote is just another of many uses of high-speed bandwidth, so, I think across the board right now, our clients want high-speed bandwidth for everything else they do on a day-to-day basis and remote, having a remote team is another one of those uses. But one of the questions that we constantly get asked by clients is how good is the Internet here? And that’s especially for tech companies who are like deploying code all day. But also true for media companies and… everybody needs high speed internet these days.
Frank [00:15:07] I would imagine so. I think it becomes more of a cultural issue and the comfort issue and working via video as opposed to in person. But we find that meetings are actually much more focused. Everybody is better prepared than if they just cruise into the proverbial conference room and sit down for a meeting. So I think remote work can oftentimes be more efficient than just having everybody piled into the same office. It’s funny. I know in your office you sit in a centralized position right in the middle of the office in an open space. I’m just the opposite. I’m usually totally isolated in my own office away physically from everybody else. What do you think are your advantages?
Jonathan [00:15:56] Being part of the information flow in a kind of inadvertent way? You know, this gets back to the deliberate nature of when you start setting up remote offices, you need to be really deliberate with how communication is happening in the office so that everybody’s kind of on the same page and feels like they’re part of the same team. One of the benefits I have found my being in the middle of the office is all these things I’m not supposed to hear. And what I mean by that is like, these one-off conversations that two different team members are having. And I get to hear part of that, too. And it is the serendipity and the spontaneity. Like two particles or two atoms colliding. It’s like when I’m walking from my desk and I bump into somebody along the way. And then, yes, we share like the casual pleasantries, but also another conversation that oftentimes is work related, too. And you just feel a lot more connected. And I think they feel more connected to me and all those kind of one-offs, like it’s about removing friction and transaction costs. Right. So if you and I are sitting next to each other, the implied cost of me having a conversation with you is a whole lot less. And, you and I sit in opposite sides of the office, much less opposite sides of the world, and I’m like, well, OK, I have to call Frank and ask him a question now. So the more of that I have, the better. I just… I get to be a part of the operating rhythm in a much more fluid way.
Frank [00:17:42] Culture… I think all companies create their own culture in that regard and find a way, so to speak. I know we have instant messenger systems that are both video and chat and things of that nature that are just buzzing all day long in the same way that an office buzzes. But we don’t hear the noise, so to speak.
And so for us, it has worked out well also because we are a multicultural company, a multi language company, I think that would be pretty hard for us to operate in a format like yours. Yet they both represent flexible workplace structures, flexible workplace patterns. I think the takeaway there is everything matches the culture, needs to match the culture of the company itself.
Jonathan [00:18:34] Yeah. And just because something works for me and for us doesn’t mean I’d suggest it for anybody else. When I think about history, which is, it doesn’t repeat itself but it rhymes — the things that work for me and for us are not necessarily the right thing for everybody else and vise versa. So you take what works and you do more of it. You try and figure out what’s not working, you do less of it.
Frank [00:19:01] True, and especially when you’re working across the multiple time zones, you’re working back and forth between Ireland and New York. We’re working back and forth between a variety of time zones. That has a big impact in a world 24/7 connected to our offices these days. So things like PTO, personal time off, things like just the adjustment to your workday to match your work requirements without burning out, by putting in too many hours. How do you think flexible work, a flexible work pattern, particularly across multiple time zones — how do you think that that impacts staff and teams?
Jonathan [00:19:43] As the nature of work changes, as the nature of how an employee interacts with their colleagues and with the organization changes, as we live in an always on culture and society, the norms around work and workplace need to change, to mimic that. You go back, 30 years ago, working from home meant that you printed out a whole bunch of spreadsheets and pored over them at your desk. And then the next morning you could go back to the office and share what you learned with the rest of the team. The fact that now everybody has what would have then been a supercomputer in their pocket changes all that. It means that I’m constantly able to communicate with my team, and my team with me, at 11 p.m., kind of wherever I am and wherever they are, which has some real benefits and also some real drawbacks. And getting back to that kind of flexibility, if somebody is going to be responding to emails at 11:00, it also means that we should be giving them the flexibility at 4 o’clock in the afternoon to go pick up their kid from soccer practice. And as more people work in more places, that changes the utilization of office space. And I think some of that is now just starting to be worked through. And it’s not clear that we’re in any sort of equilibrium there for what the right answer is. You’re always working and you’re always living life — the two blend. If you’re lucky, because it means you really like what you’re doing and you like your personal life. And then the challenge is to find the right boundaries to set for both. As well as, you’re interacting both with your work life and your personal life — how and when are you doing that? And that has implications for the space you have and where you have it and how much of it you have.
Frank [00:22:03] Well, I can certainly agree with that. I think that as we look to the future and the future of work overall, that is going to become more and more critical in the way that we all want to work and the way companies… Today companies need to service their teams in many ways and provide a variety of things for their teams, not just the security of a job and a salary, but they need to set up structures which allow for that balance so that people extend that employee lifecycle, if you will, because the only thing more expensive than moving space is moving people, losing people and having to replace them. So that becomes critically important. And that balance, as you suggest, is elemental to it. In closing, what would you think is the most important aspect of the flexible work movement today? All variety of it. What do you think its biggest contribution to productivity is and to the future of work and the worker in the future?
Jonathan [00:23:18] I think it’s becoming the norm in a way that when we first started the business eight years ago, flexibility wasn’t a conversation that people had. There was, you’re either an executive suite… eight years ago, WeWork was also in its infancy. So you had executive suites like the Regus of the world that’s been around forever. You had coworking and that was the extent of flexibility. If somebody came to me and said, I wanted a two year lease, I would say, well, that sucks. Let’s go sign a five year lease and I promise we’ll be able to sublease on the back of that in two years. So the demand… I think the really interesting thing, right, is that the desire for flexibility has always existed, but to provide that for growing companies has not existed. And now, that dam has been broken in a very good way, well, we kind of showed the world it was possible. Now, there’s gonna be a whole bunch of different business models and ways to provide that for our clients, whether you’re me as a marketplace or the guy down the street who owns the building, and there’s not going to be a one size fits all solution there. And it’ll be really fun to watch how that all plays out and hopefully be a nice part of it ourselves, too.
Frank [00:24:40] Well, you know it’s kind of a little bit of what’s old is new again in that regard, because I know you reference Regus and you reference WeWork. I remember in Regus’s history back in the late 90s during the period of the dot com boom and growth, a little different than our current economic growth because it was more of a boom than just steady growth. But still a lot of the same issues existed. Regus dedicated probably 20 or 25 percent of their space to large users that needed multiple workstation space on a mid-term basis, say one to three year term that was highly flexible long before WeWork was a twinkle in Adam Neumann’s eye. So the concept of larger space companies today, like Knotel or Regus, WeWork, etc., are applying to larger users has been around for decades. I think it cycles with the economy. That’s a big point as well, that flexibility is needed on the extreme up and the extreme down. In the flat middle it’s not needed as much. And so we see a cooling of the activity depending on the economic cycles we’re in. So that’s something that people should be paying attention to in particular, I think right now, because for the last almost 10 years, we’ve been on one side of an upward swinging economic cycle. I think corporate users, solopreneur companies need to be paying attention to their needs in the future if the economy doesn’t continue to spike upward and as well as the providers of space and how space decisions are made to consider it. Your final thoughts on that?
Jonathan [00:26:48] I think that now that flexibility is on top of everybody’s mind, it will exist throughout market cycles…
Frank [00:26:59] It used to be strategic rather than just tactical, like it has been in the past.
Jonathan [00:27:04] Yeah. And I think you’re absolutely right, Regus has had products that solve some of these problems. But that gets back to, it’s not a one size fits all. And while, Regus works for some people, it doesn’t work for a lot of people. And, I think one of the interesting analogs that some people talk about, but probably not in this way, is hotels versus apartments versus houses. Which is one is good for one night. One is good for a month and one is good for multiple years. And as you go up and down that continuum, the price changes pretty significantly. Like you wouldn’t want to live in a hotel. It would be way too expensive.
Frank [00:27:50] Yes, that’s true. That is true.
Jonathan [00:27:53] If you look… so that’s on the residential side, right, with a hotel essentially being a one night house. And what do the analogs start looking like on the commercial side? And there have not been a plethora of examples of options for companies over time. And by the way, in each of those, in a hotel, in the apartment, in the house, you have a pretty wide band of options. So there’s a budget motel, maybe without even much of a front desk. Then you have a Holiday Inn and then you keep going up to a Westin, a Marriott, a Ritz, a Four Seasons. And now you also have Airbnb. So you can rent an apartment for a night. And those are all very different value props across the value chain, solving the exact same problem, which is, I need a place for one night. And if you use that as a proxy for, I want flexible office space solutions, you historically have not had very many options. The thing that I think will be really fun going forward is as those different options start to present themselves, getting to both provide them in some instances and navigate the rest of it, and others. And what does that world look like? Just because Regus has existed for a while and yes, they had some two year space for 30 person companies, doesn’t mean that problem has been solved adequately. And also, the average company didn’t know that that was an option even back then. And now everybody knows that flexibility is a thing and a large and growing percentage of companies are raising their hand and saying, I’m willing to pay a bit of a premium for that flexibility.
Frank [00:29:54] Well, flexibility definitely deserves a premium. I think it’s definitely here to stay. And in my own opinion, the strategic use of flexible workspace in all variety of cases is only going to be growing.
Frank We really appreciate your time today. I’ve watched your company grow very successfully for the last eight years. You have a unique position in the industry that is greatly needed. And we’re very grateful to you for sharing your insight. Thanks again.
Jonathan [00:30:27] Thank you so much for your time Frank, great to catch up.
Frank [00:30:29] Take care.