ABOUT THIS EPISODE
Steve Nson from AnySizeDeals Week discusses how commercial real estate, specifically the office sector, will change because of the pandemic. From staggered shifts, to regional coworking spaces, the way people think about and use space is going to change.
Frank Cottle [00:00:16] Welcome to the Future of Work podcast. Our guest today is Steve Nson.
Frank Cottle [00:00:23] Steve is the CEO and founder of Any Size Deals, a global platform focused on connecting senior real estate executives to the most innovative tech companies in the industry. Any size deals puts on the any size deals week, which is a week- long festival of real estate innovation that takes place in Las Vegas and tackles various aspects of real estate and innovation, including blockchain, artificial intelligence and robotics, prop tech, opportunity zones, business ventures, co-working and much more. In addition, he is also the founder of d.m.c Stream, a streaming platform covering all things tech, startup and entrepreneurship. The most noticeable show on the platform, the dealmakers zone, can be found on various platforms, including Unhappen Neighborhood Network Roku. Steve has a bachelor’s degree from the University of Minnesota Twin Cities and a master’s degree in real estate development from NYU. Steve, welcome to the Future of Work.
Steve Nson [00:01:27] Thank you for having me, Frank. It was a very kind introduction.
Frank Cottle [00:01:31] Well, we tried trying to get a little bit. You’ve got a lot going on. I think the any size deals week is a particularly interesting platform for the commercial real estate industry because of the bandwidth. The fact that it runs a full week covering such a wide variety of products, I think it’s something that more people should know about and understand. So maybe you can start off telling us a little bit about why you structure, about how you drill down into topics, some of your featured speakers that you’ve had in the past. Quite impressive. Just give us a little overview.
Steve Nson [00:02:07] Absolutely. So I launched Any SIze Deals roughly five years ago. Initially, it was an online platform focused on connecting real estate professionals to do deals. Now, as any startup, when you launch your company, you have to think of different ways to get the word out there. So what initially started doing was putting on small events. And then I realized that I was getting more traction with putting on events versus the software itself. So from there, I focused on putting on larger scale events. And I would do roughly three to four events a year that each event would focus on one aspect of real estate innovation. So one event could be on real estate and blockchain. The next one could be on the future of work. The next one could be an opportunity zone. And I realized that when I was doing one conference at a time, I was able to really drill down on specific topics and deliver the most value to the attendees. What I decided to do this year, instead of having three or four separate events throughout the year, was instead put on Any Size Deals weekend, and in the four days I would cover the different aspects.
Frank Cottle [00:03:22] It’s really a series of events in the single time zone of a single location, correct? I think that’s great because people that might want to attend two of your events say the travel time and of the housing time, etc. All the cars. So it makes your event actually a much better value proposition.
Steve Nson [00:03:44] That’s and that’s my thinking now. Like in all things in life, you plan, you work on the execution and then something happens. Right. So.
Steve Nson [00:03:56] So as of today, it’s still scheduled for September 8th through the 11th at the Venetian in Las Vegas. But obviously with the pandemic, everything has somewhat slowed down. We’re hoping everything’s reopened by September, but it’s had a huge impact because of the events space. Right, it’s a space that requires a lot of social interaction like we’re discussing earlier, physical interaction. So if you’re someone putting on an event, you have to think about how you want to execute, what’s the best way to add value? So as any business owner, I’ve been kind of rethinking these things, how to communicate in what the plan is moving forward. But like I said, as of today, we’re still moving forward with events until something else changes.
Frank Cottle [00:04:47] Well, you know, 20 lions for about 20 years, we put on two events a year. One, the Alliance Strategic Summit, the other the World View Forum, both in Europe and back here in the US. Two events per year.
Frank Cottle [00:05:06] And we were focused exclusively on the flexible work space industry and our own global network of business centers and to work operators. So not the bandwidth that you have, but I know we felt it was important to keep the group together and not break the group up too much. So you have the power, that energy of the whole group that we’re I think will be a challenge coming forward for larger meetings up to the challenge. The good news is we have offices in Lagos ourselves and have some friends over at MGM, which is the largest operator of hospitality space in the Vegas marketplace. And I know there are hopes that they’re going to open next week. That’s going to be on a limited basis. So I’d keep my fingers crossed. And, you know, look, I should do everything we can do to see that this is a successful event.
Steve Nson [00:06:15] Absolutely. Absolutely. And you mentioned having a team in Vegas. And since this is really about the future of work. One of the biggest things for people like me is because people who attend or events, they come for work. Right. So the company pays for you to attend or you come. It’s business development. Now, with this stay at home orders throughout the country, we’ve seen in some states where people have gone to the beach. People have gone to concerts. People have marched because they don’t want to stay at home. Right. But the thing is that those are activities that are for pleasure. Like going to the beach is something you do for fun, going to a concert, even a march. It’s something you do on your own. Now, going to work, on the other hand, it’s different, right? So we don’t know what people’s reaction is going to be. For example, you have the Amazon workers, right. Some got sick in the warehouses and they’re upset because they feel Amazon didn’t provide enough safety in health measures for them. Right. So obviously they blame their employer. But if you’re sick and you’re at the beach, there’s no one you can blame. So we don’t necessarily know how people will react once they get the go ahead to, you know, go out and socialize. Right. Because we’re not really sure.
Frank Cottle [00:07:42] I think that there’ll be a. I know right now there’s a tremendous amount of pent up energy saying I need to get back and be productive. Correct. And a lot of us are quite productive. I know our own companies. Everybody’s working remotely. Record this first quarter and so far in April. So you can still be productive by working remotely. That’s a lot of people. A lot of structures do require facetime, social interaction. We can’t do everything on Zoom. No, I can’t, particularly to that camera. Makes me look chubby, but. Well, let’s let’s put the fall right directly into the future of work. We’re talking about don’t making a little bit. That’s going to be a sort of a punctuation point. It’s not our life. It’s something, as you mentioned. Different cycles go through all the time. But what is your view ? Office sector in general for commercial real estate in general and the office sector in particular. What’s your view about what it looks like post pandemic to you? Not necessarily. Not necessarily the timing of it. Once things are rolling in, whatever new normal we happen to find.
Steve Nson [00:09:07] So to me, I view it almost as if you have to break it down into different constituents of the space. Right. So if you are an employee, the person going to a job or an office building, this pandemic has allowed you to work from home. There are pros and cons. There’s some people who’ve always wanted to work from home. So that’s great.
Steve Nson [00:09:30] But obviously, they’re at home with the kids and it’s a bit tricky. Some people are eager to get back into the office. But even when we get back into the office, employers are going to rethink what their policies are. Right. Because this gives you an opportunity to evaluate how effective your staff is working remotely versus in the office. Right. Because think about it when you’re in the office to get a degree.
Frank Cottle [00:09:57] I think it shows who takes responsibility, who has the capacity to stay focused, et cetera, et cetera.
Steve Nson [00:10:03] Correct.
Frank Cottle [00:10:04] It’s a real good testing point. Honestly, as a manager,.
Steve Nson [00:10:08] It is. And if you think about it also as an employee, in terms of the resources you spend to have people in the office, the space, the real estate that you pay for, the energy, the resources, et cetera. If they’re working from home, it’s a cost saving. Now, the main thing is really about the effectiveness. So when they come back, are you having everybody come back at the same time? Are you staggering? For example, hot desking was a very big topic. It was a big thing that companies did, right. Where you don’t necessarily have a designated office. Designated desk. Right. So it’s more about if you need to go in a meeting, you can go into a meeting room. If you want to sit at a desk, you just sit at whatever desk is available. Right. A lot of tech companies were doing this was like a big trend. But now with the whole health issue, that’s something that we probably won’t see much of. Right. You can’t have people sharing the same desk over and over and over. Right.
Frank Cottle [00:11:11] So I think what happened in that regard. And we’re seeing this in the flexible work sector, business centers and co-working sectors. I think one of the things that we will see is a new standard of what we call clean. If Hopp Desk is going to survive in any structure, it will be organized much more effectively. I would guess because we’re starting to see this around scheduling and reservation systems so people should get a desk. They show up at a particular time on or assigned to a specific desk. And there is a gap within that that the cleaning crew understands. Just like when you’re cleaning a conference room, you have a gap between meetings and the cleaning crew is going to be specifically cleaning the workstations between reservations and the future as opposed to people just slumping down somewhere and grabbing a spot. I think that we are going to see that we’ve already seen evidence of that going on in the coworking business center environments.
Steve Nson [00:12:24] I agree with you. That does make a lot of sense.
Steve Nson [00:12:26] So speaking from the co-working and flex space environment, I have like a big concern about.. I’ve always wondered about the model. Because I think I’m friends with a lot of people in the space and a failure from a proposition standpoint, trading flexible leases, it was a very needed tool. I’ve just always questioned if it’s best done by a third party versus the actual landlord of. And my reasoning for this is, for example, if you work on a convening set or you sign a 10 to 15 year lease and then you turn around and you sublease or subdivide the space however you want to look at it daily, monthly, every six months, etc. When the economy’s going well, that’s that’s OK. But if something like this happens where people are not using the office, you’re stuck with this 15 year lease, but you don’t have any. Asset tie to it. Right. So if you’re the landlord, right. If you own the building and you have a 15 year lease you leased out to you or to me. And the space is vacant. I have a building that I can that still has some value. I can negotiate with my lenders. There’s things I can do to salvage what I have. But if it’s just the 15 year leases, you’re stuck with the liability. And that’s a tough thing to do. Now, maybe the better model is just partnering with the landlords, right? So you don’t actually take the 15 year lease. You’re just like the manager of the space and you collect the percentage. I think industrious is kind of more in that model.
Frank Cottle [00:14:19] Well, yeah, I can see industrious. Actually, we were doing that model when we were operating centers back in the mid to late 80s.
Steve Nson [00:14:31] I didn’t know that. See, you’re a visionary. There you go.
Frank Cottle [00:14:35] Regus was doing that model in the early 90s. Right. But one of the challenges you have with that model isn’t necessarily the entrepreneurial building or property company that you can basically go cut a deal with a financial institution behind that property company that says unless you have a certain guarantee, guaranteed leases that guarantees the debt that you owe me.
Frank Cottle [00:15:00] You’ve ruined your covenants and you have to increase your equity ratio. So the problem is not necessarily between the slave space and the landlord and the landlord. The problems between the property company and their lender, the property and the lender and their investors, because they’ve made certain commitments. So it’s a whole food chain issue, if you will, to deal with it. And one of the things I’ll mention, though, is that in the flexible work space sector, over the last 40 plus years that I’ve been in the industry, that sector of the industry has historically had its greatest square footage growth during negative markets, because that’s when the landlords, the property companies were had excess space and were willing to cut the best deals.
Steve Nson [00:16:00] Because they just want to get rid of the space. Right.
Frank Cottle [00:16:02] Right. This is the first time in 40 years in the industry. It’s been active for about 45 or 50 years. This is the first time in the entire life cycle that we’ve had such explosive growth in what looks like a good market.
Frank Cottle [00:16:24] And the danger there is that so many companies, some of the ones that you’ve named, in fact, have signed a big percentage of their leases at the very top of the market. Correct. So the market cycles someone with a little more experience. I’ll use Regis as a good example. As the market goes down, open a new space across the street from 30 percent lower operating cost and.
Frank Cottle [00:16:54] There you have it for that game is over. We’ve just seen this happen several times before, so it’ll be interesting to see. I heard a great quote. Maybe you’ll appreciate this. “You’ll never know who’s swimming naked until the tide goes out”.
Steve Nson [00:17:11] That’s right. That’s true.
Frank Cottle [00:17:18] A lot of companies in our industry and throughout the world have been swimming naked. The tide has just gone out. We’re going to see a lot of various organizations.
Steve Nson [00:17:32] You know, that’s the thing. It’s just you mentioned the lenders.
Steve Nson [00:17:35] So the lenders, too, have to come to the table to kind of reassess, like what’s changed. Right. And the reason it was such a high demand, even in a booming market, was just the nature of its employees and the nature of companies. Right. And I would say we work was a big mover, although they faced a lot of criticism. There were real leaders in that because they prove that you can scale this thing. So then everybody kind of bought into it. But the challenge, you know, it’s like Nortel gave back it’s given back 20 percent of their space. Right. The issue with this one is because people were asked to stay at home. So literally you can go use the space. So you have to think of something else to do. Now, if you’re the landlord, the person owning the building, you have your own thoughts of what does the post cover? How do you manage an office building? What are the priorities? I think technology is going to be a big part of how people operate their buildings. There was already a growth in that sector in terms of people adopting technology. This just fast forwards it. Right.
Frank Cottle [00:18:47] Absolutely. That’s absolutely right. And I think the first places we’ll see it will relate to that clean.
Frank Cottle [00:18:52] You’re going to see a re adaptation of the HVAC see in mechanical systems go up solving common platinum, which is going to go where filtering is going to go everywhere. A lot of green building ideas that keep buildings from being a sick building are going to become standard as opposed to special. You’re going to see touchless access on everything and all that sort of stuff, which is just a general step upward, implicitly, politically correct.
Steve Nson [00:19:24] And if you think about it, it should have always been this way. Right.
Steve Nson [00:19:28] This just accelerates the timing of it. So, you know, Frank, I got a question for you from me. My biggest thing, when we all go back to the office, there’s some people who are. This thing has really traumatized them. They’re just not going to feel comfortable being in spaces with a lot of people. Others are going to be like, you know, what’s life with that to get back to it now? It’s through an employer and someone comes to the office and they’re sick. It’s like, see, you think people if you the liability on their own or the building or the building owner, is it on the company or is this just a fact of life? How do you think people will respond to it?
Frank Cottle [00:20:09] Well, building owners have been taking responsibility in large, major markets for building security for decades, especially post 9/11. So I think the building owners themselves will look at their security processes and make some determination in that regard. Individual companies within the building or within their own properties have a further responsibility to ensure a safe workplace. But that requires a certain amount of responsibility on the part of everyone. You have to decide whether you want to live in a very Orwellian, security oriented facial recognition. Take your temperature before you go through the door of the oval, before you get into your office every day or every day It’s different.
Frank Cottle [00:21:07] So you have to be a daily routine and how that slows down what the costs are about to everybody. You’ve got to decide what world you want to work, where you want to live in. And how you as a person, how you’re going to deal with that? Well, I think you’ll see a lot of people that have those fears will change jobs. They’ll find a job that suits them in that regard. Or possibly they’re just less desirable as an employee. And maybe they’ll lose their job. We don’t know. But what we do know is we’ve seen let’s take China as an example and let’s let’s look at SA’s. Well, SaaS ripped its way across Asia. We didn’t have a here to the same degree all. We ripped its way across Asia pretty dramatically for a while. And all of Asia got back to work pretty comfortably. We have mirrors. We look the same thing. And it’s impacting the Middle East in particular. And that area got back to work. Africa is back to work. And in spite of Ebola and different things. So and if you look at the actual numbers of the. Well, referred to as the common influenza, which is a type of coronavirus. You hear all the numbers today about people that are dying from the coronavirus. Have you heard a single number about the number of people dying of completely normal flu?
Frank Cottle [00:22:47] The normal flu also kills an awful lot of people every year. And it’s a terrible, terrible thing. We don’t really have an effective vaccine for. We have some.
Steve Nson [00:22:59] I mean, we take the flu shots. Right.
Frank Cottle [00:23:01] And we do that kind of work.
Steve Nson [00:23:04] Kinda works.
Frank Cottle [00:23:05] We still have in spite of that. Twenty five. Forty fifty thousand people here in the U.S. have died.
Steve Nson [00:23:11] Absolutely. But this is the thing, though, Frank, and I’m not discounting anything you’re saying. I think two things. One, it’s really about the way it’s. You get it right. The way you catch this. Yeah. The contagion factor. So even if think about it. Assume that you think all the lockdowns are bad and assumed there were zero lockdowns. Right. You as an individual, you would feel very uncomfortable going anywhere because the numbers wouldn’t be 6000 or be higher. But two, it’s just how you catch it, right? If you have the flu, it doesn’t take 14 days. You get it. You’re really sick. Occasionally you’re in your bed so that we are not going to be giving this. You can’t be symptomatic with the flu. You’re asymptomatic with this disease. Right. And so that’s the thing. And then the other thing is we’re human beings. So anytime something is new, our brains react differently. I just snip. So I know I can die. A car can kill me. Right. People die of car accidents all the time. But I still drive a car to walk down the road because I’m aware of it. I know, but I’ve never heard of this thing. And you tell me it’s just a call up freak out. If no segue. Right. So by the time we get to like as soon we reopen, people go back. The numbers don’t get too well. People still die, but the hospitals are now overwhelmed. And then we get a second wave, though. People are not going to freak out as bad because they’ve heard of it. Right. It’s like you never heard of something that, you know, scares you. So I think that’s that also factors into what scared people besides the fact that it’s extremely can contagious. Right.
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Frank Cottle [00:25:01] Well, I think I think coming back to the what is the post in pandemic world of the future of work look like one of the things that will impact it certainly in the major markets even more than office buildings is what an office building can do or what an employer can do. And as I mentioned, if they’re hot desking, well, they can have road reservation systems. The other thing they can do is shifting systems. I don’t have to have half as many people with twice as much space, a great social distancing. I just have to have to work shifts. I mean, they have people coming in between six and three and the other half the people come in between 3 and 8 hours, different days of the week.
Steve Nson [00:25:50] I think that’s a great idea.
Frank Cottle [00:25:52] It’s all it’s all around traffic management board and space management, sort of a combination of one day out of the office that gets rid of 20 percent of the workforce at the office, one day, two days out of the office and maybe one day at home and one day on a coworking center. All of these things have a massive impact if they’re uniformly practice problems. I see. Coming at it. Everybody in New York makes fun of Californians because we all drive cars. You all jump on trains and have mass transit. Mass transit is going to be more of a problem, is it?
Steve Nson [00:26:33] I mean, that’s where numbers are high in New York. Right.
Frank Cottle [00:26:36] Exactly. That’s to be more of a problem than the workplace itself is. How do you get people to work?
Steve Nson [00:26:43] Absolutely. Listen, before this is one of the things about shutting down things. Right. Obviously, I’m Pacific. It made sense that we’ve shut down just because the numbers are going to be too high. But even if we didn’t shut down restaurants, we’re going to go out of business because no one has to tell you people. We’re not going to go to as many restaurants. And then the subway. I live in New York. I take the subway. The subways were empty before the official shut down, for example, school. I think school was closed on March 16th in New York. So that last week. My kids go to a school that has about 700 kids, right? And when you go to pick up the kids, it’s literally maybe a thousand people, including all the parents that last week, maybe 200 people were there. So people were really keeping their kids at home without you telling them to. Then the subways were pretty much empty. Right. So people were not taking the subway. This is before they shut down anything.
Steve Nson [00:27:46] So psychologically, people themselves were like, no public transport. I’m not comfortable.
Frank Cottle [00:27:53] No, I think that’s true. I read a study the other day. This was done in London based on their tube system on the metro there. But if social distancing were properly assessed as it related to London’s mass transit, there can’t be a troop train and subway system, the old system, which would operate at approximately fifteen percent effectiveness, which means 85 percent of the people that are riding those systems are mass transit systems. London could not be serviced. How did they get to work? Well, technology, we talked about changes in technology and the office place workplace, certainly technology is a factor. Work from home is a factor. We’ll call that work from home. Regional coworking of business centers that are close to the home where they can be walked to or cycle to or driven to very conveniently factor that where the technology and the center ties to the office dedicated network systems for larger companies. So I know we took dedicated network systems for some large companies where we build a custom system for one company into a coworking center so that that company has their own stuff, not the coworking centers stuff, so to speak. Now they also have a higher sense of security. So things of this nature certainly will be looked at very seriously. And again, if you have if you look at the workweek and you can reduce your factor of days in the proverbial office by 20 to 40 percent or more days a week, you pretty much by just scheduling that, you’ve pretty much accomplished your social desk the time you have.
Steve Nson [00:29:53] And I think one of the key benefits here is that more employers are going to be more flexible in terms of. Scheduling and underst really incorporate, you know, how do you talk about work life balance, which was always a myth. I think so. It just makes sense, right? Because if you don’t have to have everybody at the office at the same time, so people are more flexible. But also a lot more if you employ more people remotely than your talent pool increases. So, for example, for custards up example, take tech companies, right? Engineers cost a lot of money. Right. So if you just want to be in Silicon Valley or New York, you have to pay staff, engineers a lot more. You’re open to hire yourself engineers, let’s say, in Austin or in Des Moines, Iowa or wherever, and they can work remotely. Your costs go down. Right. So this also provides an ability to people to be more open. Right. From that standpoint, it sounds true.
Frank Cottle [00:30:54] And, you know, we’ve worked with a lot of larger Fortune 1000 companies and their big battle for talent as the economy is growing huge. And they found that they couldn’t attract talent unless they had a flexible work space program, a flexible program. So we had the old situation of the H.R. manager working with the facility manager, working with the CFO, working the house. And I don’t know if you’ve ever heard the saying, don’t let perfect be the enemy of good.
Steve Nson [00:31:32] Yes, I have.
Frank Cottle [00:31:34] Create the perfect flexible work program, everyone. And they had wonderful things over the threshold of the door to make it company wide. They just got kicked in the ass and they went right through that door and they found out good was good enough. Now that CFO is walking through that totally empty corporate headquarters right now, as you started out saying, kind of looking at all that empty space that he looked at the company and all those software engineers that you’re talking about. They’re all getting their work done and the company is running fine. And I don’t make this stuff anymore now. So I think that is a massive realization. And what you will probably see is huge because the CFO is going with a flex work program, a talent that is a reduction and balance sheet. They want to get the long term lease liability and debt liability off their balance sheet so they can improve their borrowing power to attract more capital and have a better shareholder price. So all of those things come into play now. I think that that’s the post pandemic shuffle. We’ll call it that’s going to occur as large companies will reassess, all companies will reassess what they really need versus what they had been having. They will restructure themselves their balance sheets that will create more corporate value. And to your point, it’s very expensive to hire a software engineer for a demotion and move them to New York.
Steve Nson [00:33:15] Absolutely. I wasn’t even counting you were going to move there. I was just saying, you hire them. They work from there. Right.
Frank Cottle [00:33:21] Well, that’s that’s the difference. If you move them, you have to disrupt their family. Perhaps their spouse works. Their kids are in school. They have a house where you’ve got to deal with all those costs, both actual and emotional, in order to get them to come to what they call. So they’re going to end. You’ve got a higher cost of lifestyle and an employment in certain markets, too. But you have these other costs that you don’t really talk about, the impact of that higher salary, if you can hire people that find the best people, keep them in place, maybe with a combination of working from their home even, it would be cheaper to buy them a new house.
Frank Cottle [00:34:05] Just say, oh, four year old house for five hundred grand. Let’s buy you a new house for six hundred grand. And that new house has a gigabyte wife on it and a private office is probably cheaper like inside, you know.
Steve Nson [00:34:18] Or another option would be, is there some regional flex space operators that can offer good deals where it’s not as expensive? So then you have your remote first work from there versus everybody having to be in the same physical location. Right.
Frank Cottle [00:34:35] You do see a lot of that. Now, could the U.S. federal government just put out an RFP a few months ago for a beta program that was kind of interesting, a beta program that would include between ten thousand and fifty thousand workers nationally. Oh, wow. And that RFP required in 33 different markets costing for unscheduled Allwork.Space, basically unscheduled hot desking, fully scheduled dedicated workstations in a freestanding environment and private offices, all to be set up on what you would normally in a business center. A coworking center. A rolling one year budget. And that’s a pretty complicated project. But several people have done it ourselves included. And what do you find about the government? You know, I just say it. You can argue about governments all over the world, but pretty much one thing in the U.S. government ultimately has to agree on. Both parties and all parties have a budget.
Steve Nson [00:35:48] That’s true.
Frank Cottle [00:35:49] And how long is the budget? One year. So if they just, like the corporations are trying to do, can match the real estate liability cycle with their budget cycle, which is part of this experiment of cost cutting effort by the federal government if it works the same with corporations, corporations. You said referencing their 10 to 15 year lease cycle or debt cycles for their real estate when their employee lifecycle is just under seven years. So they’re trying to match those life cycles as well as their portfolios of fixed asset portfolios versus their employee lifecycle. And that imbalance also and they can do that through the use of the coworking and business center, the flexible work space industry. And then like before where you were challenging the models of the couple working in the sector, you would say, well, wait a second, that sector became the savior to these other two problems.
Steve Nson [00:37:02] So, Frank, this is the thing, the flexibility of the lease. I’m not challenging that. That makes sense. Right. Like the federal government wanting a one year lease because of puts. That makes perfect sense. What I’m asking is, who is the best to deliver that value?
Steve Nson [00:37:22] Is it a third party coworking company or is it the landlord themselves? I guess that is my question. Right. Because like … does it, too. Right. They do. They own all the buildings, but then they also have their own in-house flex space and coworking brand. But they also lease out space to their competitors. The works of the world, etcetera.
Frank Cottle [00:37:43] I would very definitely say that the third party provider is the solution.
Steve Nson [00:37:48] Why is a third party better equipped?
Frank Cottle [00:37:52] Well, I’ll use the hospitality industry as an example.
Frank Cottle [00:37:56] There are a lot of people that own hotel properties, lots of hotel property people. They hire Mary out to run them.
Steve Nson [00:38:05] That’s very hard to get out of the business of owning the real estate agent’s figure. They run it right.
Frank Cottle [00:38:11] That was the business of managing and providing a service or a service provider.
Steve Nson [00:38:17] Correct. They have that strong brand. Right. Like I’m going instead of Marriott. Right. Right.
Frank Cottle [00:38:21] And all you all use Alliance itself. It’s got no business of owning business centers and two thousand. And yet you don’t know we don’t own business centers. We look like we’re one of the biggest business center operating companies in the world. And yet we only own the customers and provide the service. We don’t own the centers anymore. So we’re like Mary up services in that regard. We deal with the customer kind of a blend between Mary of services, so to speak.
Steve Nson [00:38:53] So, Frank, I have a question for you, because you seem to know a lot more about the hospitality space than I do. So when Marriott cuts a deal with the person who owns the physical real estate, the hotel. Like, what are the terms of the array0? Because it’s like nightly rentals. Right. So is Marriott on the hook for something, assuming the market tanks and people are not staying? Like what is Marriott’s liability in this arrangement.
Frank Cottle [00:39:22] Your general hotel management companies..
Frank Cottle [00:39:26] Number one, Marriott, like all of them, has 50 different styles of deal.
Steve Nson [00:39:32] Probably, yeah.
Frank Cottle [00:39:32] You have what generally have large master hotel property development companies and they build the facilities they own the dirt they own that they own the fixed assets they hired. An operating company could be very apt to be hired to be any number of companies to come in on this fixed. Ask that for them. You see the same property sometimes go one day to Sheraton, the next day at dimaria. You see that that occurs all the time. And generally those companies, very young particularly, say we will run your hotels so long as you involve bonus in the design and the development. So we know it’s built right. The standard of our customers and that contract is subject to our approval, the design of the development. It’s also our management on a participation basis. So we take X percentage of Y basis if we fall below Xie’s some overall number. Did you have the right if we can’t correct that to replace us?
Steve Nson [00:40:53] Correct. But Marriott is not paying rent to…
Frank Cottle [00:40:58] It’s not on the hook. Now sometimes they go in. Different companies do this definitely as a partner and they say, well, this form of three, a partnership, you contribute the property will contribute to the operation.
Frank Cottle [00:41:09] So we’re on the hook business, but you’re on the hook for the property.
Steve Nson [00:41:14] But which was my point, Frank, is that it’s not that and that the business itself is very valuable. My thing is, maybe the company should rethink how they cut deals with the landlords. Don’t don’t sign a 15 year lease with them because it exposes you and you’re responsible for this. If the market tanks so come up with a different arrangement,.
Frank Cottle [00:41:39] I would fully agree with that.
Frank Cottle [00:41:42] But I don’t think the property companies in general, there are many of them that have entered the industry on the surface, Belkacem and coworking industry over the decades. They generally are better at building buildings and running facilities than they are providing service. I’ll ask you if you’re a tenant in any building anywhere. What was the last time you actually got some sort of someone you know, just some people types and structures of companies are built to do different things. Just like a service company generally isn’t the best technology that’s a technology company. So I think that the third party provider. The other thing is the customer wants choice and Tishman Device Company is a very large company with great properties, everything. What are they having? Kansas City?
Frank Cottle [00:42:37] I’m going to guess they don’t have anything in Oklahoma City.
Steve Nson [00:42:39] I don’t know, I have no idea.
Frank Cottle [00:42:42] Texas and the customers, the large corporations and in particular, they need to see…
Steve Nson [00:42:53] The same quality of service, regardless of where they’re located.
Frank Cottle [00:42:57] Exactly. And across 100 cities and they want one contract to do it with, you know, that’s the point.
Steve Nson [00:43:04] Amal the CEO of Knotel. That’s the argument he would always make.
Frank Cottle [00:43:09] Well, it’s valid. The problem is that no-till can’t be everywhere. Even Regis isn’t everywhere. Overall reaches up. Thirty five hundred locations.
Steve Nson [00:43:20] Well, he just met like a global company, right. They want to have the same standard for their employees throughout the world. Right. So if you and if you’re in Paris, if you’re in New York, as in his company, then it’s easier for them to pitch a multinational company to use them as their office, provider, service, etc..
Frank Cottle [00:43:45] Yeah. I think that’s the pitch. I don’t think it’s valid in their case because they just don’t have enough coverage. I think that’s a goal. Something to talk about, but not something that’s reality in that particular case. Others Regis Instant Alliance Health Coverage.
Frank Cottle [00:44:08] So that makes the pitch real. I know I can often open. You say to me I need offices in 10 countries and I need in 10 cities in each of those countries and I want them all in 10 minutes. One contract. There’s two people in the world that can do that. Regis and. So. We’re talking, we’re kind of wandering all over here. We started off with a post pandemic and we’ve wandered all over the place. But that’s good news. There’s a lot of bandwidth in the conversation. And I know you’ve gotta a time deadline here. So if you’re going to make one pronouncement from what you’ve seen from all of your sessions that any size deal week.
Frank Cottle [00:45:06] If you make one pronouncement in a post pandemic office environment. On behalf of the worker, on behalf of the employees, would it be.
Steve Nson [00:45:18] I would say on behalf of the employees. Employees are going to one want a lot more flexibility in terms of whether they’re working from home or coming to the office and if they do come into the office. I think the biggest concern is really about what sort of health and safety measures are around. I think that’s going to drive a lot of the conversation when people are looking for companies to work at, when they’re looking for benefits packages, et cetera. Really, what are you doing to ensure my health and safety and what is your flexibility around where I work? I think to me that’s going to be the biggest takeaway.
Frank Cottle [00:45:53] So you see health and safety in the new post pandemic world, public health, security treatment, health security as a required benefit for the employers of the future and a required deliverable for office buildings to their tenants. We’re those employers who those employers would be and that the flexible workspace and co-working sectors need to be looking out into the market near the workforce because of mass transit issues.
Frank Cottle [00:46:38] And those people just fixated on the central market. So,.
Steve Nson [00:46:43] Absolutely. Absolutely. Absolutely.
Steve Nson [00:46:46] Because it’s a huge valley, right. Because we like to talk about it for me to get to work. I have to hop on a train or whatever. So you can bring an environment that’s closer safety that has enough safety, then you’re obviously adding value to me. Right.
Frank Cottle [00:47:01] I think that’s a good summary for our session today. Thank you very much, Steve. You’re really shedding light on a lot of different areas that I have considered and look forward to sharing more with you in the future.
Steve Nson [00:47:17] Thank you so much for having me, Frank. It was a pleasure.
Frank Cottle [00:47:21] Take care.
Steve Nson [00:47:22] OK, bye bye.