Annie Rinker of Hines | What’s Next for the Office and CRE?

ABOUT THIS EPISODE

Annie Rinker shares why flexible lease terms, the flight to quality, and the monetization of amenities will be key for landlords to attract CRE tenants moving forward.

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Transcript

Basically, eighty seven percent of US firms expect to make real estate strategy changes in the next 12 months as a direct result of the covid pandemic. And so what Hines wanted to do is be in a really great position to capture some of that change that happens. And I think as it relates to the CBD, as it relates to office space, I am big on the camp that office space is not dead. I am big on the camp, that office, that flexibility from the standpoint of being able to work in different places at different times is here to stay.  

Ceci Amador [00:00:52] Hello and welcome to the Future of Work podcast by Allwork.Space. I’m Ceci Amador de San Jose, and today I’m looking forward to chatting with Annie Rinker, director of Workplace Services at Hines, about the changing theory and flexible workspace landscape. Annie, welcome.  

Annie Rinker [00:01:09] Thank you, Ceci. I’m really excited to be here today.  

Ceci Amador [00:01:11] I’m really, really happy to have you. Annie is the director at Hine’s Workplace Services. She is responsible for the rollout and operations of their flexible office platform, including The Square, the coworking brand developed by Hines. And I want to start off by saying Hine’s is probably among the pioneers as a landlord to launch their own flexible workspace brand. Why?  

Annie Rinker [00:01:39] Well, I’d like to say that I was the one that did it, but I had honestly nothing to do with it from its inception, so I only joined hands in two thousand. And at that point, Hines was pretty far down the path of thinking through, you know, not necessarily exactly how we were going to roll it out and what it meant for Hines. But certainly, that needed to take a step forward in having a more formal, formalized flex office product. And I think it’s interesting. When I first started at Hines, I was with the Office of Innovation, I joined the Office of Innovation Team. And it’s a group still to this day that’s thinking about all of the stuff that’s happening in real estate and how technology and how we work and where we work and how buildings are built and all the tech that’s going into this industry and all the dollars that are flowing to it. How all of that should change Hines’ strategy. And so way back in the day, Charlie Koonce, who was leading the group at the time, started to see a lot of things that were happening with our work. And I think specifically that all of a sudden coworking and Fleck’s offices in a new thing, it’s been around since the eighties, but historically it was small and medium sized businesses.  

Annie Rinker [00:02:55] And now all of a sudden, we had a number of tenants that were large tenants of our Hines’ global portfolio, but were seeking out this product and Hines wasn’t able to deliver it. So instead they were going to third parties. And not only were they just going to third parties for this sort of what traditionally was thought of as flex office, but they were going like a company like Amazon would go to an operator and they would take a couple of seats and then a couple more, and then they take a floor. Then they take two floors. And instead of having a direct relationship, we didn’t. We lost that relationship and we lost that touch to them, to our customer, our client at the end of the day. And I think he says we care a lot about the buildings that we build. We care a lot about the property management team that runs the space and we care a lot about the customers who interact with our product. And so I think the Office of Innovation did a fantastic job at the time of making a really compelling argument as to why Hines’ needed to get into this. And they were really futuristic at that point, not necessarily for those of us who are living and breathing coworking every day, but as a large institutional owner, developer, landlord to say I wanted I see the shift is happening in the workplace and I want to have that direct relationship with our customers, even if it means changing or making some adjustments to our product strategy or at least adding a new product into our stack. That’s something that they were really passionate about. And the innovation team was at the forefront of thinking through that. And so, you know, fast forward, I joined the team in twenty nineteen and at that point there were a couple of locations that they had identified, two of which we opened in twenty, twenty one. I think for Hines it’s always been about the experience, it’s always been about putting our customers at the forefront of, of how they interact with our buildings. And I think landlords historically have not necessarily thought about everybody who’s setting foot into their product type. But I think Hines is really starting to shift and started to do so back when they were coworking on how they really push this product into the future and how we can be more engaging with our customers as a result.  

Ceci Amador [00:05:05] And I have to say that, I mean, Hines did a great job. I mean, you guys were pioneers in that sense. And I think it’s paid off, especially now that we’re seeing a lot of landlords kind of embrace the flexible workspace model. And then part of the reason why it was surprising that Hines did this so early on is because at the time, landlords were still still skeptical about going into business with coworking operators. I mean, it wasn’t the most solid of business models. So how the Hines approached us and I know you guys have championed management agreements with Industrious, and that’s been a great partnership. And it’s helped grow Hines’ coworking offering as well. What can you tell us about the landlord perspective of why this partnership model works and why it was better to partner with a coworking space operator versus just doing it on your own?  

Annie Rinker [00:06:04] Yeah, so I will say that we started to see some shifts in how we think through this. So again, well before my time, our Office of Innovation identified several really key operators in the space that were doing a fantastic job from a growth standpoint, that they had the experience in the hospitality elements that Hines really considers to be a core product of what we offer through our property management. And so industrious was one of the companies that we identified through an RFP process early on and thought through that. And we knew we wanted to bring them on as an operator, so they were part of the operation for our first two locations, they’re still operating our location in Salt Lake City through the industrial platform we call the square with industrious. And the intent is that we have created a white label product, basically an in-house product, the square. And where we need to use partners, we certainly will partner with a solid operator as we continue to scale globally. It might not make sense for us to operate all of these locations in-house, but we have shifted a strategy. And a lot of that, frankly, had to do with covid. And a lot of the things that we’ve seen over the last 19, 20 months. But we have shifted away from a partnership model and we are bringing operations in-house and are doing so at one location. In the next two locations that we are opening will be an in-house operation. I think we’ll probably look at sort of an in-house first model, but certainly not exclusive to in-house. We are still open to partnering, like I said, where it makes sense to do so. And I think that’s something that has always done really well, is that we enjoy partnerships where it makes sense. And if we think that the model is more appropriate, it makes sense for us to bring in Alison. We’ll figure out how to do that as well.  

Ceci Amador [00:07:58] And so you guys are kind of you’ve seen both sides of the coin. So what can you tell us about the benefits and disadvantages of each model, like doing it in-house versus partnering with a third party?  

Annie Rinker [00:08:12] Yeah, I mean, it’s not something that we went into lightly. It took a lot of time and research for us to sort of think through how we build it out. I think each larger landlord is going to be different. A lot of it has to do with the capital partners that we work with at each of our different projects. And I think we’re one hundred percent in agreement that the management model is the right path forward. I think that what we’ve seen, especially in covid, is that the traditional leasing model in the good times, the operator is taking all the upside and in the bad times, the landlord’s taking a lot of risk from an operator walking away. And so we are fully in agreement that the management agreement is the best approach forward, that it aligns the operator with the landlord. I think what we’ve seen those bringing operations in-house further solidifies that alignment because it is truly what we are doing is best for the asset rather than for the sort of the operational component of the coworking space. And so what I mean by that is we might have a building where we make a decision to do something that might hinder the, you know, the margins that we’re able to achieve in the coworking space. But at the end of the day, if we’re adding exponential value through the building itself, then that is fundamentally a much bigger play for Hines’. And it helps, I think, our capital partners, which is extremely important to us. At the end of the day, we consider ourselves to be fiduciary managers.  

Annie Rinker [00:09:52] And so we want to always look at what’s the best strategy, how can we add the most alpha to our operation and having an in-house operation that allows for us to be extremely flexible in the truest sense of the word, including how we operate in deals that we might do to support leasing strategies or asset strategies. It makes the most sense. But again, we didn’t start off that way. And I’m not saying that we will forever, from this day forward, be in a self management situation. I think for us, we did a lot of evaluating what a platform would look like for us to bring operations in-house. And, you know, I mean, frankly, for most owners and landlords, it doesn’t necessarily make sense because the scale that you have to have to pay for sort of the operating platform. And if you think about some coworking metrics in terms of an operation, you might have anywhere between 20 to 40 percent margins and really strong operating locations and some that aren’t so good. You’ll have between 10 and 15 and then there might be some operations that are losing money. And so for us, we had to look at what our corporate overhead was going to be by us bringing operations in-house.  

Annie Rinker [00:11:09] And by the time you pay for staff and software in the marketing and the operations to support multiple locations, what did it mean for us from a growth standpoint? But it was something that Hines was willing to do to sort of create. Like my division it is almost like it’s not necessarily a profit center. We are intentionally designed to add an operational component to our property management stack that will help support. The asset strategy as a whole adds coworking operations on knowing that there are a lot of components that we need to think through and divisions that we need to create to support coworking operations, because it is fundamentally much different than property management. But by us having that strategy and not necessarily looking at the yield that we achieve on a one on one specific coworking floor, but rather the amount of value that we can add to a building by having this operation, it’s it’s something, again, that Hines’ Hynes was willing to to sort of go in headfirst and keep pursuing.  

Ceci Amador [00:12:12] And I remember speaking about the value of a building. I remember I think it was a couple of years ago with twenty nineteen and I believe it was CBRE, but I’m not entirely sure. And they did some research and they concluded that having a certain percentage of a building be coworking, it could increase property value by about 20 percent. I don’t know if that’s sort of like the same number that you guys have found. And like you said, covid has changed the landscape dramatically. And you guys need to be flexible. And I think that’s kind of like the key, core concept of moving forward. Futura, for whatever the new normal will be, is that it has to be flexible. And a lot of that has been spoken about companies and they being able to kindly offer shorter leases and stuff like that.  

Ceci Amador [00:13:00] But I do think that in the CRE industry, which has been known to be a little bit slow in adopting new technology and welcoming, kind of like innovative, innovative approaches, I think that the flexible workspace offering is increasingly becoming very, very valuable for landlords and property owners. And so I guess what I want to get at is how do you see the theory industry in large property owners kind of leveraging this new flexible offering in the future? There’s been a lot of talk about hybrid working satellite offices and the exodus from the city center. So how does a flexible workspace, whether it’s in-house or through a third party, impact how it will change the scenery landscape?  

Annie Rinker [00:13:53] Yeah, I mean, I think there’s a lot of noise out there, a lot of statistics that you can point to. I think one of the things that we thought was there’s a lot of research that we’ve done in space. And one of the big things that we noticed from a research standpoint in this, I think came from the US remote work survey. But basically, eighty seven percent of US firms expect to make real estate strategy changes in the next 12 months as a direct result of the covid pandemic. And so what Hine’s wanted to do is be in a really great position to capture some of that change that happens. And I think as it relates to the CBD, as it relates to office space, I am big on the camp that office space is not dead. I am big on the camp, that office, that flexibility from the standpoint of being able to work in different places at different times is here to stay. And I think that it’s just going to change the strategy that institutional portfolio managers are going to have to look at or that enterprise portfolio managers are going to take for their teams. Because people you know, we’ve even seen it just hiring new associates in different organizations. We’ve heard that if you don’t offer flexibility, then you are not going to attract them. And I think this word flexibility in this concept is interesting, because when I say that I’m not talking about having a working strategy, I think that that’s sort of like one piece of it. But the point is that enterprise organizations and even small startup, medium sized businesses, need to realize that what’s happened over the last 18, 19 months has dramatically shifted how and where people want to work.  

Annie Rinker [00:15:41] We recently interviewed a bunch of interns that were working for Hines’ over the summer and everybody was on the bandwagon of a three day work week. I think that what I found for myself personally, I’m in the office today, but I think, you know, I’m in the office, I’d say four days a week. And I like one day a week where I sort of head down with work. That’s me personally. And that’s the biggest thing here, is that it’s such a dramatic shift and it’s such a personal experience. And I think companies need to recognize that, that there’s not this prescriptive one size fits all on how we work anymore and that they need to have a portfolio strategy that is supportive of that. So that’s sort of the approach that I was taking. I think you will see a compression in the amount of space that people take. But I think what’s going to be really interesting is if you think historically that a company needed twenty thousand square feet of office space and now they only need ten thousand square feet, well, if they have the same budget they can afford. To have an extremely beautiful, really, really well positioned space so that when their teams are coming into the office, it’s just this incredible experience. And I had a conversation the other day with somebody that was like, you know, I feel like. Everything’s so cyclical and I feel like my life is like that right now because, you know, when I started off and coworker thousand six, we had to think of really interesting ways to get people to come into our offices because it was a serviced office back then, an executive suite, whatever you want to call it. But we were working with primarily small and medium sized businesses that had options to work. They could work from home or they could work from a Starbucks. And both those were free options.  

Annie Rinker [00:17:19] And so we had to attract them into our space by having the best customer service in the industry and having really great coffee and having really spectacular hospitality elements and really beautifully designed spaces and really spectacular Internet and all these different things. And now I feel like that concept is being applied to a full building where now property owners and landlords and managers are thinking, well, how can I even have portfolio managers for the enterprise? Occupiers are saying, like, how can I attract people back into the office? And I think that it’s a lot of those same elements that made coworking what it is today that we’re now just looking to apply on a larger scale to a full building. But it’s it’s it’s again, it’s not something that is necessarily new, I think is just shifting the mindset for a developer and a landlord. And so that that company that had twenty thousand feet, now they might have ten thousand feet. That’s just like the best office space ever. And people are going to want to go to it at least a couple of days a week. And so I think you’re going to see a pretty big hit and ABC office space. But some of the premier development projects in the CBD, I think will still survive. It’s just going to be a rethinking of how space is utilized.  

Ceci Amador [00:18:37] I have to agree with you that I’m in camp. The office is definitely not dead. But I do think that companies will have to make it very appealing for people to want to go back of, like, destination workplace. And I do think that amenities will play into that. And, you know, amazing design. And you just touched on the point that I wanted to bring up, which is a vacant space in CBD areas, especially as more people move to hybrid work and if companies start to open satellite offices in more suburban residential areas. Do you think and you just mentioned that great, big, great buildings are likely the ones that will experience the most vacancies. Do you think this space will be repurposed in any specific way? Do you think they’re just going to make upgrades and kind of like try to convert it into a class A type of environment? What do you see happening in that specific area of the serious landscape?  

Annie Rinker [00:19:30] Yeah, I mean, I think you can take a big building that’s in a really great position or location within a city really near transit, really high walkability scores, the parks, restaurants, et cetera. But it just needs some redesigning and you can reposition that asset and add some of these elements in and all of a sudden you are looking at something that is at least a B plus A minus building. And I think that’s a really interesting concept because a lot of embedded amenities have been raised for years now with different building owners throwing a ton of money at gyms and lobbies and lounges and all these high quality amenity spaces for occupiers. And the big question is, will we start paying for that? And I think that what coworking can potentially do is start to provide this concept of a monetized amenity, because historically speaking and the amenities arms race landlord would build out a conference center and they would take the the rent that they want or some type of of common area maintenance and charge that back to the tenants. And it’s adding to the fear factor. Know. But I think that there could be a world now where what coworking has done really well is they figured out how to monetize this high quality amenity. And if we can apply that concept to not only working but the conference centers and everything that are sort of going into spaces, all of a sudden you have the same lobby and lounge for tenants and you’ve got a conference facility for tenants as well.  

Annie Rinker [00:21:07] But we’re monetizing it. They’re bringing in people from the outside so that you’re able to generate a return on that space that is equal to, if not higher than, a traditional NCR that you’d achieve through a market rent scenario. And I think that that is something that is going to start happening a lot more than just building out sort of like these mausoleum type lounges that are being utilized. You need to have an active programming strategy behind that. And that comes through the personnel. It comes through a lot of the engagement and activities that happen in a traditional coworking sense. And so if you have that lounge that is built out, but it’s also part of a coworking lounge and the conference. Rooms are available for tenants, but they’re also available for the coworking operation and we’re maximizing occupancy and revenues through a marketing and leasing strategy to bring people in that normally wouldn’t have access to that space. I think it kind of changes how we look at buildings. And so now that Class B building not only has these amenities, but we’re able to generate rents that they normally wouldn’t be able to achieve in that type of space by sort of deploying both strategies, not just the amenities, but the monetary monetization of those amenities.  

Ceci Amador [00:22:25] And speaking about the amenities and you mentioned gyms and I think gyms, for all the hype not too long ago and buildings, do you see that changing as a result of covid?  

Annie Rinker [00:22:36] No, I honestly, I think that you’re going to see a lot more high quality gyms going into office spaces. I think there’s going to be a huge focus on wellness in the future, especially the higher quality buildings. I think, you know, people are going to start asking about the filtration systems that we have in our buildings, which is not something that would have ever happened before. It’s going to be part of the leasing tours that we’ll talk specifically to some of the inner workings and the engineering components of a building that nobody really cared about historically. I think that’s honestly a huge benefit of hindsight, is that Gerald Hines was basically an engineer and he’s always, always cared about. He built his company caring about the bones in the infrastructure of a building, and he wanted to design beautifully designed buildings. But he wanted the internal components to be high quality, not only for the fact that at the end of the day he saved the building money and added value to the building. But it was a huge thing that he thought was important for our customers, that they had the highest quality products that went into our buildings. So all that to say, I think that gyms are going to be really important. I think that this whole concept of wellness and the amount of natural light and the amount of airflow that we have and, you know, even down to the plants that we have in our building can be the availability of outdoor space. Like it’s only going to continue to be something that is increasingly important with tenants.  

Ceci Amador [00:24:11] I have to agree, I’m a big fan of the wellness movement within the workplace. And I think that’s what I mean; everything comes with the good and the bad. And I think one of the good things that have come out of it is that people are being more aware of all of this and with the buildings. And so the elevator or the stairs, I feel like we can say goodbye to being kind of very far behind this very ugly kind of thing, just like in case of emergency. I agree that gyms are probably going to stay stuck around. But then I also think that there’s a vital component to the amenities and to creating this kind of amazing workplace experience that ties back to the available technology. And it’s part of wellness, like natural lightning, but also temperature. And so I and the Internet of Things and sensors. What do you see as the role of technology being moving forward? Do you think that we’re going to see the theory industry being kind of more actively incorporating and adopting all of these available technologies? Do you think that they contribute to a better workplace experience? What’s kind of like the landlord’s perspective on that?  

Annie Rinker [00:25:22] Well, it’s interesting. One of the great things about The Square is that it’s not only our branded coworking product, but it’s also an R&D facility for us to think through a lot of those different things that are rapidly evolving, frankly, in and in the world. And so I’m at our Houston location today and we have about one hundred and fifty sensors coming from seven different sensor companies. And so we are constantly tracking utilization and occupancy and even down to counting door swings in the restroom so that we can deploy our cleaning crew not just every two hours, but based on utilization. And so, there is a lot that can happen. I think the interesting thing, though, is, is, you know, there’s like I said, prop tech is such a big thing. I’ve hired an entire team in our Office of Innovation that’s constantly thinking through how we should deploy this and looking at the technology and how quickly it’s changing. But I think it’s the question of how much of this is on the landlord versus how much of it is on the client or the tenant, because there is, I think, a lot of technology that we can put into our buildings that will make the building smarter and better and more efficient. But then there’s also technology for technology sake, which doesn’t necessarily add value. And so that’s something that’s probably going to be more on the on the. Her side and again, I think it just depends on what technology it is and what the purpose of it is. A great example is there’s so much happening right now, I think, with an experience app. But almost what’s happening faster is that occupier’s themselves, at least the larger ones, are starting to deploy their own apps. And so as buildings are starting to think through what their engagement app strategy is and should be, all of a sudden now we’ve got this sort of another layer to add to it, which is the larger occupiers have their own. And so if we have now a building app where you can book resources and look at different things and now the tenants also have an app, it’s like, how do those two play together?  

Annie Rinker [00:27:35] And I think that that’s just something that you constantly have to think through at a ball, which is hard. I mean, like we’re building our global headquarters that we’re going to be launching in Q1 of next year. And it’s a project that started to develop five years ago and probably has been thought of for ten years. And so if you think about five years ago where technology was and even when we started the concrete oring, which I was in, I don’t even think I was here. When it happened, it was twenty nineteen. It’s like technology already so far. And so where we are is that you have to think about these buildings and add these different elements, but constantly evaluate what we should be doing, how we should be thinking about it. And I think that for behind’s, at the end of the day, there’s plenty of technology out there that needs to happen that I think from an engineering standpoint fundamentally can change our buildings and bring a lot of value to both our our financial partners as well as our our client partners. But you’ve got to have a team again. That’s why he has an Office of innovation, because there are super, super smart groups that are constantly thinking about these things and calling out areas that we need to continue to evaluate and could add value to to our enterprise as a whole.  

Ceci Amador [00:28:55] And I have to say that I agree that the rate at which technological advances have been made is a bit overwhelming. And then you mentioned something very, very important. And I think it’s how technology can help you design better spaces. And I think that’s really where the value is for landlords. So you guys talk. You just talked about counting how many times a bathroom door is opened and closed. And it seems small, but it’s kind of like those details I feel that will make for a much better workplace experience. It’s about the seamless experience where every single touch point is improved upon. And I do think that technology can help buildings and property owners stay flexible, especially if they know how to incorporate that technology into their buildings, or more importantly, if they know how to analyze and use the data that they gathered.  

Annie Rinker [00:29:48] Yeah, that’s the biggest thing. I think people are looking at sensors and how they can solve things. But the thing is, there’s so much data that you can collect in a building, but it’s worthless unless you have a plan on how you plan on utilizing that data. And so for us, all the data that we’re collecting on utilization here, it needs to be a way for us to build better products for the future or provide a better service or do something with that data that we’re collecting. Otherwise, it’s very expensive to collect. It can be very valuable if you use it. Right. But if not, then it’s just an expense that is unnecessary.  

Ceci Amador [00:30:25] I completely agree. And then you also talked about who pays for what. And I do think and correct me if I’m wrong, but I do think that tenants are willing to pay a premium for better spaces that are well designed, that have the right technology in place. And I think coworking is proof of that in the long run. If you look at the monthly expenses of coworking, well, yes, that’s short term. So you don’t need as much initial capital investment, but in the long run, it can be a lot more expensive. But companies and individuals, they’re willing to pay for that for a reason. And so I think moving forward, we’re going to see a lot of that. And I think that’s going to force landlords to stay on their toes and be nimble and willing to adopt and implement new technologies and new leaf models.  

Annie Rinker [00:31:19] I mean, I think that’s it. Like if you think about just technology and lease models. So I’m a big fan of the square and our products, but I don’t think it’s the only way that we can look at flexibility. So, you know, I think that the whole thing and I’ve said this before, that it’s a spectrum of flexibility. And so not every single landlord should deploy some sort of coworking strategy in their space. It really depends on acid, asset ownership, stock ownership, stock. But what needs to happen is. They need to provide at least more flexibility through a different leasing model, through a spec suite program that also added some other elements, and I think that that’s another big piece of it, is that, you know, if you build out a twenty five hundred square foot spec suite, the type of tenant that’s attracted to that is not going to be interested in the seven to 10 year lease. And they have to figure out the technology and the furniture. You need to take it to the next level and provide the furniture. It needs to be turnkey and it needs to be on a short term lease. And I think that that’s the big thing, is that we sort of deploy up a multi, multi step approach where it’s like one product. Is that true flexibility where you’re looking at maybe one to three years max and you have to have different products for individuals that are also for larger enterprise companies for twenty five to 50 people. But then you sort of have that three to five year plan where it’s like a more of a short form lease, but it is service. And then from there you can sort of step up to the next and then they’re sort of like the more traditional leasing model.  

Annie Rinker [00:32:58] But, you know, even if you’re not sort of starting at the low end of the spectrum, the landlords out there need to understand that at least that middle range of flexibility is something that those companies really want right now. And I know there’s a ton of research out there about how quickly enterprises are shifting, and it just makes it really difficult to lock in the longer term leases. But it’s hard because that’s how our buildings are valued, right? They’re valued on a fixed fixed income. It’s like what is real estate? Real estate is like money in a time period, old money out. And so when you start messing with that sort of fixed income scenario, it changes a lot from a capital market standpoint, which I think there’s still a lot of wrestling about what that is going to do to real estate as a whole. But again, I’m not suggesting that all leasing scenarios in the future are going to be flexible. I’m just saying that instead of it being 90 percent long term, I think that’s going to start shrinking down where you’re going to have maybe 50 percent long term. Twenty five percent, that is sort of mid-term flex in twenty five, that sort of short term flex. And but but it’s it is it fundamentally changes a lot that real estate has been built upon. So it’s a lot to think about and a lot to, you know, just consider, especially when you start adding in things that have shifted as a result of covid and people saying that the office is dead, which again, I don’t agree with. But it again, there’s a lot that you can sort of look at that’s happening right now in real estate.  

Ceci Amador [00:34:34] I have to agree. I think and it’s still surprising to me that people say the office is like I could believe that, you know, the first two months we were into the pandemic. But then, like once the three month mark came, I feel like people were starting to see the struggles of working from home. And the office is definitely not dead. And I think that’s something that people need to realize. And I agree that it’s it’s it’s on an individual basis. So you like going forward days, a week? I feel like we should ascribe a particular number. I know that an average is likely to be three days a week, but I can say I don’t know, like I like working from home. But if I had access to an office really nearby, I could maybe go every single day depending on how much I need to get done versus another week just going once a week. But I do think that the concept of flexibility is definitely what people like. You need to put it to the top of your priorities. Like this is where you need to be thinking how to remain flexible and resilient. And we’re almost running out of time here. So if you could think of three not necessarily trends, but shifts that you’re seeing in the cereal landscape and as a result of covid or as a result of just natural technological advances, what could they be?  

Annie Rinker [00:35:53] Yeah, I mean, I think we’ve kind of touched on a number of them. I think that the concept of sort of Class A buildings being a more prevalent leasing scenario for companies into the future. I just think that people are still going to want to have headquarters and they’re still going to want to have office environments for their people. I just think that there’s more opportunity now for those to be in class buildings than ever before. And that’s going to be more of a desirability for the type of qualities, just a flight to quality, which I think we’re going to continue to see. I think the second thing is I don’t even know if we’ve touched on this yet, but I think, you know, management fees are one hundred percent here to stay;  I’m a big believer in that. From the flex office world. I think that covid has accelerated the need for agile Allwork.Space and that with what’s happening with third parties. Operators as a result of covid, especially as we continue to potentially push this return to office down with the Delta variant, I think that it’s even more so that management agreements are here to stay. But I think. What we’re going to see is that there’s going to be this compression and ease. So if you look at an operator right now, they might be taking anywhere from five. I’ve seen all the way up to 12 percent from an operating model. So as their management fee, they’re taking five to 12 percent. That’s kind of like the top line. And so they could still be making money with an operation, losing money, especially during a ramp period or in a scenario like covid. So I think what we’re going to see is fee compression. If you think about it, in America, a property management contract is between two and three percent.  

Annie Rinker [00:37:44] And so I think you’re going to start to see that management be compressed to be more in line with a property management fee, which I think is going to shift a lot from an operator standpoint, because, again, there’s they’re relying on those fees. You’re relying on first and foremost in a leasing scenario, sort of that lease arbitrage where you’re taking the rent differential and now in a management agreement, you’re not taking any of those sort of upside scenarios, but you are dependent on fees and those fees are compressing. I think it’s going to be really hard for a lot of operators. So it’s just something for us to watch in this industry. But I think those are some of the big things. And again, I think the big thing is, is this commoditization of amenities rather than just building out amenity spaces, how can they start to add value? And, you know, when we look at buildings to underwrite, we always look at any premium that we’re able to achieve. And if we can start layering on elements where you don’t have to build out a standalone lounge or lobby area for tenants, you don’t have to build out a standalone conference center. But we can sort of compact that into the operation of the coworking space and monetize that. And I think it’s something that could be really interesting. And we’ll see a lot of changes happening.  

Ceci Amador [00:39:00] Amazing. Thank you so much for taking the time to chat with us today. And thank you, everyone, for the Tuning Into the Future Work podcast by Allwork.Space. Remember, you can tune in on Apple and Google podcasts, Spotify and YouTube. New episodes are released every Thursday.  

Annie Rinker [00:39:16] Well, thank you so much, I appreciate it