ABOUT THIS EPISODE
John Williams, CMO at The Instant Group, discusses the current state of the flexible space industry and why the “great consolidation” that many expected, hasn’t happened. Instead, corporate clients are leaning on flexible space more than ever before, and are rejecting larger operators in favour of smaller spaces that can meet niche requirements.
Chief Marketing Officer of The Instant Group
Frank Cottle [00:00:51] John, welcome to the Future Work podcast. We’re grateful to have you here today. You know, I’ve known Instant since 1992 or 93 when you first started this company. I think you and I have known each other for at least ten years now.
John Williams [00:01:06] It’s seven years, Frank. When I had the great pleasure of coming to your conference in D.C., an amazing city, one of my favorites, seven years ago this year, and that was one of my first great baptisms into the flexible workspace world.
Frank Cottle [00:01:19] Well, I’m glad we were able to bring you into the industry. But for those that aren’t familiar with Instant and yourself, let me let me read the brief obligatory bio, if you will, so others can be more familiar with you. John is the Chief Marketing Officer of the Instant Group, which is a real estate solutions and flexible workspace specialist group. They have more than 20 years of data on the global market, and their insights are used around the world. The company now manages more than six million square feet of flexible space with clients including IBM, Amex, GlaxoSmithKline, M&G, Barclays, etc. and as Chief Marketing Officer, John is responsible for Instant’s market reports and client insights. Considering your client base, that’s a hefty job, I would say. I know you’re a speaker at MIPIM, Cityscape, Work Tech, every major property conference in the world and CoStar considers you to be the preeminent thought leaders in the flexible workspace field. I’m a little offended by that, by the way, I always thought that I was the preeminent. But you’re welcome, John. Your credentials are amazing with the company you work through for is absolutely one of the leaders in the flexible workplace world and without peer, the largest specialized brokerage group globally in the deals with flexible workspace. So, thank you for joining us today.
John Williams [00:03:02] No, it’s a pleasure, Frank. And not least because it’s been a hell of a couple of years we’ve all been through, so to to be here talking about such a positive future for flex after such a difficult time is a real pleasure. I think we all feel very grateful. We’re still standing, right?
Frank Cottle [00:03:18] Well, I think that’s true, but you know, our industry, interestingly, especially the established companies in the industry, we all saw an upsurge, a big uptick as companies worldwide, even government recognized flexible work and a flexible work program is critical for their future survival. And I hate to be the beneficiary of something in bad times. But our industry has been. Tell us a little bit, you know, many companies are trying to figure out how to restructure their portfolios, how to reorganize their own corporate real estate holdings. And what’s your thought on that? But what advice do you see instant able to provide to companies going through that right now.
John Williams [00:04:12] There’s more than a couple of things to unpack there, Frank. In part because we’re obviously speaking to a lot of major internationals right now, not only to deliver solutions for them, but I’m calling them to get research and ask their opinions about the return to office and how the market’s unfolding for them. And look, you know, we’d love to be definitive and say, this is going to happen right now. But what we’re really hearing from a lot of these corporates, all the corporates are that, yes, they’re going to use more flex in their portfolio is going to become more dependent upon it. And that’s not a story that was the story before the pandemic. Correct. What is happening right now is that they’re in this test and learn process. So they’re kind of finally realizing, look, we can’t predict what the future is going to look like, but we need to take the approach which is so common to other sectors like the technology sectors we’re going to test to see what kind of environment our staff come back into, what draws them back in, understand what works for them, look at the data and then postulate on what comes next. And so, we think really that the kind of wash out will be 18 to 24 months, at least before we really have a view on what the future of the office looks like, which is not the most dynamic and exciting answer, but it’s the most pragmatic. We really need to understand what we’re dealing with here and how people feel about workspace before we start saying definitively, this is the future.
Frank Cottle [00:05:35] Well, there’s a lot of things in play here. First, you have the human. You know, we always say that the industry is comprised of people, place, and technology. Right now, we’re talking just about place. But when you start changing any one of those things, you must take into consideration the other two. Keep the balance that creates the industry. So, when you look at the people side, which is what we’ve been dealing with through this pandemic period and even before that, if you didn’t have a good, flexible workplace program in 2017 or 18 or early 19, you couldn’t get good talent. Yeah, exactly. Companies were already going through this process on the people side of figuring out what works productivity wise. But they were like you say, they were learning, they were experimenting with it. The pandemic changed all that. Now it’s got to do it. Got to do it now. As we come back, though, people are, it seems that the people are driving the process more than the decision makers at the corporate level. The grand strategy is driven from the bottom up right now as opposed to from the top down. And that strategy from the bottom up will change the way that place is dealt with and certainly the technology is there to bring it all together. So, what’s your thoughts on the bottom-up strategy as opposed to the top-down strategy?
John Williams [00:07:14] This is something where, again, we are 100 percent seeing from the clients I’ve surveyed, probably around 100 heads of real estate now globally that we’ve kind of quanted up their views on the workspace and we’ve been replicating this research each quarter since the pandemic started. So, we have a qualified view of how corporate heads of real estate feel about the office and what they’re seeing from the staff undisputedly. Initially, the pressure was top down like, reduce your portfolio, what are we doing about cost, drive value to the business. Now this kind of, as you say, it’s spun 180, whereby actually it’s their colleagues, the staff, the workforce who are saying, we’re not sure we want to come back in the way that we were before. We’re not sure about those locations. We’re certainly not sure about design. What are you with the real estate department going to do about this? What are you the C-suite going to do to allay fears and address our concerns around the bigger issue of wellness? Now that’s driving behaviors, as you say from the bottom up, as well as the top down, and real estate guys sit in the middle looking for answers, thinking we need solutions to what is a not insignificant problem. It’s a good problem to have. They’re excited about it. They’ve wanted to change things in real estate for a long time, but now they’re really searching around for different ways of reducing real estate outcomes, but also in terms of producing outcomes, they need to measure outcomes differently. You mentioned productivity, that is a very broad baseline. Productivity can mean a multitude of different things. And my point of view is I think there is a mistaken emphasis on productivity being output-ed, i.e. let’s do more of something. And really, what we see the office being used for is doing things differently and thinking differently. You come into the office to meet people, to have a different train of thought, have a conversation, spark an idea, see a client. And flex space is really geared up to help facilitate that. You want to meet new people, have new ideas and be collaborative. Be productive in a different way.
Frank Cottle [00:09:08] I was going to say that it’s interesting, but let’s look at some metrics on that overall. I know in our own discussion with a variety of the heads of various large corporations, one of the common parts that we saw in managing this change and this started before the pandemic but accelerated during the pandemic, one of the major heads of property from all these companies indicated that they wanted to try, they looked at their portfolio two ways. They looked at two portfolios. They looked at their property portfolio, but they also looked at their people portfolio and they said, you know, our property portfolio has a long-term contingent liability of 11 years. The leases and renewal periods, the owned properties, debt, etc. They said, our long-term liability on our balance sheet is 11 years and then they looked at their people portfolio and said our turnover in our people, if you will, our portfolio of people has a seven-year lifecycle on average throughout the entire company, hundreds of thousands of employees. So, they looked at those two things and they said, that’s what we want to balance. We want to balance our life cycle of our employees at seven years with our long-term liabilities on our property portfolio. That was the first thing that they said overall. And then as the pandemic evolved, they took another step and they said, on average, we think that our people side of our portfolio are going to be out working outside of the office on average in some form or another, we don’t know yet, but in some form or other, two days a week. Yeah. So we want to reduce that property portfolio from a match of seven years down to a match of four and a half or five years, tops. They were taking the occupancy down a little bit and they’re look at the debt in their balance sheet. So, using those kinds of metrics, how do you see change going on because those are massive, massive numbers?
John Williams [00:11:42] And look, this is the other thing about this test and learn response we’re hearing from heads of real estate that they would love to make some changes now to their portfolios. But the reality is that the way you procure space via conventional leases means…
Frank Cottle [00:11:55] It doesn’t always work that way.
John Williams [00:11:56] Yeah, they can’t even unwind, the open goal in front of them is to unwind some of these leases in spaces that are less popular. And to combine this answer with my previous one, one thing that’s interesting from our research is the regional nuance around the world, and nearly every head of real estate I spoke to said, do you know where the problem I have now is? The U.S., because staff aren’t going back because they’re saying, you know, I’m not going to go back to the office five days a week. We’re not going to go back to the same location and the type of space that we entered before. We want to see change. And because of the labor market in the U.S. now and the great resignation, they have power. I think the U.S. employee probably has more power now than they’ve ever had previously. And they’re going to use it. And now it will be the people metric. That’s what you were talking about is staff attraction, retention, staff wellness. Surveying the staff regularly to decide is the space working for them and does the space match your people strategy? And the last big outcome of that is every head of real estate that I speak to is either reporting to or working very closely with the head of talent because it’s talent led outcomes now, which really matter above all else, and wellness. All the metrics around pound per square foot or dollar per meter are irrelevant now.
Frank Cottle [00:13:10] Well, you know, it’s interesting you say that. When you look at the cost structure of a major company, the top four items for almost every global Fortune 50, 100, 1000 company, whoever you want to look at, says talent, people, is generally number one. Number two is either technology, facility, or travel. It’s one of those three. Those are the big four cost centers. When you look at flexible workplace today and you look at those four big cost centers, which one is most aligned with the highest flexibility in the workplace?
John Williams [00:13:58] I mean, look, you’ve got to give people options now. This is what the issue is in the U.S.
Frank Cottle [00:14:03] That was a rhetorical question. It’s travel. It’s travel, OK?
Frank Cottle [00:14:10] The large corporates have learned to manage remote workers for decades and decades and have systems in place today to track every cost, every activity, every contract, everything to do with travel. And if anything, today there is no such thing as an occupier anymore. There are only travelers in the workplace. We are all travelers, every one of us, the digital nomad today. So, applying and when they look at facility and looking at HR, they should be looking, in my opinion, at least, And I’d be interested in yours on this, at how the travel management systems work and apply those to the workplace. And as a result, the way they recontract on facilities.
John Williams [00:15:10] Well, look, I have quite a geeky answer for this one, but it’s, you know, if you’re in the workspace sector, you’re going to be interested, whereby we also know from the client base, they want to give choice of location and allow people to work where they want to work. There’s no one saying that you need to come back to one location all the time. They’re happy to liberate the workforce and go out there and let them choose their location. It’s more in doing that, what do they get back? So, if it’s going to be coworking and flex that fills the gap, which it logically should be, the flex sector is going to have to do more and giving data back to the procurement channel, so they understand what value looks like and what good looks like in that space. So, they can say, well, we’ve got 10 employees in this suburban location. It’s a good cost for us. It’s a great location and staff love it. But the moment extrapolating that data out is not impossible, but extremely time consuming. And therefore, you end up with real estate teams trying to manage a lot of data which they don’t really want to do nor have the skill sets to deliver on. So as a sector, we need to be able to be much better at doing this to represent value and represent information back to the corporate procure of space. Have you heard that from anyone else, Frank? Because it’s something we’ve already seen.
Frank Cottle [00:16:24] I think that that’s a big key. Large corporations make their decisions based on data, but we have a mantra. We say get the data. Data becomes information, which turns to knowledge, which allows action. So, get the data. So, we have our own little mantra that I know you have something similar. Overall, every major corporation has some view of that, government as well. The systems that are in place in the travel industry and the service providers in the travel industry, to your point, all are able to flow that data through large systems, like Highmark, all the big res engines, et cetera, and every major service provider from the hospitality to the travel side to the rental side, car rental, et cetera. It all feeds into this giant single system that allows the end user to, number one understand exceptions, understand cost overall, but also allow a decision maker at the corporate level to figure out the contracting. And the contracting in this case, relates to restructuring contracts that allow for a reduction in debt on the balance sheet and reduction in debt on the balance sheet frees up capital for corporate growth. And corporate growth, through that reduction in balance sheet debt, can easily make up for losses that we have in fact suffered through the pandemic. So, if you look at the whole thing as a giant balancing module we’ve suffered through the pandemic with certain issues. The solutions to this bottom-up pressure to keep people side happy also keep the shareholders side happy. And allow for corporate growth, which in turn provides national security for every country because it improves the business climate, which feeds us all. It’s an interesting circle to play with and I know you guys have massive amounts of data in that regard.
John Williams [00:18:58] Well, we do, and this is one of the things I’ve been addressing with clients through research is that, you know, the end user client, whether it’s an SME, a scale up, or a global corporate, they all have similar issues, right? There is a lack of scale in this area, in real estate and in flex space. So, one issue that came out is reporting around sustainability. Now, most big clients, most mid-market clients, sustainability, hitting net zero targets, staff wellness. These are three of the biggest problems on their corporate agenda right now. No doubt. They are all there, unilaterally saying we have to solve these problems. However, the market’s not really giving them anything back. And if they do, it’s like flex space, it’s highly fragmented. It’s quite hard to read. They need scalability. They need scalability of reporting around sustainability, they need a view of the market and how it’s driving value for them, how it can improve. And to your point, Frank, you talk about supply chain and procurement in travel. There are big, scalable models pushing data back at the user so they can measure value and measure output. In real estate, there are thousands of landlords, there are thousands of operators. For the heads of real estate sat in the middle of this, giving out requirements, how do they pull all this data and make their lives easier and make interesting and intelligent decisions. You know, even now you look at the procurement of remote working opportunities and hybrid working. I can’t foresee hybrid working, really working seamlessly until clients have more visibility on where these guys go, and where are they going, and how does it work for them? How do we pay for it? The sector is going to need to come up with solutions, right? And there’s a plethora of them out there, but they’re small and they occupy a little niche in the market here, a little niche in the market there. As a sector, we need to start managing our data better and giving answers back to the clients, I think.
Frank Cottle [00:20:50] Well, you know, I agree with that, and I think looking at the flexible workplace industry and this is maybe a good place to start thinking about tying this conversation off, as we look at the industry, the industry itself needs to come together to put common data structures in place so that they can provide that transparency and that data that the large end users need, because as an industry, there’s a lot of one to three center operators in the flock. And then there’s a few hundred plus and a couple of thousand plus, but there’s a long gap between those two groups, and the end user wants choice. They don’t just want that thousand plus user, they want choice, and the choice has to do with neighborhood, it has to do with place. As we say, it’s better to build a new flexible work center on a bike path than on a metro path. I love that. So, people do want to live and work in their neighborhood, whether it’s downtown or out of town. So, the industry, one of the things I think is a calling here is to work with the largest clients and come up jointly with a common data platform or at least data metrics that everybody can feed into to help large corporates make this decision, gain this extra level of efficiency and support of their own teams overall. And I think if you at Instant as Chief Marketing Officer, were to raise another flag, it would be for this common standard of data that everybody could use. You know, we’d certainly be up for it.
John Williams [00:23:04] Exactly that, Frank. And look, but I think there’s a few things, you know, some data to throw back at you there, which is exciting for the sector to some of those points, you know, firstly, the predictions from, a lot of the conventional real estate analysts was that the flexible workspace market was going to, first of all, contract and then said there was going to be consolidation. We haven’t seen either of these things. And what we’ve happily seen is those owners of one to three centers have done well during the pandemic. It was assumed to be a bloodbath, but they’ve done okay. They’ve had sympathetic landlords, but demand for them hasn’t really dropped off. We’ve seen a demand maintaining real consistency in what you might call non-essential urban locations, so suburban or even rural locations continue globally as a trend. Yes. So the market’s bucking the trend there, and it looks really positive for flex workspace operators that they’ve continued to grow and prosper, and the great consolidation hasn’t occurred. But and, you raised the point there, and I can back this up with data. Bigger clients, whether they’re mid-market or above, they’re not buying from just the top two or three by volume operators. They’re becoming more nuanced. They’re enjoying buying from smaller, more bespoke operators who can give them what they want, which is tailored bespoke areas or, you know, do a separate deal for a bigger client. And that’s because we’re in a service industry. We’re going to work hard for our clients and do the right thing by the customer. I think bigger businesses are cottoning onto this. They don’t feel the need to buy only from one, two or three big global operators. They’re happy, very happy to buy from that longer tail new reference, as long as they can navigate the market, which is hopefully where we can help.
Frank Cottle [00:24:44] But that’s one of the changes that the travel industry brought forth also. Before, your company had a contract with Hilton and that was it. Today, your company has a travel management system that collects the data through every reservation and booking system that exists, feeds it back into the reporting structure that the company can use to manage its contracting, to manage its cost, to manage its exception reports, things of that nature, and it all works quite well. Offering both choice and consistency is what high level decision makers need overall. Well, John, give us a 30 second commercial on Instant. I usually don’t do this, but I know the work that you guys do, and I have for years, and so tell us a little bit about Instant, how people can reach you, where they can reach out to Instant if they want to know more about how to access flexible space on a global basis?
John Williams [00:25:58] Well, there’s several different audiences there, so which we cater for all of them. And like, if you’re a client and you’re looking to navigate the flexible workspace market and understand the way the new kind of human physical digital interface in the workplace works, we’ve got world leading consultants who can help you build solutions, whether they’re bespoke, or whether you buy in essence through an existing flexible workspace operator, we’ll help you navigate that path. And we will help you from smart procurement of space, we’ll help you if you’re a landlord looking to set up, looking at footfall in an area we can help right there, all the way through to a customer saying, look, half my workforce are remote, half my workforce are in the office, how do we knit them together in a series of locations and using the right technology to make it feel seamless? That’s where I think the future of work is heading, and it’s what we’ve recruited to try and provide to all our clients. From an SMB in Austin, Texas, to a global in Singapore, that’s what Instant is here for, to knit together the workplace of the future.
Frank Cottle [00:26:57] Well, we appreciate that very much, you know, that you guys do a terrific job of it. And how would people reach Instant should they want to do so?
John Williams [00:27:08] You can come to theinstantgroup.com, which is our corporate site, which allows you access to any of our experts. You can download research reports and market information there. That’s a good jump off point. Our aggregator if you’re looking for space is instantoffices.com. And that’s the easiest way to procure space on a global basis.
Frank Cottle [00:27:30] Perfect. That’s great. Well, John, thank you very much. Appreciate you, your support and your insights on a global basis for the flexible workplace sector and the future of work. And we’ll look forward to getting together in London sometime soon.
John Williams [00:27:46] Well, I mean, the point is I’m hoping to see you in the U.S.
Frank Cottle [00:27:50] Come to Newport Beach, then.
John Williams [00:27:51] Exactly that. Cheers
Frank Cottle [00:27:54] Take care. Bye.