Jamie Hodari [00:00:00] You can build a deep sense of culture without having to be around the same set of people all day, every day, five days a week.
[00:00:09] You’ve scanned the headlines, read the articles, and liked the posts. Now listen to the experts themselves in the Future of Work podcast presented by Allwork Space. Are you ready?
Frank Cottle [00:00:25] Today, our guest on the Future Work podcast is Jamie Hodari, the CEO and co founder of Industrious, the highest rated workplace as a service company in North America. Under his leadership, Industrious has grown to over 145 locations across more than 50 cities since its founding in 2013 and is recognized by commercial real estate leaders for its asset-lite model based on landlord partnerships rather than traditional leases. Most recently, Industrious is named as one of America’s 500 fastest growing companies by Inc magazine and appeared on Forbes annual list of the best startup employers. Jamie Hodari, a JD from Yale Law School, an MPP from Harvard University and a BA from Columbia. Welcome, Jamie. Glad to have you on the Future Work podcast.
Jamie Hodari [00:01:16] Thank you for having me. I’m excited.
Frank Cottle [00:01:18] Well, we’re very excited to have you, too. And of all those things you’ve accomplished, candidly, being one of the best employers has got to be one of the most meaningful to you.
Jamie Hodari [00:01:32] I certainly feel that way. I think that’s true. Anyone who starts a business, you realize very quickly the constituent group that in certain ways moves you the most is being there for your team. But especially if you’re in a service business, you have to have happy employees who want to be there, or you really can’t even deliver a product that customers would be excited about.
Frank Cottle [00:01:54] No, I think that’s absolutely right. No question about it. So kudos to you for having accomplished that. We’re here to talk about the future of work, and the future of work really, in many respects, has been referred to as we change the way we work as a 15 minutes city. Short commutes, amenity rich walkable environments, generally, lower commercial office vacancy rates, and higher flexible workspace member utilization. How does that 15 minutes city play in with the way you created Industrious, and how do you see it working for all of us in the future?
Jamie Hodari [00:02:32] It’s a great question, and I think 15 minutes cities, that’s a phrase that you hear a lot right now in a lot of different contexts. But certainly what I would say is we have always endeavored to create workplaces that people want to be at, where people want to be, and some of that has changed as a result of the pandemic. What we see most notably is that people have in many ways, become much more sensitive to commutes, and they want to work. They want to go into work for 2 hours a day, come out and go to yoga class, go back in. So they want to stitch their work together with other parts of their life. When you combine those two things. What we find is the industrious locations that are in neighborhoods, very animated places where people work and they can go out to eat and they can go to the yoga class as I described. Those are doing extraordinarily well. The ones that are in very vibrant downtowns that match that are doing very well and the industrialists that are in very office first or office only downtowns that feel very empty after 06:00 p.m.. We’ve seen less demand for those these days than we did pre pandemic. And we couldn’t have anticipated all those changes, obviously, when we started the business. But certainly as a result of that, I would say we are beefing up our locations in neighborhoods that surround city centers in mixed use areas and are still going to add new locations in central business districts, probably at a much slower rate.
Frank Cottle [00:03:56] Well, I think that’s got to be true. There’s two things that seem to be happening. First, your comment about the commute. Absolutely. People hate it. It’s costly, it’s time consuming. It takes them away from the things they want to do. It makes them less productive in their job. And we’ve seen cities that are dependent on literally importing their workers on a commuting basis, particularly with public transportation as the cities that were the most hit and have had the hardest time in recovery overall. And I would challenge that. We’re going to have to see a repurposing with vacancy factors being what they are in many respects from people that can’t import their workers or choose not to anymore. We’re going to have to see a repurposing of cities. And your 15 minutes city concept, which is a common concept, it’s not just yours, but that concept is going to be a part of that repurposing so that people don’t have to basically the people let’s use New York as an example. The people that work in New York will also live in New York, which if buildings are repurposed, commercial buildings are repurposed even in part, will allow for potentially lower cost residential costs and allow for that to happen. I’m curious whether you think that’s something on the horizon or whether you think Nap never going to happen.
Jamie Hodari [00:05:25] That’s the dream. I mean, obviously a lot of the country is working through right now what the economics are of that. The New York Times just had a great article showing how certain types of office buildings are very well suited for residential conversions and other ones are very poorly suited. There’s some very physical realities to that. But yes, the dream is to have cities to have submarkets and neighborhoods that are mixed use rather than residential only areas, dining out and partying only areas, office only areas. That model the Robert Moses model, or however you would define it, I think has long been strained and has had issues that made it a little bit unsustainable. And I think post pandemic has been revealed to be something that people really don’t like. And so to that point, you need to add residential to areas that are primarily office. And you need to add office to areas that are primarily residential. I mean, we have industrious locations that we’ve shoehorned into places like Crown Heights in Brooklyn or various areas around the country that are primarily residential. And they do extraordinarily well, and they’re clearly under office. There’s a lot of demand for places where people can walk or bike to work. And so to me, in certain ways, it’s symmetrical. You have to take these places that live for one purpose and one purpose only and find ways to make them true. 15 minutes multi use cities where you can get everything you want in your life within a space that’s either walkable, bikeable, or is a ten minute drive, not a 45 minutes drive each way.
Frank Cottle [00:07:04] Well, I think you’re right, and I think you can liken cities to people in many respects. We all want to have multi capabilities and personalities and things of that nature. If you had a person with a single trait in their personality, they’d be pretty boring. So when we have these areas that are single use areas, they do get boring at different times during the day overall. And I don’t think that works. And it’s funny because office only, residential only, that’s really a pretty recent phenomenon. I mean, go back to even the mid last century, there was a lot of over under a shop below, residence above, something below, office above. There was an awful lot of that everywhere. And you go back another 50 years, and that’s the only thing that existed, just about.
Jamie Hodari [00:08:08] And it’s very American.
Frank Cottle [00:08:11] Well, it is very American. We can go to Europe and walk down the street and see that today everywhere. Not very American. I think it’s very post World War II. So this is a phenomenon that is correctable if we recognize it and deal with it overall, I believe. But you said something that was really interesting. You said that it’s more bikable. Okay. And I want to bring something up in that regard. We’ve been advising people when they develop properties and projects in the flexible workspace industry in particular, since probably about 2017 or so. It’s much better to choose a location for development on a bike path interesting than on a metropath. And as we see, I won’t call it a flight to the suburbs because an awful lot of the workers already live in the suburbs, and we’re going to the cities as we see people say, no, I don’t want to do that anymore. The city isn’t ready for me yet, or whatever. The thing is, they don’t mind being in the office. They just don’t like to commute. How do you think the sustainability of suburban workplaces will be in the future by comparison to the central cities? Will people stay in the suburbs until the cities are reimagined or will they? What what do you think is going to happen?
Jamie Hodari [00:09:39] This is where we’re getting into sort of urban planning and things where I don’t want to represent any false expertise or even the phraseology of it sometimes is the experts really have the exact.
Frank Cottle [00:09:53] Hey, go out on a limb.
Jamie Hodari [00:09:54] Yeah, I’ll go out on a limb. But I’ll just say the difference between a streetcar suburb and an ex suburb and sometimes that can be a little bit opaque. What I observe is there’s a lot of demand for for example, I grew up in Michigan in a true residential only bedroom community called Bloomfield Hills. And there was no downtown, but there was a town adjacent to us called Birmingham that had a very cute little downtown and it was walkable and it was still a suburb, but it had some of that mixed use flavor. And right now I do think you see very rising demand for working in those types of settings. So when you talk about suburbs, I think oftentimes people picture office parks and we do need to figure out what to do with office parks. But if I had to make a bet, for example, I would want an industrious on Main Street in Greenwich, Connecticut, even if someone lived 15 or ten minutes away and would drive. But then they’re working in a mini downtown where they can walk around. That’s the suburban pattern, I think is very durable. These miniature, very cute downtowns that are walkable, that have city like qualities, I think those are going to do very well for a very long time. That’s not a temporary trend while people wait to redevelop an appetite to commute an hour each way, but the deep suburbs where if you are going to leave your home, you’re talking about working not in a cute downtown, but in an office park. That seems more permanently impaired to me.
Frank Cottle [00:11:28] Yeah, I would agree with that, by the way. And as we see in Europe, where those villages, so to speak, with those great high streets, not Main streets where those great high streets surround a lot of the major metros, we have seen a flight to those areas by the workers and the creation of workplaces that allow them to still be connected. And usually they’re connected around a bike path, but also a metropath. Usually there’s connectivity to both. I think when it comes to commute, people don’t like the habit of commuting, but most people don’t mind commuting for a purpose. So to go into that important meeting or to go meet that important client or to get something you could only get in the central city, people usually don’t mind that at all. So you’ve used the word hybrid. We are going to a work from home, work near home, work in the city, work at the clients, to work anywhere, environments overall, I believe. And one of the things, though, that’s always challenged in that seems to be challenged in that by the CEOs of major corporations is, oh, I’ve got to keep my company culture together. Therefore we all have to sit in the same building at the same time and sing Kumbai in a chorus. That seems to be breaking down a little bit. But culture not just where you work or the facility type that you work in, but mostly who you work with is very important. So a sense of community that is cross generational, that allows people from different backgrounds and different professions to intermingle and maybe grow, how does that play with what you’re doing at Industrious or how you see the whole flexible workspace and co working community? Overall.
Jamie Hodari [00:13:41] I couldn’t agree more about the importance of the people who you’re around. I guess I would start by saying I very much agree that we are moving towards an employee choice work from anywhere world. If not, we’re already there to some degree. And I think it’s okay to see your colleagues less frequently than people did in the past. What I see from a lot of our customers, it is hard if you never see your colleagues, if your entire world is virtual. But to me, there’s a little bit of a shift almost from the high school model to the university model, where in high school, the way you build a high school culture and a sense of affiliation with high school. Is everyone goes to the same four classrooms every day, five days a week. And then people go to university. And you might go to a 40,000 person university. Sometimes you go to class, sometimes you skip, sometimes you go study in the library. Sometimes you only really see the other people in your dorm and you’ll go weeks and weeks maybe without seeing people outside of your small, close group of friends. But it is episodic or periodic. You once in a while see all the other students at the football game. You sometimes go to events in the student activity center and that method that’s more dispersed. And then once in a while you gather and you maybe only see a subset of people. A lot of people feel more affiliation for their university than they necessarily did for their high school. So you can build a lot of institutional affiliation. You can build a deep sense of culture without having to be around the same set of people all day, every day, five days a week. I mean, my best friend who I love, I probably see every once every three weeks, and that’s enough to keep a very serious, very close relationship going. And so in a lot of ways, I think the workplace is like that. To your point about people don’t mind commuting once in a while for a purpose. I think our Happiest customers tend to work from home a day a week, maybe two days a week, go to a local no commute office many days and then maybe once a week will commute all the way into downtown to see a lot of their colleagues. And I don’t see those people losing a sense of connection. And one of the most wonderful things, I guess, to finish would be that they get the community of their workplace on the days they go into downtown, and then they get their local community if they go into a local space in Wimbledon in England or in Brooklyn or in Short Hills in New Jersey. Some of whom are their colleagues and some of whom might just be people who work at other companies but who live in their community, and they get to meet and go out to lunch and develop those relationships. That’s an amazing combination of factors that can enrich someone’s work life but also their social life.
Frank Cottle [00:16:35] Well, I would agree that you can actually get burdened by only seeing the same people every day and only seeing them in a work environment. Think of the sitcom, the Office. Like, gosh, what a chaotic, horrible place to live and work. But that happens. There’s a reason it’s a sitcom, is because it’s real overall. And as human beings, I think we like variety and we like new things. It keeps us stimulated and really nothing’s more stimulating than sitting next to somebody that you don’t know but who is equally capable as a professional that you can share new thoughts with. So how important and how do you create an engender, a sense of community within your own facilities?
Jamie Hodari [00:17:31] This has been a journey for us over the last decade. How do you create an engender, a sense of community in the spaces? And it’s changed over time, and I don’t think we’ve perfected it, but what I see is about 30% of people in most of our spaces, or about a third, they really want they’re active about wanting to meet new people and interact and go to events. And so those people would say, if you said, is it important to you to be part of a community? They would say yes, and they would opt in, and they would choose to participate in all sorts of events that, to your point, engender that or help create that. And then about two thirds of people would say, I’m a little bit of an introvert or already have enough friends. And they feel, in certain ways, suspicious of anything that feels too overtly about creating community. But there’s a lot of research that a lot of what makes you feel connected to others, a lot of makes, you know, the combats isolation. It can be thinner than people expect, like a smile when you walk in, someone saying, hey, I know you’re an almond milk person. We’re out right now, but someone’s running the store. We’re going to have it in 20 minutes. If you sit tight so you feel seen, you feel noticed, moments like that, or again, once every few weeks, a collision with someone else at the space, those often can be very meaningful to people, even if they’re in the subset of people who think that community is not as important. So what we try to do is actively provide the more affirmative proactive opportunities for connections with others for the one third of people who really want that, and for the two thirds that again, feel a little bit differently about that. We try to be very subtle, we try to not be coercive. We try to create opportunities to connect with others or even just to smile at someone or feel seen. And then people can opt in if they want to be part of the more sort of active moments of community. And oftentimes over time you get the same amount of customer loyalty and sense of connection for both of those populations.
Frank Cottle [00:19:36] So do you think that community actually extends the lifecycle of the customer within a center, a flexible workplace center? Overall?
Jamie Hodari [00:19:46] Yes, absolutely. I would say even to step away from flexible work centers. When you look at the Gallup Q Twelve survey, which is kind of the oldest gold standard survey for employee engagement, of the twelve questions, the one that’s most highly correlated with workplace engagement, how long someone stays at a job is do you have a best friend at work? And so it’s quite clear for any employer having a sense of community or connection with people around you that goes beyond just, hey, that’s Becky from accounting is an extraordinarily important part of enjoying your work each day, and that flows through to customer retention and whether people want to stay or not in our centers for industrious. So I think we do it for a lot of reasons, but it’s good business to make sure that people in your centers connect with each other and feel connected to the people around them.
Frank Cottle [00:20:42] Well, it’s funny. I work from my home. I have for years, for decades, on and off, but I do have a best friend at work. It’s a black English Spanish.
Jamie Hodari [00:20:57] And I.
Frank Cottle [00:20:58] Thoroughly enjoy his company and I only hope that I’m as good a person as he actually thinks that I am. I get that. But it is funny when you say community. I know for years, quite a number of years, I commuted back and forth on a very regular basis to London, where we had offices that still do. And I developed a sense of community within the travelers community. When the flight crews on the long hauls from La, where I used to live, to London all recognized me and called me by name when I came on board, I felt I was comfortable, I was home, and I would not change that airline because of that. I would do whatever it took to stay on those flights of that airline where I knew that crew would be there. And that’s probably an extreme example, but it really is important that you feel at home.
Jamie Hodari [00:21:59] I actually think that wonderful example. And I’m probably going to use that moving forward in other contexts, I think, because people can close their eyes and picture it, they know what it means to be a long haul traveler where there are all the inconveniences and to do it often enough that people know your name and you feel welcomed. But I think that is different than what a lot of people picture when they talk about community. To my earlier point, I think people think it needs to mean you know everything about everyone else and this is your crew of ten people and you’re inseparable. But there are lots of types of communities and they can be very meaningful even if they’re around a shared interest and even if it’s only once a month or every I don’t know how often you are flying, but every weeks or something like that. And they still are very powerful, meaningful to the individual and powerful sources of loyalty. So when people talk about community in a flex space and a co working space again, sometimes that can be hardcore and everyone knows everyone else’s name and they’re all going out to lunch every day and sometimes it can still be a powerful community that on its surface seems a little more diffuse.
Frank Cottle [00:23:15] Well, let’s kind of stay something related to that. But let’s shift gears entirely here. And instead of talking about the people inside of a center or an office and the workers, let’s talk about the other side of what’s necessary in the workplace, and that’s the landlords, the property companies, you are dealing with them on a regular basis. Those of us within the industry have and it’s been both at times of love hate relationships or incredibly powerful partnerships that can bring a lot of benefit to both parties. Your business model is a little different than some others where it seems to me and I’d like you to go into some depth here if you could, Jamie that you seek to create a joint venture esque relationship with the property companies as opposed to a classic landlord tenant relationship, which the term landlord I think they were using that back in the days of the pharaohs. I am the landlord and I always imagine a castle with them around it than peasant farmers, that sort of thing, but it’s a bit of an anachronistic term and in today’s structure I think it’s not the property companies that held it back. I think the property companies would always be anxious to be creative. I think it’s been the investment community behind them that has held them back from being more creative. And I don’t know what your thoughts are.
Jamie Hodari [00:24:55] Well, I’ll start with the structure, as you said, and elaborate a bit on that and then can touch on if someone is holding back the ability to deepen those partnerships, who would it be? Since the very first days of Industrious. The dream was to create a business where you would have joint ventures with landlords to turn a portion of their building into flex space and then use that flex space to make the landlord more money on the 10% of the building that’s flex space, but also to improve the performance of the other 90% of the building. That wasn’t possible in the very early days of the business. You have to have a long track record and be able to persuade landlords that they should have to take the risk and put up the capital necessary to do that joint venture model versus simply signing a lease with you and clipping their check every month. So our 1st 30 locations or so were leased in the more traditional landlord tenant, asset owner tenant model. Then we were far enough along that we could start going to landlords and saying or going to asset owners and saying there’s something here and it’s a powerful source of value in your building and it’s going to help the rest of the building and we should be doing this shoulder to shoulder and it will unlock certain things if we do that. And we were eventually able to succeed in that transition in about 2017 or 2018. And now more than 90% of our network are partnership agreements JBS with landlords instead of arm’s length leases. And I will say it was a hard transition, but I think it succeeded my expectations in terms of what it is able to deliver. You can just deliver such a better product when you’re sitting together with the landlord and saying, okay, are people going to use the same key card to access the elevators and access the space and hey, the security guard was treating people poorly. We have to figure out what to do about that. It’s very hard to deliver a great workplace experience on the fifth floor of a building if you have no say in what’s happening in the entry sequence or on the way up or in the shared spaces of the building. So I think it is where the industry is heading eventually and I’m a true believer in it. And when you say, well, what’s the obstacle to that? Who’s been kind of stood in the way of the creativity necessary to effectuate that business model? I would say you are right that I think it’s the investment and lending community because an asset owner are oftentimes entrepreneurial. What does this building need? What’s going to make this building? What’s going to make me money? And when you start to get to the investment side of things, the question is, okay, well, when you go sell the building, what is some future buyer going to want? Think about homes. A lot of people want a quirky home. They want to make their home more interesting. They want to paint it purple. They want cactuses in their backyard instead of grass. But the thing that keeps them from doing that is they say when you go to sell, go for the thing that is the most generic, go for the thing that would have the highest number of buyers. And that’s not necessarily irrational. It’s just one of the ways in which people, when they start to think about capital markets, not just what’s going to make my building great, but what is some other buyer going to think they want that can oftentimes drive conservativism, status quo bias, sticking with what’s familiar.
Frank Cottle [00:28:17] Well, I would agree with that. I know we were doing management, contract participation, leases, et cetera, back in the late eighty s. And I know how hard that was back then. You can only imagine. But when you talk about working with the landlord, I was at a meeting very early 90s, sort of with a variety of property company luminaries. I had Trample Crow in the room. And Jerry Hines. And Sam Zelle. We were all in the room together. I was the punk. I was the punk in the corner, right? And I forget who asked Sam Zelle at the time because Sam was building these smart suites, he called them in his buildings, in the original Equity Office property buildings. And he built 50, 58 of them. They were basically executive suite or serviced office complexes that he built, single floors. He had his own property people do it. And everybody was kind of going, sam, what are you doing? Why are you doing you’re wasting this good floor? That sort of thing. He came up with the best answer that I’ve ever heard anyone as a property company come up with themselves. He said, I want to service the entire lifecycle of my customer. I want to service them when they begin, and I want to service them to the end, and that’s the only way I can do it. And he built 58 of those facilities inside of his buildings. And that was in the late 80s, early 90s, so way ahead of his time. But today he probably would be seeking, if he were still doing that, he probably would be seeking out you saying JB, JV, JB, we want to do a JV. Because that works. That seems to work. I will comment I made a pitch to Crow in the same meeting, and his answer was real simple. Young man, your tail ain’t going to wag my dog.
Jamie Hodari [00:30:18] That sounds like a high powered meeting.
Frank Cottle [00:30:20] So I did not make that deal. I did not make that deal, but my tail was not going to wag his dog. And that was the end of it.
Jamie Hodari [00:30:29] That’s amazing.
Frank Cottle [00:30:30] So when we look at things like this overall, there’s so many transitions going on in the real estate industry. And sort of the elephant in the room right now is artificial intelligence. And how do you see artificial intelligence impacting the capacity of the serviced office space group, your groups that you’re part of, to. Provide additional layers of service and or to make improvements operationally that will create greater efficiencies that would serve the purposes of that joint venture with the land.
Jamie Hodari [00:31:11] To me, there is a lot of opportunity in AI to improve what we do for a few reasons. I think most importantly, we’ve talked a lot about this conversation about some version of the concept of being seen of individual service. And that really part of the reason that’s so important in our industry, is that there’s a traditional association with white collar work, with being a bit invisible. People will kind of talk about being sheep or an undifferentiated person in a suit that could be swapped in and out. And a lot of what makes great flex providers is ability to make people feel seen as individuals. And that can be very hard to do, and it’s hard to train on that, and it’s hard to know enough about individuals to deliver on that. And so anything that can help sort of anticipate process all the information necessary to say, this person tends to come in at this time, not this time. This person’s a big coffee drinker. This person isn’t, hey, this person’s anniversary is coming up next week. XYZ it’s a lot of information if you have 70,000 customers to keep a handle on, and it almost becomes impossible for any human being to manage all that information. So the application of AI to that, to anticipate customer needs, to segment customers to enable your service people to seem superhuman because they know what the person wants, because they know that their company just closed a big round or something like that. That’s very powerful. And every time we’ve invested in that type of service, it’s paid back ten times over. And I think AI will be an accelerant to that. And also we’ve delivered 30 million days at work. We’ll sometimes say, and if we’re going to go to the J. P. Morgans of the world and the Googles of the world and all of America’s small businesses and say, we can deliver a better workplace experience for you than if you did it yourself, you really have to be an expert in what makes people love being at work. And there’s millions of data points that are created in a workplace about the way people use the space, about their attitudes and interaction, about what customers are churning when. And it produces this sort of enormous but very messy world of data that I think we’ve done a moderately good job of mining for saying, how can we improve the product? How can we improve the product? But I think AI is going to be helpful in the next generation of insights that we’re able to draw from that. Because what a shame to deliver people in 1015 countries, hundreds of centers, thousands and thousands of thousands of people, and not use that as a way to learn for what’s working for them, what isn’t in the richest way possible so you can keep improving their experience.
Frank Cottle [00:34:00] No, I would agree. I think it’s this generation tool, if you will, to use. And you mentioned data, and we have a little mantra in our own company, and I think it’s what you were strongly alluding to, is data has to become information which is turned into knowledge, and knowledge allows for action.
Jamie Hodari [00:34:20] I love that.
Frank Cottle [00:34:21] So it’s that action data that it’s important. The data itself is worthless if you can’t turn it to knowledge and action.
Jamie Hodari [00:34:30] Our analytics team often says data is like flour. Like it’s useful, but you got to know how to bake the flour into cookies. That’s what you really want is the information, the action, something that you can actually do something with.
Frank Cottle [00:34:48] Well, you know, it’s funny, because one time somebody asked me, this is back in the early 90s, about the flexible workspace industry. He says, what do you like? What do you do? I said, well, we’re like bread. We take flour and salt and water and we make bread. I said, but instead we take people place and technology, we bond it together into a single product and we deliver it with a highly flexible service agreement. And that’s what our industry is about. That’s what you’re involved in. That’s what I’m involved in. And I think today that’s what the world is becoming involved in, the combination of those three things bonded together into a single structure. And I think that’s what we’re going so, Jamie, we’re running a little long. I want to thank you for your time. You’ve been just marvelous to hear your thoughts. We’re really appreciative of it and I will look forward to next time.
Jamie Hodari [00:35:44] Thank you. Great questions, great stories. This is one of my favorite podcasts I’ve ever done, actually. This was great.
Frank Cottle [00:35:50] My day is made. Take care.