About this episode
In this episode of The Future of Work® Podcast, Frank Cottle is joined by Chase Garbarino, Co-Founder and CEO of HqO, to explore how cities evolve when we treat them like outcomes-driven systems rather than tech experiments. Chase introduces the framework behind “Quantum Cities,” arguing that technology must serve measurable results—starting with GDP—while balancing essential principles like privacy, liberty, and economic dynamism. Together, they connect the dots between city revitalization, the changing demands of the workforce, and the growing need for better feedback loops on what people actually value.
The conversation then moves into the practical reality of commercial real estate and workplace experience—from the limitations of legacy landlord thinking to the rise of “experience” as the new differentiator. Chase explains why the industry must become more customer-oriented and data-driven, including concepts like tenant health scores and better success signals tied to renewal and expansion. Frank expands the lens with a “food chain” view: if the employee experience breaks, every layer above it—tenants, buildings, cities, capital—eventually feels the impact.
About Chase Garbarino
Chase Garbarino is the co-founder and CEO of HqO, the world’s leading real estate experience platform. For more than a decade, Chase has focused on leveraging technology to build networks and communities that help startups and small businesses. He is an active angel investor and has also founded his own businesses, including Streetwise Media, which was acquired in 2012 by the American City BusinessJournals, a division of Advance Publications, one of the largest and most successful media companies in the world. As co-founder and CEO of VentureApp, Chase is focused on building a marketplace to help startups procure their business services, saving them time, resources, and money, at scale. Chase received his BA in Economics from Hamilton College.
What you’ll learn
- What Chase means by “Quantum Cities” and why cities function like economic “products”
- Why leading with technology is often “the tail wagging the dog,” and why outcomes must lead
- How GDP becomes a unifying KPI for city progress—and what metrics ladder up to it
- The shift from legacy landlords to experience-driven commercial real estate operators
- Why “earning the customer back every day” is replacing static lease-era thinking
- How concepts like tenant health scores can predict renewals and protect NOI
- Why the industry’s traditional modeling assumptions (like renewal rates) are breaking down
- How return-to-office debates collapse without a stronger, measurable workplace value proposition
- Why workplace strategy requires a partnership model between occupiers and building owners
- How “experience” becomes loyalty—when time in-office feels like time well spent
Transcript
Chase Garbarino
[ 00:00:00,000 ]What, at the end of the day, is most important, which I think is economic opportunity for people, and then, if you can generate that, how do you make sure that all the other experiential pieces of this are feeding into a great experience that will continue to bolster economic success because that really is the foundation.
Frank Cottle
[ 00:00:21,490 ] Chase, welcome to the Future of Work podcast. Really excited to have you here today.
Frank Cottle
[ 00:00:27,570 ] Kind of wow. Um, It’s one thing to have an expert, you know, but an innovation expert and an innovator like yourself. In the previous conversations we have, I’m really excited about our topics today. Um, you have, through your company, been servicing millions and millions, like 400 million square feet of office space, I think it is. Um, through your software system.
Frank Cottle
[ 00:00:56,480 ] And you’ve developed a couple of concepts that are intriguing to me. One of them is your quantum cities concept.
Frank Cottle
[ 00:01:03,110 ] Another is your REX, your real estate experience concept.
Frank Cottle
[ 00:01:07,630 ] And I’d like to delve into the quantum cities because there’s a cascading effect of your concepts— quantum cities to real estate experience to where we are today and things like return to office. Uh, overall, so I’d like to start at the top and cascade, if that’s okay. That works.
Frank Cottle
[ 00:01:27,360 ] Okay, good. Good. Can you explain your columns, quantum cities concepts, and how cities are changing or need to change in order to be revitalized?
Chase Garbarino
[ 00:01:39,050 ] Yeah, certainly. And first off, Frank, thanks for having me on. I’m a big fan of your work both with this podcast, but everything you’ve done prior in your career. So I appreciate you having me on. Looking forward to diving in. I think one of the things that, you know, particularly with the Future of Work podcast, where you kind of attack it from one angle. and the work we’re doing at HQO attacking it from a technology angle. We probably have some of the same shared beliefs. That when you really think about a city and when we think about work. You know, cities throughout human history have really been the ultimate kind of B2B products in the sense that they are the engines of economic progress. We don’t have to go all the way back to Egypt or Rome or all those examples. But when people come together and cluster, you know, we tend to find ways to innovate and move humanity forward, which, um, somewhat unintentionally, has been a bit of a theme throughout, you know, my uh 20-plus year career, through different business models.
Chase Garbarino
[ 00:02:55,870 ] But you know, we, when we got into HQO in particular, and we were bridging kind of the two worlds— technology and real estate.
Chase Garbarino
[ 00:03:09,150 ] You know, the technologists tend to lead with technology, and that’s kind of like the tail wagging the dog. When we really need to be leading with outcomes. And so the whole smart building, smart city crowd, I love them dearly and I appreciate their passion. But they tend to talk about tech for tech’s sake. And so, we have a partnership with MIT and their real estate center. And one of the things that I was saying to know our partners there i was like well what if we if we could simplify it down to one kpi know what is the kpi of the city and you know our our belief is that it’s gdp you know if Yeah, I’d go with that. Is the economy stupid? Right?
Frank Cottle
[ 00:03:55,420 ] Like in politics. And cities are much like corporations or cities, states, and countries.
Frank Cottle
[ 00:04:03,399 ] All cities are struggling for market share.
Chase Garbarino
[ 00:04:07,050 ] And the competition these days is fiercer than ever. You know, the switching costs have gotten lower. I think we saw on COVID.
Chase Garbarino
[ 00:04:17,130 ] substantial amount of people voting with their feet, if you will. And. Again, when you kind of look at human history, if we just focus on the United States, Boston around the 1830s, when you think of other industrial cities, Chicago, when New York was coming up, more recently outside of the United States, when you look at Singapore, Dubai, you know, when a city tends to kind of find that magic. What you’ll see very consistently is 10 annualized GDP growth over at least a decade. Um and these, you know, if you if you start with that concept and I always kind of laugh about you know the national politicians you know tout whatever GDP number they’re touting. And if you’re a financial investor, you would say, ‘All right, what are the kind of leading operational metrics that are going to build up to that overall GDP number?’ And north of 50% of the United States GDP comes from 19 metro areas, right?
Chase Garbarino
[ 00:05:21,820 ] So I’ve always wanted to see a politician break down. Specifically, what metropolitan areas that are already economic engines are we going to be bolstering? What new areas do we think we want to bolster and develop? And so, if we start with that as a goal, technology can be in service of you know an actual metric that I think touches everyone. The Quantum City Initiative, um, was you know initially a white paper, and we now do an annual conference with MIT with people across technology, real estate, academia, government, where we try to bring people together to.
Chase Garbarino
[ 00:06:04,140 ] Ultimately, figure out, all right, we have all this technology, but how is it going to yield real societal progress?
Frank Cottle
[ 00:06:13,140 ] Let me ask a question there. But. Maybe it’s a simple question or you’ll go on for three hours. I don’t know.
Frank Cottle
[ 00:06:21,080 ] What makes a quantum city or what makes a city quantum? And it’s the growth, certainly, but it has to be much more than that.
Frank Cottle
[ 00:06:31,220 ] There have to be additional elements that cause that growth that are the steps towards a city’s quantum status.
Chase Garbarino
[ 00:06:41,080 ] Yeah, so some of this obviously has what I would describe as Western values baked into it, because I’m a, as you can see from my background, a deep believer um in the grand experiment that is the United States. So, you know, when you think about the implications of technology, yes, it should yield economic growth. And very much, I believe in Jim Collins, the author of Good to Great, Built to Last, a number of my favorite business books. He talks about the power of ‘and’ over the tyranny of ‘or’, and you have a lot of people who kind of say. You know, we can we can have these tech-enabled cities, but we have to sacrifice personal privacy and ultimately citizen liberty. Which terrifies me as someone who does not want a government knowing everything that I do.
Chase Garbarino
[ 00:07:35,830 ] So I think, you know, the— in a giant lead room by the way, yeah I like that I got the bunker in the backyard, so yeah, okay, okay we’re good. We’re one of those, um, but you know, it has to back economic growth, and some important concepts like individual liberty. I think economic dynamism is really important. important so you know there’s a another great book called triumph of the city uh edward glazer covers why new york for example has been so resilient through troubles in the 70s with crime and things like that and how it kind of tends to get back on its feet and while new yorkers are very resilient it also has you know essentially economic diversity right you have finance you have media you have fashion you now have tech right so You see these kind of single horse towns in cities, you know, when when there’s disruption, take Detroit, for example.
Chase Garbarino
[ 00:08:39,440 ] They’re not economically dynamic in a way that can kind of help them get through those disruptions. There needs to be better organization of data in a way that you know anonymized and aggregate, but how do we ultimately you know think about a city’s compute? Because to your point about a corporation, right— cities have p l’s and ultimately, I think any corporation, whether you’re a know a city or a private entity, data is going to be very very critical to that. So the concept of compute is important in a way that ultimately yields the other principle, which is you know, what we call you know, experience. Right and so are all of these things ultimately yielding a better citizen experience. And so you know, just some basic feedback loops— you fill out NPS, you fill out customer surveys, you do this, you know, in the private markets all the time for the products and services that you buy.
Chase Garbarino
[ 00:09:41,510 ] Um, we tend to only collect that data in the form of voting. I think there needs to be, you know, much tighter feedback loops on how the entity of say a city government is ultimately serving its citizens. So if you can kind of ladder those things up towards economic growth, um, I think you have a pretty good foundation. Of what marries the principles that we believe in in the West with what is ultimately one of the most important things from a national security perspective— are you economically strong?
Frank Cottle
[ 00:10:18,260 ] Yes. Yeah, no, I agree with that. The quantum cities, though, they’re built.
Frank Cottle
[ 00:10:26,700 ] In order to develop that economic foundation that’s their strength. On a number of factors, Sunbelt factors. Could be an issue, people. Vote with your feet based on a number of things, not just economics.
Frank Cottle
[ 00:10:45,920 ] Crime, as you mentioned. Weather. Economics. Security in economics a boomtown, also a bus town. A lot of times, security and economics is is really important. How does that translate to the commercial?
Frank Cottle
[ 00:11:04,900 ] Excuse me, the commercial real estate industry, with a real estate experience.
Frank Cottle
[ 00:11:09,600 ] Structure around commercial real estate of people wanting who are working in these quantum cities actually want to stay.
Frank Cottle
[ 00:11:17,680 ] From a lifestyle and a work experience point of view, versus just the economics.
Chase Garbarino
[ 00:11:24,090 ] Yeah, so I mean, I think they go hand in hand in the sense that you’re seeing a lot of people, you know, move to those Sunbelt cities because, to your point, weather is, you know, a critical component. Obviously, that contributes to kind of the citizen experience. And there’s very little, despite what I think some of our previous Olympic hosts have claimed, there’s very little that you can do to change the weather, at least from what I’ve seen.
Frank Cottle
[ 00:11:56,740 ] Well, you know, if we are going through climate change in any way, I think we may see, instead of Sunbelt cities, we may be moving for air-conditioned cities. We may be moving back north again. Right. We might see that as well.
Frank Cottle
[ 00:12:13,280 ] That.
Chase Garbarino
[ 00:12:13,740 ] That is, I mean, look, there’s already talk of you know a bunch of people are allegedly trying to start a new city in Greenland so, you know, they seem to be bullish on it getting warmer up there. So I think the.
Chase Garbarino
[ 00:12:27,640 ] The kind of basic premise, um, that we’re driving at, and you’re seeing this in other areas, Singapore is a great example of it. But how do you, how do you think about this city, as kind of the ultimate human product, right? And I think there’s different models, you know, we are not advocating for any one model. We think of it kind of like operating systems, right? You have an operating system, like Linux, that’s open source. You can do a lot of different things to Linux to make it work on whatever computing machine you have it on. And then you have things like. You know, Apple’s operating systems, which are much more closed, and they put some emphasis on experience, so you know, weather is probably the one variable that, you know, none of us really can change. But I think there’s a lot of other things and economic opportunity. At the end of the day, it’s kind of that circle of good times make weak men, hard times make strong men.
Chase Garbarino
[ 00:13:34,990 ] Strong men make good times. And I think, you know, when we get comfortable and things are going well, we tend to forget some of the principles of which created that environment to begin with. Third-generation wealth issue. And we vote on things that, at the end of the day, are not economic. And then I think, when stuff gets tough again, we tend to gravitate back towards, at the end of the day, paying our bills and providing for our families. So I think it’s important not to lose sight of what, at the end of the day, is most important— which I think is economic opportunity for people. And then, if you can generate that, how do you make sure that all the other experiential pieces of this are feeding into a great experience that will continue to bolster economic success because that really is the foundation.
Frank Cottle
[ 00:14:25,850 ] Well, I’m going to go back to the question, though.
Frank Cottle
[ 00:14:30,360 ] What do building owners, commercial properties, um, have to do?
Frank Cottle
[ 00:14:38,540 ] To improve the user experience, so that people want to stay and be in them, as opposed to what we have witnessed in the last years since the pandemic. Uh, distribute much more of a distributed work structure, which causes suburbs to grow but core cities to fail.
Frank Cottle
[ 00:15:02,500 ] Overall, and what are solutions that cities can can apply themselves. To draw people back in, especially when the cost of housing inside of a city— used Manhattan as an example, London’s another great example— the cost of core housing is so high. But people have to commute. In order to get in, in order to have a lifestyle blah blah blah we all know the issues. What do the buildings have to do? What contribution can commercial real estate development make? It will help this process along, to strengthen these cities, as opposed to have them melt down, if you will. Uh, to the suburbs, yeah.
Chase Garbarino
[ 00:15:44,030 ] I mean, when we talk about this in the paper, you know, we break it down in scientific terms. Which, if you think, the atomic unit of a city is a person, right? Cities are just people close together, right? The molecular unit something that brings atoms together is say, the building. It’s you know, where where people cluster and at kind of the micro level, and a city is just you know, a big network of those people in buildings. I think You and I have talked about this. I think there’s a pretty stark line, and kind of a tale of two cities, pun intended. Of you know the mindset of different people in commercial real estate, so you know we call them either traditional or legacy landlords. Um, and you and I have both disputed the term ‘landlord’— it’s from feudal back in 1100, literally the keepers of the bread.
Chase Garbarino
[ 00:16:47,390 ] And the fact that they still go by ‘landlord,’ I think, is somewhat indicative of some of the issues we see in the business. And then you have what we consider kind of the experiential landlords— or what we try to say is experiential. Commercial real estate organizations where they truly are customer-oriented. And if you think about what commercial real estate is, it’s pretty much.
Chase Garbarino
[ 00:17:14,330 ] Transportation infrastructure and commercial real estate are the physical platform of that city, which we do believe is, you know, humanity’s most important product. Commercial real estate, you know, you see, you see some groups do a very good job of this, particularly the people who are kind of operating and are part of, you know, they. They like to use the term placemaking. They’re part of creating things that become very important to the local communities that they serve. They really think about the different personas of people. Who use the property service? The property but at the end of the day, you know, in a lot of other industries, you have people. I come from ad tech, which is probably the furthest along in this, but you have people that maniacally map the customer journey. And they’re really thinking about what is the touch point at every step of the way. And I think what you’re seeing now in this moment, coming out of COVID, obviously.
Chase Garbarino
[ 00:18:16,840 ] You know, a rate cycle is, you know, pain tends to drive change. And you’re seeing kind of this bifurcation: there’s a group of people.
Chase Garbarino
[ 00:18:27,650 ] It’s going to go back to the way it was.
Chase Garbarino
[ 00:18:30,320 ] I’m going to collect my rent, and how do you get work done— not in a building, and nine to five, Monday through Friday? And then you have people who are saying, ‘Hey, every day.’ We have to earn back the customer, both the B2B tenant customer, but also their people. And we really have to think and act like a hotel. And I think if they do that, whether it’s an office, mixed use, it will make a difference. Um, you know, obviously different strategies, but if they’re customer-oriented, um, you know, I think they will contribute to. You know, when you think of it, going up into quantum cities, I think it’s a core component, if not the core component, of the physical platform of a quantum city that will drive economic growth. And then, for their business model, I think you know, there’s, we’ve seen it in other industries— whether you want to talk about airlines, hotel, hospitality, even what’s happened in media, from you know, the transition to streaming. You have to become far more data-driven about the user of your product and service, and you have to earn them back every minute of every day, depending on which of those industries you’re in.
Chase Garbarino
[ 00:19:40,640 ] And I think commercial real estate contributes. Contributes greatly to both the macro and to ultimately the way that people are going to succeed in the industry moving forward for their investors.
Frank Cottle
[ 00:19:52,400 ] You know, I’m going to move some of the blame.
Frank Cottle
[ 00:19:57,660 ] Okay.
Frank Cottle
[ 00:19:59,930 ] Um, as a flexible serviced office operator going back to 1979-80 and having experience.
Frank Cottle
[ 00:20:10,740 ] Every imaginable landlord possible.
Frank Cottle
[ 00:20:13,800 ] In that time period. Um, I’m going to not blame the landlords or the property companies or the development companies. I’m going to blame the financial institutions behind them. Mhm. Um, In the mid 80s, we were doing joint ventures with property companies. Uh and the the Development companies love the addition of services and amenities and all of that sort of thing. So this goes back, this is like generations ago in business. Okay. Property companies loved it. The property companies always have. But the financial institutions behind them were so concerned with government as opposed to yield that they refuse to allow the property companies the freedom to exploit these service issues and service the entire life cycle of the customer as opposed to only the mature life cycle of a customer, only a mature customer. And that was a stigma to growth itself, but it was imposed by the fear of the financial institutions and the rules they laid out.
Frank Cottle
[ 00:21:23,270 ] How do you see or do you see that changing or do you still see that as a. Partial roadblock. And if you’re a property company with an innovative capital resource, versus a property company with maybe a capital resource that’s not as innovative? Is that going to hold you back?
Chase Garbarino
[ 00:21:43,940 ] I think first and foremost, Show me Charlie Munger. Show me the incentive. I’ll show you the behavior. So I think you’re absolutely right. It starts at the top with the capital. And, you know, when we. We work with a litany of different types of commercial real estate organizations. We work with capital partners that you know want their managers and operators to be tracking tenant data and providing better experience.
Chase Garbarino
[ 00:22:14,490 ] We work with the owner-operator, the public REITs that are doing everything in-house. At the end of the day, as you know well, it really was a great business, right? A lot of times your hold period was shorter than the length of the contract with the customer. Um and yeah, three and a half four years is what we would go through.
Frank Cottle
[ 00:22:42,210 ] 10 and 15 year customer cycles and have to deal with three and four years. Two. Two landlord cycles and three and four year investment cycles.
Chase Garbarino
[ 00:22:52,390 ] Yeah so I I always talk to people in commercial real estate about this. Imagine if you know, behind the scenes, Netflix had to deal with you know all of this. You know, all right, we really got to optimize one of our assets— one show or one movie— because our hold period on this is different with the investor who funded this. Rather than dramatic simplification, we want to get as many people watching as much stuff and they pay for your content differently. But because of the way the business is capitalized, it is hands down the biggest structural impediment to becoming customer oriented. To underwrite you know a very long term contract that you know almost sits like first lien debt, right? So it starts at the top with the cap, capital, and where I think the operators have responsibility and opportunity is that you to provide new sets of metrics, because you know finance people and spreadsheets only speak in finance and spreadsheet terms, that will kind of move them towards what you’re
Chase Garbarino
[ 00:24:06,520 ] saying, which is being more innovative sources of capital. And when my co-founders and I started HQO, I was amazed I got my hands on a bunch of anonymized discounted cash flow models from a group that you will know well—I won’t name them here— but if not the most sophisticated, one of the most sophisticated commercial real estate investors on the planet. So when my co-founders and I started HQO, we were able to get our hands on. You know, some anonymized discounted cash flow models from a group you know I won’t mention here, but if not the most sophisticated commercial real estate investor in the world, certainly one of the top five.
Chase Garbarino
[ 00:24:51,710 ] You know, as I’m going through the the tenant renewal rate, which is a significant lever you know for net operating income (NOI), as the industry calls essentially profit. Um, was 72 72%, 72% for every single tenant in every single building. I you know I asked my friend, I said, ‘How are you getting 72%?’ And he made a joke. I think it’s hard coded in Argus. And for people who aren’t familiar, Argus is the financial modeling software the industry predominantly uses. And I was like, ‘If I showed up to my investors with that, you know, I’d probably be fired.’ Um, and you know, as you’ve seen, lease compression happened over the last 10, 15, 20 years. Obviously, the internet is still happening. Yep, the internet is making work more dynamic with the everything happening with AI and layoffs and people repositioning. Folks, it’s just very hard outside of you know if you’re a very large corporation outside of kind of HQ or core hubs to commit over long term.
Chase Garbarino
[ 00:26:00,170 ] So, you know, we we think that from an operational perspective, you know, there needs to be this concept of a tenant health score and it’s not credit. Right. They. The industry does a very good job of getting your credit score and your ability to pay, but are you actually having success at the property? And whether that’s productivity, culture, collaboration, efficiency.
Chase Garbarino
[ 00:26:27,330 ] You know, for the industry, it’s the success that aligns with.
Frank Cottle
[ 00:26:31,190 ] Renewal or expansion, and yeah, I was going to say there’s 50 different ways to define success. You have to have a relative renewal that right, right, and it’s it’s got to yield in that financial outcome.
Chase Garbarino
[ 00:26:42,680 ] Now I mean, you’ve seen it, I’m sure in your career. Um, you lose the anchor tenant, you lose someone, it blows a hole in the NOI for a year, two years, you’re dealing with downtime, you know, new TIs. Brokerage fees to replace the tenant that you lost. So, if you can start to really predict what are the six signals of success, so that you can manage towards that. I think you’ll see the capital start to think a little bit differently. If you take it a step further, you know, we have this concept of you know um customer lifetime value in technology. How much total revenue are you going to drive from the customer over the lifetime? In commercial real estate, it’s somewhat but myopically focused on the lifetime of one lease. Our big customers, you know, the portfolios of hundreds or upwards of thousands of buildings. They have the idea of a Fortune 500 company.
Chase Garbarino
[ 00:27:45,210 ] For each lease, it’s treated as a separate customer rather than, ‘Hey, we have a top three global bank that’s in 15 of our buildings.’ How do we take a total, you know, tenant lifetime value of their overall you know workplace spend?
Frank Cottle
[ 00:28:01,000 ] No, I agree with that completely. In our own company, as an example, we are a month-to-month service company doing offices and virtual offices. But in this particular company with about a 15-year history, we’re serving over 270,000 customers globally. And about 20% of them health. 15-year life cycles. On number one places. Month-to-month programs and so a short-term service agreement, if your services are good, can be equally effective to a long-term lease, which is basically. Instead of handcuffs. Yes, yeah, and trying to handcuff people as a try— as opposed to trying to service people— is an anachronistic way of doing business that goes with the term ‘landlord.’ Let’s keep them in jail for as long as we can, and then we’ll worry about finding a new prisoner when we release them.
Chase Garbarino
[ 00:28:56,260 ] Yeah, and it’s completely misaligned. Where you sign a lease, and then you know, the goal most of the time is how do we keep expenses down? Which I understand the incentive structure, but if you have to earn that customer, and you are able to build an operating platform with more flexibility and adaptability, how do you earn more with that customer over their lifetime?
Chase Garbarino
[ 00:29:23,750 ] Um, whether it is multi-location, more bundled service, and experience, you know—I think what we’re seeing is some of the largest sophisticated occupiers on the planet are gradually moving more and more towards flex. I talk to people about commercial real estate about this all the time. In the early 2000s, you remember the cable companies were like, ‘eh, this streaming thing isn’t that big of a deal.’ Uh, Netflix in 2017 surpassed all cable operators in viewing eyeballs and every metric— how many hours watched.
Chase Garbarino
[ 00:29:59,160 ] Friction and you orient around the customer typically what you see is substantially more demand. We take more rides than ever with Uber, even though less people own cars. So I think you’ve been in this business for a while and the capital is certainly the largest. impediment to becoming customer oriented, but somebody or more likely many people need to crack this because, you know, it is our belief that there is substantial demand for workplace. It’s just going to look a lot different than the 10, 15, 20-year lease. Bulk buy, lease— if you will, okay.
Frank Cottle
[ 00:30:41,460 ] I I I I want to break the the train here a little bit. We’re talking about the landlords or the property companies and the financial institutions behind them and all the change they need to make. But the leaf cycle, the leaf cycle, is dictated by the number of employees that a tenant, use the term, has or can keep on site.
Frank Cottle
[ 00:31:07,620 ] So, what in order to make the Quantum City the real estate experience of the commercial lease, the commercial level work— for all parties. You actually have to have the operating company who is the tenant. Let’s say the magic financial institution, or the magic technology company, or media company, or whoever is the tenant, whoever’s got that. Full floor, multiple floors that support this entire structure you’re talking about.
Frank Cottle
[ 00:31:36,910 ] They have to make. The user experience onsite worthwhile and the purpose and the reason people go to an office worthwhile.
Frank Cottle
[ 00:31:46,600 ] That entire food chain falls apart.
Frank Cottle
[ 00:31:50,350 ] So. What are the responsibilities?
Frank Cottle
[ 00:31:53,870 ] To provide a work environment not just profitably, you’ve got your profit responsibilities, but usually they go hand in hand, a work environment so that people actually want to occupy that space. They say you know it’s worth an hour commute on a dirty train next to a smelly person next to me to get there, because the experience in the company is so good. Without that, you.
Frank Cottle
[ 00:32:22,860 ] The company can’t win the war to talent if they force people back to the office. So they have flexibility of some sort.
Frank Cottle
[ 00:32:31,890 ] And they can’t succeed unless they win the war for talent so they wouldn’t be able to pay their lease payments, et cetera, et cetera. So again, it’s a food chain issue.
Frank Cottle
[ 00:32:41,490 ] The worker has to be satisfied on site. What’s the corporate responsibility to do that?
Frank Cottle
[ 00:32:47,810 ] How many people are really doing that versus dictating? If you want this job, you must. Right.
Frank Cottle
[ 00:32:55,450 ] That is a slow erosion to the corporate structures and the success of that company. They will lose the war for talent and, over time, lose their competitive capability.
Chase Garbarino
[ 00:33:07,580 ] Yeah, well and I think you know there’s there’s a bunch of things to pull apart in that, but I think if we start at the top— between the corporation and the commercial real estate organization— I think we can kind of boil it down to changing one word, as you know well. It’s a very transactional industry, and I think it needs to be significantly more of a partnership industry. And, you know, on the on the commercial real estate side. Just as they need to be more data-driven about experience and these things to their investors, they also have to do the hard work. To be data-driven about what is the true ROI of in-person work, because they love hammering technology companies like us. What’s your hard ROI? And I tend to ask without trying to be too much of a wise guy. What’s yours? Right, so when a CFO is looking at that rent bill, which is typically number two behind their people costs, how do they justify it?
Chase Garbarino
[ 00:34:15,830 ] How can you show? I think everybody has the anecdotes right. It’s You Know, you lose culture, you lose connectivity, learning loss happens when people aren’t together. I think there is very hard data. That can start to paint the picture of why people being together tends to drive productivity and innovation and culture and all those things. But you got to do the work to kind of prove those different scenarios. And on the corporate side, you know, if they get that partnership, you know, we’ve talked to, we we bought a business that is the kind of leading survey for the Fortune 500 on workplace experience. So the employees fill out the survey about what they need from the office and workplace to be productive. And not a single one of the top tech or finance companies believes that their core competence is workspace, right?
Chase Garbarino
[ 00:35:16,050 ] They provide technology products and services. They provide financial products and services. But a lot of them have built up all of this infrastructure to handle it because they don’t have the partners whose core competence it is to drive employees. Outcomes and so I think you know the the commercial real estate industry needs to go a step further and really understand different employee personas. What does success look like? And become, you know, much more data-driven and frankly multivariate. Because the success criteria for an executive at a top bank versus an engineered a technology company look different. But significantly more rent decisions and space decisions are being made on the totality of the employee population, versus the old days of CEO, CFO, like the location, right? Because you’re right. It’s all about talent, attraction, and retention.
Frank Cottle
[ 00:36:14,830 ] That’s what it is.
Frank Cottle
[ 00:36:17,110 ] Um, I think as we start to run long here, I think the issue when we look at The bandwidth of the bandwidth of issues here.
Frank Cottle
[ 00:36:30,350 ] You can’t find a single solution at a single layer. And the structure, it is a multilayered structure. It is a food chain issue. Yes. If you will. Uh and that. If you disrupt the bottom of the food chain, the employee.
Frank Cottle
[ 00:36:51,920 ] Then the top of the food chain will fail.
Frank Cottle
[ 00:36:55,890 ] And so the services that companies provide to their employees through the structure of the services that the property companies provide to their tenants.
Frank Cottle
[ 00:37:11,460 ] Through the flexibility that the financial institutions that provide the capital of those property companies.
Frank Cottle
[ 00:37:19,310 ] Through to the investors that provide their investment to those capital resources.
Frank Cottle
[ 00:37:25,920 ] That all of those things are tied together and then it’s tied with the workability and the structures of the cities themselves that allow for the development of projects. To be. Developed within their cities to manage this food chain structure.
Frank Cottle
[ 00:37:46,580 ] That relies upon, in some cases, even our state and federal governments and the regulatory issues or the tax issues and things of that nature. Um, I don’t wanna say it’s incredibly complicated. I don’t think it is. I think it’s incredibly simple.
Frank Cottle
[ 00:38:02,820 ] If you service the bottom of the food chain— through every aspect of what you do— you’ll succeed. If you don’t, you will fail.
Chase Garbarino
[ 00:38:14,030 ] Well, and it’s, that’s exactly right. And when you think about it and you’re. Your career in commercial real estate, the black box of data, has always been: what are the people doing, and what are they like and not like? We now have the technology tools to get that data, and to your point, everything is in service of that, right? So particularly in commercial real estate. The for the employer, the customer, and the real estate team is the employee. Uh, for the commercial real estate organization, they just need to add one more variable. Which is— we have our B2B customer, and we have our B2C customer. And you know, the money might flow only through the B2B customer. But what we see very distinctly in you know the budgets of the tenants is that more and more money is being spent on what we call our alternative space uses. So the off-site meeting, the training and development meeting, the you know, executive, the board, the board room meeting that you book at another building.
Chase Garbarino
[ 00:39:23,240 ] So you know, you have substantially more people making economic decisions on space. A lot of big companies, before they take a lease in a city, they’ll just give budget to the employees to go pick flex spaces. Then you know, they try to follow the employees right. So they need to kind of think like the the hotels and airlines. They have corporate programs they market to the consumer, right? And they kind of have to tackle both of those issues. From an investor perspective. I think one of the things tying it back to your original comment is. My good buddy, Joe Pine, who presciently wrote the book in 1998, The Experience Economy. You kind of laid out the playbook for this for pretty much everybody. It starts as a commodity, it becomes a package good, it moves up to a service business, and then it turns into an experience business where he puts that on a graph of differentiation and pricing premium. And, you know, the fact of the matter is that margin is going to be found.
Chase Garbarino
[ 00:40:27,820 ] In whatever you want to call space, plus and so he describes services and you see it in furniture budgets and the ti we have a bunch of customers now that put tenant credits into the leases to spend on all the ancillary services at the building and services are things that you know help you save time and the way that he defines experience to your point about the commute.
Chase Garbarino
[ 00:40:55,680 ] Is there a brand and emotional connection where it’s viewed as time well spent? And I think the industry is moving slowly, but up to the service level. And they really need to be thinking about that experience level of how do we develop a durable connection with demand? And that’s loyalty at the end of the day, right? And there’s not a lot of loyalty to your landlord.
Frank Cottle
[ 00:41:21,970 ] Agreed. Agreed that too. Well, Chase, I’m fascinated by a lot of this, as you know, and I’d like to look forward to episode two someday. Uh, I really drill into the devil in the detail on some of these things because they are elements of change.
Frank Cottle
[ 00:41:40,080 ] Elements of change help to define the future of work. And I want to thank you very, very much for your time today.
Frank Cottle
[ 00:41:46,860 ] And uh, Look forward to.
Frank Cottle
[ 00:41:49,830 ] Really circling around and getting a deeper dive.
Chase Garbarino
[ 00:41:53,560 ] Yeah, well, thank you for having me on. I know we could go for probably eight hours with our interests. We’ll do that.
Frank Cottle
[ 00:42:00,780 ] We’ll do that. Thank you. Thank you, Chase, very much.
