The Tech Haus
Season 2: Episode 4 Transcription
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Cutting Edge startups in fortune 500 all in one room talking about how emerging technologies are changing our world.
Swish: Today I'm here with David Cairns and Marlon Rodrigues, David Cairns is the Co-Founder of CBRE Forward and Senior VP of Office Leasing at CBRE, the largest commercial real estate company in the world, it focuses on leveraging industry knowledge to meet the needs of commercial clients. Welcome, David, thank you for coming on.
David: Yeah, thanks so much for having me.
Swish: And on the other side, we have Marlon Rodrigues. Marlon is the Brand and Growth Lead at FlexDay. FlexDay helps businesses find workplace freedom by connecting them to dedicated spaces in the city. Welcome to the show. Marlon,
Marlon: Thank you for having me.
Swish: Marlon, one of the terms we use in your bio is workplace freedom. How would you define that?
Marlon: When I started my career, the traditional mindset was that you interviewed in an office, they walked you around, you got to set some sort of hierarchy on the floor plan, corner office, meeting room, you kind of could project from that interview on where you were going to sit, what your day was going to look like for potentially decades. And that has completely changed. Even in the last few years. I think we're noticing that there are many more people that live beautiful, fulfilled lives and never show up to an office. And so workplace freedom is about making this match between people and places. To do the work that they intend to do in the ways that best suit them, and to best suit their culture and way of life.
Swish: And when you think about something like that other than FlexDay, is there a company that you think of immediately?
Marlon: I think that's like a beautiful thing of what we're working on. Because I don't know that there is a company that has raised as far ahead of this trend. In this way, the easiest check on workplace freedom is walk down the street and look at every coffee shop. And like half of the people are on laptops, right, which is not necessarily a good way to enjoy coffee. But it is a good way to do some light work while you're away from your house. And so I think we're all aware that this is already happening around us just through light checks like that. Probably your Starbucks is your best indicator of workplace freedom and the flexible workspace that people are expecting to have that support their way of life.
Real estate is always a hot topic, and I'm excited to sit down with David and Marlon to learn more about what challenges real estate professionals are currently experiencing and what the rise of flexible workplace solutions will have on traditional real estate.
When you look at some of the major tech companies in the world right now, whether it's Google or whether it's Shopify, you can see that they're prioritizing remote work a lot more now than ever before. And the fact of the matter is that it’s only going to create more flexible models when it comes to workplaces.
I do think that going and setting up an office space where you require employees to work there from 9 to 5, each weekday is an archaic model that is only going to be thrown out, especially as COVID-19 ramps up. A key question I want to find out is will the rise of flexible workspaces be the fall of traditional workspaces?
Swish: But before we get into that, do you find that there any misconceptions around what you do and your role? David, let's start off with you.
David: For me, I think the main one given that I work for a very large brand, is that they assume that I'm on the side of representing landlords, which is a piece of what CBRE does, but really the focus of my business is more representing companies and helping them with anything related to a real estate transaction.
And that can actually span multiple geographies as well. So for a lot of the Canadian companies that are going global, I'm helping facilitate them entering new markets, whether it be Chicago, New York, London, England, whatever. So often, I just get kind of pegged as being someone who represents landlords.
Marlon: Yeah, it's actually really similar because we're a service company too. We're a service layer on existing real estate. And so when you open the app, you'll notice that there are 50 spaces throughout the city. And the initial impression is that somehow we have consolidated all of these leases, and we host them and manage them. Really what we do is we've put a technology layer in to help individuals and small teams, maybe some companies, not quite there yet to find workspaces that work for them. And that might be workplace freedom in terms of a place to sit down for the day, place to close a door and have a meeting and then other places where they actually may want to linger a lot longer, and that's sort of a newer part of our business.
So it's like that aspect, understanding us as more of like an Uber or an Airbnb for an existing industry, that hasn't really changed all that much. And so that paradigm is kind of a mismatch. It doesn't seem to make sense. But when you talk through it, it turns out that people have already used this model in other parts of their life and quickly make sense after that.
Swish: I think the thought behind real estate is that it's very static and archaic, it hasn't changed a lot. But I think for you guys being insiders, you probably have seen things change. So what are some of the radical shifts that you guys have seen in real estate in the last five years?
David: So there's been a real pivot to what I would call agile working and agile working can be in the way that you formulate your transaction. In other words, the length of the lease term, it could be deferring capital costs to someone else, putting them on their balance sheet. And then it also has to do with how you actually build the working environment, creating almost a way of being nomadic within an office environment such that you can work and be productive from a number of different locations rather than being relegated to your desk.
Swish: Is that like an open concept idea?
David: They call it hotelling but for me on the transaction side, it really does have to do with the demands that customers are requesting in terms of at least having some portion of their real estate footprint, be more flexible. Most CEOs and founders, you put 40 of them in a room, maybe a very small percentage of them will be able to predict what's happening five years down the road. Most of them are even at the enterprise level. They're thinking along the lines of 12 months. People are signing 10 year leases, but they can't predict what their business is going to be like 12 months later. So that demand has just kind of caught up and it has not caught up from the landlord side. It's caught up from the provider side like FlexDay, like WeWork, Breather. There's a whole host of providers that have changed the game.
There's a lot of predictions out there that say that flexible office space will represent potentially as much as 30% of inventory in major cities around the world. And that could be maybe aggressive, maybe even it could be not aggressive. We won't know but I think that the providers along with the landlords are going to start to get more and more into providing agility and better experience for customers.
Swish: And I've noticed that so many companies, they'll buy out the entire floor, but they'll maybe have half the floor and they'll make it a co working space, they'll be able to accrue some sort of interest off that as well.
David: That's like a hybrid model. And they're doing that, in part because there's such a low vacancy rate in most cities in North America, Toronto actually having the lowest vacancy rate in all of North America. So if you're a fast growing company, you know, real estate's not aligned for you. And if you think you're going to grow and you have confidence in that you're better to take more space, rather than get into the real estate business again, and have to move and deal with a lot of the disruption to your business.
But it shouldn't be that way. Companies should be able to take the amount of space that they need, the buildings should be set up. And the landlords need to start thinking of customers as customers instead of effectively commodities.
Marlon: It's funny that some of the best known coworking brands that you know, started off by buying more office space than they needed and sharing it right? This is the WeWork story, but I'll piggyback on something that David said, one of the things that we noticed in our viewpoint and we work again with more of the freelancers and contracts, is that the way we're working is changing more quickly than the spaces we can work in. And in that mismatch, we're sort of seeing this turbulence. We're giving choice to, and the ability to work in local community environments, I actually predict that you're going to see enterprises like Deloitte, that are going to start to leverage renting space from providers like FlexDay, to allow for their employees to have more local places to work in as well, in addition to a main hub, like satellite office.
Swish: At the retail level, similar to you know, you mentioned walking off the street, the coffee shop, being something that people are just really accustomed to, and they like that sort of environment.
Marlon: I think that we're going to see more and more of what I would call I don't really like to call it coworking spaces. I just think it's such an umbrella term that's not really accurate of how big the cross section is. But you're going to see flexible working environments at the street level and enterprises are going to buy and is that shift mainly being directed to by by millennial It's like a younger, you know, younger employees are pushing for this type of work environment or the just the industry is primed for it now,
I mean, it's a bunch of stuff. We're talking about the entire labor force, right? 40% of GDP is value added services. Right? So also the economy, now we're going away from manufacturing, more of our economy is service which implies some sort of technology connection, your smartphone, your internet, your laptop, all of a sudden, there you are. That's Minimum Viable office. So more people are working in this way than ever before. 10 years ago, I don't know that you could have said that. There were certain people, executives, maybe salespeople, maybe like a call desk, people that were working remotely, but really, all of us have some degree of work that we're doing that is already primed for remote work, and that's super interesting. I think the comment on millennials is interesting because we're millennials. We're probably the older end of that spectrum, and as much as we've used the term millennial is sort of this flippant term. Millennials now outnumber all other cohorts in the labor force, we may not have the power and seniority quite yet. But yes, in businesses that rely on a millennial workforce, they have to understand the needs of their talent. And more and more, you're seeing that sort of demand come from technology companies, right, or consulting companies that rely on this young talent. And this is further, you know, outside of being a great way to attract them. It's also a great way to sustain them, because it allows them to manage the rest of their life so that they can meet the pressures of the workplace while being ambitious at home and ambitious in their personal lives.
David: I'll add to that. So I think you gave a great human example of why this is so relevant. And you know, it is much deeper than the millennial audience. So I love the way you answered that. I think it's also just that the enterprise is able to transact on real estate in a more flexible way today than they ever have before. And I think that if that wasn't available, you know, option to them 10-15 years ago, they would have taken it because the reality is like optionality in your lease, whatever that means. You should almost pay whatever someone wants to charge you for it for the point that I was making earlier is like, you can't predict your future like the risks high and the risks low are significant.
So I think now that that optionality is available, and you know, the deferral of that upfront capital cost. And you know, let's say you're a company of 1000 people, which is a significant number of people, but you're not at that level of delivering an office experience. So I think it really is a very, very big, big problem that's starting to shift. And it's a human problem. And it's also an enterprise problem. That's finally kind of moving to the next phase.
Swish: Got it. And then if you guys have to summarize like, what do you guys see is the biggest challenge then is for commercial real estate right now? You know, if you had to put it in like two, three sentences, the one big problem that you guys might even be interested in, but just overall, if you look at the industry, what are the big big problems affecting commercial real estate?
David: I'm coming very much from the commercial world, probably, you know more of the enterprise world, I do help scale up companies and help companies that have five people all the way through to thousands. But for me, I think it's that the landlord side of the business still really needs to get up to speed. And I don't mean that to disparage any landlords out there. Like, they're really smart people and they deliver amazing buildings. But I think that there's just this still this paradigm of thinking that like agile working environments are more for startups, they're more for small teams, they're for satellite needs. This is not the case at all.
So I think that despite any of the negative news out there, and WeWork and all, that this paradigm shift is very much here to stay. And it's coming from the customer side saying, I want to buy real estate in a way that aligns with my business objectives, and the forecast stability of my business. It's the future of work. So I think we still have a ways to go in that situation, a city like Toronto, where you've got theoretical zero, when does that incentive start to become really present for landlords to make these investments to become more agile or to work with future customers? Because like, I think we all agree that the trend is that it should change and the mix on the ground should change to reflect the needs of the customer. But in a place like Toronto, landlords still have all the power because there's no space.
So I think what'll end up happening is that we're almost a satellite market for the United States, right? So you got Microsoft here, you got LinkedIn, you got Facebook, I could just list a million names, right? These companies are going to start to be able to transact this way in the United States. And I think that they're going to ultimately dictate that flexibility needs to be part of any lease that they do on a go forward basis in Canada. Do I think that's gonna happen next year? No, but over the course of the next five years, I think that paradigm is going to shift and these enterprises hold a lot of power right? Over landlords actually. When you get to the level of a Salesforce or whatever, you hold a lot of power, and I kind of think that eventually ups or downs in the market in terms of vacancy will become less relevant when those large enterprises are making these requests. And that will have a trickle down effect.
Marlon: We're already seeing this with some of the big companies that have approached us and the independence at those companies, right? Not necessarily a deal at like the operations level, but you have individuals that have this sort of workplace freedom inherent to their jobs, and then picking up something like a FlexDay or Breather or any number of tools to make sense of their world. But what I think is also interesting to note is that some of these big companies are giving permission to the workforces explicitly.
Swish: Do you guys see yourself, like FlexDay as a competitor to companies like CBRE? Not to pick you guys up against each other, but do you guys see yourself as competing for market share with service like CBRE?
Marlon: I don't think so. Maybe it's my way of being. I just don't choose to see people as competitors because I think that we're all looking at these massive trends and trying to figure our way of existing and coexisting, I think that all of us are going to exist, I don't think offices are going to dissolve, and everyone's going to be at street level. And so I think that for us, and we're only two years old, right? But it's about having these relationships and understanding how to work with different service providers, and then to work with some of these markets making companies so that we are part of the conversation about how they solve their workplace needs. And I think that this is like one of these rare multi trillion dollar businesses so I think even thin slices are worth a lot a lot. It's not a zero sum game.
Swish: David for you, do you guys see them as competition? And also if not, do you guys ever work with startups like FlexDay?
David: Definitely do not consider them a competitor. But what I think is gonna happen on my side of the business, is that there will be less transactional work to do with small companies as time goes on. And I think it's going to be the rise of companies like FlexDay and Breather, WeWork, whomever are going to continue to expand, the duration of those terms are going to continue to shrink, there's a lot more transparency in the way that these transactions are done, which is great for the customer. But it actually creates a bit of an issue for me, right? Where I'm not actually as valuable in those transactions. I just think that we're probably overpaid in that small company category. And I think that eventually, marketplace dynamics will start to expand, right? Like right now there's a lot of opacity to transaction data and information, things that people need to be able to find a space, eventually it's going to become more and more transparent platforms will exist like Airbnb, I think that will guide consumers through the relevant aspects of a digital experience for commercial real estate, which today doesn't really exist. It's in its infancy.
Swish: Do you guys believe that the younger generation of workers are moving towards more flexible office models and if so, then how do you feel that'll affect any sort of traditional commercial leasing?
Marlon: That depends on what you're doing for work, the culture of your workplace, if there are any dependencies, privacy is one of them. If you need to be in a closed room or to share something right and around your question, is this a generational shift? I think we're very mindful that it is in part, because work and life are not separated anymore, right? Even at the beginning of my career, you kind of could walk away from your desk, you could think about some stuff, maybe you went onto your laptop and opened up an email. But everything is mobile first, and you're not putting your mobile device away at any point, right. We're teaching ourselves now to create some separation for our mobile devices. And so I think the average person walking in, I'll speak for myself, understands that my work and my life are already interwoven. And so if I'm going to work outside work hours, then I'm also going to take care of life stuff during work hours, it's a modality. It's not about a strict schedule.
So definitely there are some places that are missing in our cities or experiences that are missing to support that way of work. I'd also say that one of the things that comes up around some of the startups that we talked to and we're a startup of five people, is the cost. That's a meaningful expense for a business to undertake. It's the cost of the real estate itself. And obviously, the carrying cost anything else you might want to do for staffing, cleaning, whatever that is. And I don't know what the number is exactly. I think it's about $1,000, and good real estate around here. And so like, that ends up being a business consideration, that wasn't really an opportunity all that long ago. You could start to say, “well, you know, are we ready for that? Is there another way to do that?” Envision talks about that, they basically went like, “hey, you know, we have this challenge right now in hiring. What happens if we dissolved our office and actually used some of that money to hire more talent?” When you frame it in those terms, now, it's a very different conversation and it's just about you know, where you want to spend money on your assets.
Throughout this episode, we've discussed how flexible and traditional workplaces can go hand in hand rather than compete with one another. Ever since the rise of COVID-19, I actually do see traditional office setups disappearing, I think remote work is likely going to be more dominant than ever before coming out of COVID-19. And we're actually going to see a lot of departments work entirely from home.
Flexible workspaces can definitely be used for small and large companies. I do think that smaller companies can benefit from using them given the fact that they're cheaper, but I think larger sized companies can also benefit from them in terms of culture, giving more leeway to your employees to work when and where they want. But I was still curious to know whether Marlon sees FlexDay as being a possible supplemental offering for large enterprises who have employees that want to work remotely.
Marlon: Totally. It's not a claim, it's what they're doing. And what's happening already is you have individuals at these companies who already have permission to expense some part of their work, taking FlexDay on and using it to find the workspaces they need for also getting further into meeting rooms. So it turns out that there are tons of places to work in the city. But even if you could solve all of that, meeting rooms tend to be this next tier of problem because you don't notice what meeting rooms exist from the street. And so we're getting tapped for more of those types of use cases.
And just in general, we're interested in all of these assets in our city, right? We're a big growing city, already tons of density, and there are really interesting matches to be made here. And so we're noticing that these companies are independent of setting a company wide policy to go remote. Individuals are showing up, then you have individuals showing up to put together meetings. And I think we are in conversations with a couple of big brands, multinationals about what the entry point will be for them, but it just has to be part of a complete diet, right. It's like turning a blind eye if those businesses are not paying attention to the way their staff are intending to work and often works beautifully as a compliment. So this is about them being able to go into an office when they need to, but having access to other spaces wherever they are, at some predefined price point often quite affordable for an individual freelancer, but allowing you to hold all of those options in your mind when you think about where to locate from a product perspective.
Swish: I mean speak to me more on the convenience side of using a FlexDay compared to just having a stable office like what is it that your customers love about FlexDay and using it and being able to experience it?
Marlon: The interesting thing about how our product is used is if you think that the average work week is about five days, we noticed that our cutting customers are using the product one to two times a week. So I don't think we're ever in the business of going like a five out of five, right? There are a couple of power users that love what we're doing, and it really, really works for them. And that's amazing. It's amazing to have fans like that. But fundamentally, we're not a five days a week product. So we understand that we're already part of a compliment. And it's our goal to be a good complement to the home office where they want to spend some of their time on client sites or their sort of corporate office. But it is meant to make that process of selecting a place to work much more seamless than what exists today, which often is some sort of rubric held in the mind without transparency and sort of walking down and finding out whether that's actually how it's working on the ground there.
From this discussion, I think we can take away the understanding that traditional real estate is not going anywhere, but it is being threatened by flexible workplaces that are on rise.
I believe that the future of real estate looks very similar to a wework model where we are going to have communal living spaces as well as communal working spaces, to think about the ability to have multiple homes in one city by being able to rent out specific properties for any given month and being able to move around like that.
In today's day and age, where everyone's working from home and a lot of employees have actually seen the benefits of working from home specifically towards their mental health and the ability to go and interact with their family a lot more. I absolutely think that larger organizations coming out of COVID-19 will have to adapt and offer flexible workplaces or remote work solutions for their employees to be happy.
Swish: Our final segment is the rapid fire round, it is my favorite segment. I'm going to ask you guys a bunch of questions one at a time and I would like the answers to hopefully be rapid and full of fire, David, what do you want to see invented In the next 10 years? Get creative.
David: I want to see the first ever fully transparent commercial real estate platform that people can transact on.
Swish: Are we close to that?
David: You know, one platform that could be near it, we're very much in the infancy of it. No one is doing it. People are showing what spaces are available, but no one's helping bridge the gap of transacting on the space.
Swish: What technology should be feared?
Swish: Instagram, why?
David: I just think that there's no boundaries to that platform. And it's just so toxic in my opinion. Whereas like, take LinkedIn as an example, there are so many boundaries that you don't need to even describe to somebody about how to interact with people.
Swish: All right, Marlon, you ready?
Marlon: Let's do it.
Swish: Okay, the first two questions are pretty similar. Number one, what do you want to see invented in the next 10 years? Get creative.
Marlon: I'm also paying attention to all this social media stuff, and I think that there's like a missed opportunity in it because I think it's being treated as the final goal. And so I'd love to have somebody think about how to get the online tool so you're offline again. And to not finish just online relationships, because I think that is leading to an A type of emotional starvation.
Swish: What technology should be feared?
Marlon: I think artificial intelligence scares me immensely. There's a documentary on Netflix called Alpha Zero. And it's all about the behind the scenes process of inventing the algorithm to beat the hardest board game in the world, right? There's like only one board game left that a computer had not beaten a human on. And this was the behind the scenes of it doing just that. And that was quite an eye opener. And I've shared that with a number of people around me, we are equivalently afraid.
Swish: When it comes to the growth strategy for FlexDay, what have you seen that works really well that could be replicated for other startups in other fields?
Marlon: The more human you can be, the better. I think we've tried to pull all kinds of jargon and charts and all this type of stuff. And it turns out that people still trust other people when they make the decisions. And if they can't remember what you do, there's no consistency of the version of stories that's carried out there. You have no ability to spread. And so figuring out how your constituents are talking about you is actually more important than you hearing yourself talking about yourself.
You guys have been listening to The Tech Haus podcast where we bring cutting edge startups and Fortune 500s to the table to talk about their contrasting views on how tech is changing our world. Stay tuned for our next episode. This is your host Swish, signing off.
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