October 31, 2025 • 30 mins
The U.S. office market is molting.
The industry has spent the last five years shedding its old skin — and underperforming assets — and is attempting to emerge fresh and appealing to workers.
Return-to-office mandates are helping bring workers back to their desks, and vacancy just ticked down for the first time since 2019. But few mandates come with teeth, meaning how many employees actually show up on any given day still comes down to how many want to, CBRE Building Operations and Experience CEO Jamie Hodari, who also co-founded and still runs Industrious, said on this week’s show.
And while ping pong tables and pizza parties can help bring a space to life, he said he judges the success of the office based on whether people have their heads up talking to each other.
“If people are interacting with each other, if people are learning from each other, I don’t care what the lighting is,” he said. “I don’t care if the windows are 13 feet or 10 feet or whatever, that’s a commute-worthy office.”
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Transcript
Episode Transcript
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Mark Bonner (00:09):
Alright. Welcome to First Draft Live. I'm Mark
Bonner, business analyst editorin chief coming to you live from
New York. It's Friday, October31. It's Halloween y'all, but
there's no tricks today on theprogram, but maybe a treat.
The office has finally stoppedfree falling. For the first time
since 2019, national officevacancy actually ticked down
(00:30):
barely to 22.5%. Attendancemeanwhile remains well below pre
pandemic levels with mostcompanies still seeing roughly
half their workforce in on anygiven day. And new construction,
a rounding era, starts atdecades lows with fewer than a
million square feet breakingground in Q2 alone. That's
(00:50):
compared to tens of millions inthe pre pandemic cycle.
So yes, technically the marketis recovering, but emotionally,
it's still in therapy or maybejust wearing a really good
costume. The cubicle's dead.Hybrid is the new default. And
what used to be a Monday throughFriday ritual is now a choice,
(01:12):
one that landlords, CEOs, andcity mayors on both sides of the
Atlantic are all trying toresurrect. And that's the real
story here.
It's not where people work, butwhy they bother showing up at
all. That's what today'sconversation is about. The
reinvention of the office, thepsychology, the culture, the
money behind its second act. Fewpeople have had a better view of
(01:35):
that transformation than myguest today, Jamie Hodari. He
built Industrious into one ofthe world's largest flexible
workspace brands, a company thatbet early on partnership over
leases and community over squarefootage.
Now as CEO of CBRE's BuildingOperation and Experience
division, He's helping thebiggest landlords in the planet
(01:56):
reimagine what an office isactually for. Jamie Hidari,
welcome to First Draft Live.
Jamie Hodari (02:03):
Thank you for having me. And to your point on
Halloween, my favorite of allthe holidays.
Mark Bonner (02:09):
Good. So let's try to unmask this issue then. So
for years, we've obsessed overwhere people work, at home,
hybrid, at the HQ. Now we'reasking something a little harder
today. Why gather at all?
No doubt about it. Humans stillneed to connect, to learn, to
collaborate, to belong, to spendmoney. That never went away and
(02:30):
it likely never will. Theproblem is the office stopped
earning that right to somedegree. Vacancy at 22 and a half
percent, that just isn't anumber, it's a mirror.
And it reflects a product thatperhaps hasn't totally caught up
to the people it needs to servetoday. So Jamie, what does the
modern office still give us thatremote work just cannot deliver?
Jamie Hodari (02:54):
Let me start by saying, I like I I I kinda like
your point about for years wewere talking about our people
back. Are they not gonna beback? Are they hybrid? And and
we've kinda reached anequilibrium. Like, you you just
look at the data and people areback around three days a week.
And so now there's probablystill some remaining debates
over exactly what does that looklike and but it's to me, there's
(03:16):
a luxury now of getting to belike, okay. For the most part,
that's solidified. Now thequestion is, what do they do
when they're there? Why wouldthey go there? What are we
trying to offer workers in TheUS in exchange for for for
showing up and be and being partof something?
And I think what I would say onthat front is that the pandemic
(03:39):
kind of revealed that you don'tneed to be in the office to be
productive in the narrow sense.And so that that was, know, for
many companies, that was theirprimary argument for why you had
to come in. You get you get workdone here and you don't get work
done at home and that's justbeen disproven left, right, and
center. Right. So, that opensthe space now for for something
(04:00):
different.
We should say you're coming into feel connected to the
institution you're part of.Right. To unlock creativity, to
unlock connection to yourcolleagues, to unlock your own
sense of connection to yourwork. But it is a more
ephemeral, I think, I wouldargue much more deep and much
more meaningful set of things,but it is not, you know, hours
(04:21):
of labor input to widgets oflabor output because the office
has not proven to be especiallycentral to that particular
equation.
Mark Bonner (04:29):
Right. And the statistics kind of have told us
now that we're five years beyondthe pandemic that, like, on one
hand, what was said is you can'tbe successful unless you're at
the office. You can't bepromoted unless you're at the
office. You can't learn how togrow into middle management or
executive level managementunless you're at the office.
You're not gonna get the bigassignment if you're not at the
office.
And the data has told us that'snot necessarily true. It's at
(04:52):
least an open question. You canbe productive to your point.
There have been studies likefrom McKinsey that have said,
actually some of theseworkforces have been more
productive depending on how youwanna measure perspective.
Certainly salaries are inquestion.
That's for that's sort ofanother matter here. But I think
the bigger issue that you'retalking about here is that like
this massive social construct,which at least in, you know in
(05:16):
The United States over the lastfifty years, we all went to an
office or a place of work fivedays a week. And so really
essentially what we're talkingabout here is we're talking
about white collar internetbased work. Having to show up at
a place that was developed inanother era. Some of these
office buildings that we'retalking about are thirty, forty,
maybe even 50 years old.
Some of them have been renovatedwith a lot of bells and
(05:38):
whistles. But I think they'llit's it's a fair question to say
perhaps society has evolved at adramatic pace beyond the
original design and purpose ofwhat a traditional office
building is. And I I wonder, assomeone who's lived and breathed
this world for many years,Jamie, what you think of that.
Jamie Hodari (05:56):
I think it's a very fair point. I think what I
would say is the the you you Ithink a lot of that former
generation. First, let's justacknowledge when you say 22%
vacancy. You know, you this is agiant three fifty million
person. You know, the the verybig country and when you give an
aggregate number, what that canobscure a little bit is really
(06:20):
bad offices are really empty andgood offices are more full than
than in the past.
There is more demand. They haveless vacancy than any point in
the past. And so there's thisreally extreme sort of shining
of a light on the fact that ifyou can create a workplace
people want to come to, that ismore in demand than ever before.
(06:41):
And if you're in a locationpeople don't want to go to, if
the building has no naturallight, it's challenged in a way
it never would have beenchallenged before. So then the
question is to your point, okay.
Well, what makes the places thatpeople that work in 2025 and
2026? What makes those placestick? I would say the first is
at a philosophical level, theoffices that work right now are
(07:02):
democratic. They are not builtin a coercive top down what's
gonna impress the CFO or what'sconvenient for the CEO way.
They're built from a point ofview of what does the deputy
head of performance marketingwant when they walk in that
door?
What makes them want to get onthe subway, you know, five days
a week or at least a few days aweek and I think those things,
(07:27):
they're softer. They're aboutbeing welcoming. They're about
enrichment. And I think they'realso more about the way offices
are run than in the past. In thepast, people really talked about
office buildings in a staticway.
Is it marble? Is it not? Is itthis many square feet? Is it
this many square feet? And Ithink we're now in an era where
it's much more, okay, know, thatthat is one of the components,
(07:47):
but it's more about when you getthere, what's happening?
Are you having interestinglectures at lunch? Is there good
food or not?
Mark Bonner (07:53):
Yeah.
Jamie Hodari (07:54):
Is the music the right volume? Are you having
interesting collisions withpeople that that you wouldn't
get if you were at home? So thatwould be the other piece that
they're that that I think theoffices that are really pulling
people in. It's not just aquestion of the physical plant.
It's is it being run with an eyeto how someone wants to spend
their day?
Mark Bonner (08:13):
Right. And we'll get into amenities and and some
of what we're what you'retalking about in those class a,
a plus, new offices or the orthe ones that have been
renovated. I I guess the otherthing I think about a lot here,
Jamie, is that, like, there'sbeen so much focus on workers
and what they're willing to door not do. And you mentioned
democratic decision making.Right?
(08:34):
But, I mean, the people who makethe decisions about office space
have decided they need less ornone at all. At least that's
what the data is starting toshow us. I don't think the
office is dead, by the way.Right? I I I I see that there is
a much value in showing up inperson.
Five days a week, I don't know.Three days a week could be zero.
For some people, maybe, but I Ithink it's somewhere in the
(08:56):
middle, and I think that's whatthe data is showing us. But if
enough people who make decisionsabout whether or not they need
or do not need office or theyneed less than they needed
before or shining shorter andshorter term leases or maybe
going away from traditionaloffice into flex, which is
something I know you know a lotabout, What do you think happens
to the $3,000,000,000,000 assetclass if those decision makers
(09:19):
just continue to make thosedecisions? Like, do you do you
expect that that'll change insome point in time in the
future?
Like, where's your head at onthis from a more macro
perspective?
Jamie Hodari (09:30):
I would say well, first to your point about many
are deciding they don't needoffice at all. I think that's a
pretty niche strategy. I wouldsay that the that the vast
majority of businesses might besaying I need less square
footage. They might be spendingthe same amount. You know?
What what like, when I was incollege, I showed up, and there
was a half price sushirestaurant, and I'm in college.
(09:51):
So me and all my friends arelike, oh, hell yes. And then we
ate there a few times, and we'relike, oh, no. Like, this is
really bad. I think I'm gonnaget sick from this.
And at some point, make thedecision, I would rather go half
as often to the normal sushirestaurant than twice as often
to the half priced one. And inthe same way, let's say you take
New York City, and you could geta giant block of space on
(10:14):
Eleventh Avenue or First Avenue.And for those of you who aren't
from New York, you're pretty farfrom the subway. That's kind of
a painful commute. You're kindof far from amenities or you
could get something on ParkAvenue right on top of Grand
Central where people can commutein and they walk right into it
and there's a zillionrestaurants when they walk out
their door.
I think a lot of people aresaying, I would rather have less
(10:34):
space and be in a great buildingon Park Avenue people want to go
to than more space that peopledon't want. I want a little bit
less often of the full pricesushi, not more often of the
half price sushi. And that, Ithink, is what what you see
happening in the numbers. Andand as a result, if you think
about New York, there was moresquare feet leased in New York
(10:55):
this year so far than at anytime in the last twenty five in
the last twenty five years. Andthat is, I think, what the trend
is gonna be.
So the problem is not the$3,000,000,000,000 The problem
is for the bottom quartile ofbuildings, the bottom 20% of
buildings. What do you do?
Mark Bonner (11:12):
Right. I mean, look, New York is a unique
place. Right? As has been saidbefore, what happens in New York
doesn't necessarily mean that'swhat happens everywhere else.
Certainly, what happens in NewYork can can ricochet around the
world as a point of influence.
But even here in New York whereI am and you are based, every
commute seems like it's anegotiation at this point.
Right? Castle data, which I knowhas been poo pooed by a lot a
(11:33):
large quarter of the industry asunreliable, but that's what
we've got so I'm gonna use it.Current data is showing that
office attendance is hoveringaround 45 to 50%. And so in this
economy of time and attention,the office has become a
subscription model and peopleare deciding whether or not they
wanna redo.
Renew. And you you brought upsome amenities. You know,
(11:54):
companies are danging danglingperks. Team days, food programs,
gym memberships, ice baths,pickleball, paddle, ping pong,
beer on tap, Quidditch clubs.You know, anything to make the
trip feel more worthwhile.
Right? What makes a person tradean hour of their life at home
for an hour of life in office,Jamie? What moves the needle as
(12:17):
far as you can see it?
Jamie Hodari (12:21):
I think at a fundamental level, and companies
need to be absolutely clued intothis, a person has to believe
this enriches my life in someway. And that can be very broad.
That can be this will help memove my career forward. That can
be this is what gets me out myfront door. And when I didn't
leave my front door, the problemis I also didn't go to the jazz
(12:44):
concert in Central Park.
I also didn't meet up with myfriends after work. And so the
the office is also a conduit toa broader life in a city that I
don't get if I never leave myfront door. There's, again,
connection to colleagues,connection to your work. Like,
the the the it's rather broad,and I think if you really zoom
out, the one commonality wouldbe my life is better off in some
(13:07):
way, for at least a few days aweek showing up and doing this.
And I think the good news is I Iwould argue the vast majority of
Americans are not sayingnecessarily I wanna go five days
a week but but the vast majorityof Americans are saying my life
is better off getting to bearound other people, getting to
be in the work a few days a weekthan having to spend all day
(13:30):
every day for the next decade ofmy life, you know, sitting in my
living room.
Mark Bonner (13:34):
Totally. And I I I hear that loud and clear, I
think a lot of people do too.That that makes perfect sense,
and it's true. That that that'sa slight pivot though from
return to office now. Right?
Which we've seen from a lot ofthe Fortune 100 or Fortune 500
companies, you know, forcingpeople to return or you don't
work here anymore. Right? Butwhat you're talking about is
(13:55):
something that let's just callit return to presence. Right?
That's a cultural pivot.
It's not a policy. That's avalue. But that's also a value
that probably takes a longertime to knead into the bread.
Right? I mean, how how do youcross how do you cross the
Rubicon on that if you're acompany and you really wanna get
back to the office, but youdon't wanna force people back?
Jamie Hodari (14:20):
One thing I mean, I think it's a great question.
And one thing I would say isthere's probably 3,000
Americans, maybe 5,000, havingto make a decision about
workplace policies. There's a100,000,000 Americans having to
say, okay. What does this meanfor me? What what what do I want
out of this?
And so the question of return topresidents and what do I want
(14:44):
out of my day at work is a muchmore pervasive, much more much
more deeper cultural questionthan what a few heads of real
estate are deciding they'regoing to sort of, you know, set
as their policy or not. And I Iwould note the policies are not
always adhered to. Part of why Ijust say people are coming in
three days a week. Is there someevidence that even when
(15:05):
companies say you gotta come infive, people are tending to come
around three anyway. So, it'sit's kind of easy to say
regardless of what a companystated policy is, people are
mostly coming in Tuesday,Wednesday, Thursday, and they're
mostly working from home onFriday and, you know, choose
your own adventure on Monday.
The the for me, like, the mostdeeply personal one is about the
(15:32):
the isolation crisis we have,and just the the fundamental
reality that people need weakties in their life. They need to
be connected to group people.They need to see other people.
They need to be exposed to newideas. They need to be exposed
to new music.
They need to be challenged insome of their comfort zones. And
(15:53):
I think the office is a reallywhen it's done right, is a
really wonderful place for that.And I think we all have memories
or moments we can look to andsay, my life was a little less
narrow, a little less small forthe opportunity to get to spend
time with other people who Ifound smart, who I thought were
(16:15):
were you know, I wanted to learnfrom. And for better or worse,
this is the main once you're outof college, that's the main
venue in American life forgetting to have that in your
life. And what a blessing thatwe get to have it in our life.
Mark Bonner (16:30):
If you're just tuning in, this is First Draft
Live. We're with Jaime Hodaritalking about the office's
identity crisis, why we stillshow up, what makes it worth the
trip? And whether this$3,000,000,000,000 asset class
is reinventing itself or justnursing a hangover. If you have
questions for Jamie, put it intothe chat. We'll get into as many
as possible.
Jamie, let's talk about flex fora second. Because, you know, I
(16:50):
that that's been a majorcomponent of your focus in this
industry over over the years.Today, roughly 60,000,000 square
feet of US office spaces rununder management or flex
agreements, triple what it wasfive years ago. It's the Airbnb
ification of office, if youwill. Shorter, lighter, more
service led.
(17:11):
But, you know, that that agilitycomes at a cost. Choppier cash
flow, new valuation math, andthen that uneasy marriage of
hospitality and traditionaloffice. Is Flex finally the
grown up model for office, or isit still a stop gap in search of
stability?
Jamie Hodari (17:28):
For me, and maybe I'm a little biased, I think
that growth rate you describedis incredibly healthy for the
real estate industry and forpeople who show up in a
building, you know, for tworeasons. One is, the main reason
(17:48):
for that growth, I think, is notabout flexible lease terms. A
landlord can offer a traditionallease on three year terms if
they want to. It's to your pointon service, it's a productized
workplace offering. And whatused to be the case is that, you
know, you have big companiesthat might have 10,000 people in
Chicago, but they might have 41people in West Palm Beach.
(18:09):
They might have 70 people inPlano, Texas. And my god, was
that a dismal office experiencewhen you worked for a small
company or one of the far flungouter reaches of a big company.
There is nothing you can do tomake a 40 person space vibrant.
(18:29):
It's basically a bunch of desksand two conference rooms. You
can't have speak easy rooms andreally elegant rooms to have
pitch meetings in and a food andbeverage program and a music
program and, you know, lunch andlearn, then lectures at lunch
and book signings in theevening.
You kinda have to get to athousand people to do that. And
so that growth of flex by andlarge for me relates exactly to
(18:51):
the conversation we're having,which is people have to wanna
get out their front door andhave a workplace experience that
moves them. And for teams ofunder, let's say, 500 people,
that's better served in asetting where you have some
shared infrastructure and sothat to me is the by far the
largest driver of that demandgrowth is basically all the
(19:12):
small offices in the countrymoving to my people are going to
be happier with some shared sortof structure than if we just try
to lease some space for 30people and throw in a couple of
card
Mark Bonner (19:21):
So one of CBRE's latest survey says 85% of
tenants rank transit access astheir top driver for this
decision. 75% site food andbeverage. You know, it's less
treadmill at noon and more getme home in twenty minutes.
Right? In Manhattan, as youbrought up earlier, trophy
assets are thriving again.
(19:43):
Leasing hit six six point ninemillion square feet in Q2.
That's the highest since 2011.But mid tier space is still
bleeding. There's stillfragility underneath the top
line. People will pay forenergy.
They'll pay for daylightproximity. It doesn't seem like
they're gonna pay for ping pong.I guess what from what you see,
Jamie, what does a commuteworthy office look like now?
(20:06):
Design, tone, experience? Like,what do you have to do here?
Jamie Hodari (20:12):
I'm gonna give you my wish list, but I have to
acknowledge, like, the noteveryone gets this. I would
start with transit access. Imean, you're right. There's
just, I think, the biggest tradeoff, but we see with
industrious, for example. Peoplewho are the industrious that
they work at is like two blocksfrom their home.
(20:32):
They basically do go five days aweek. So, you have facial
evidence that there aren't likepeople don't actually prefer to
work in their living room. It'sthe commute is the barrier and
if there were no commute, thatthat is the primary trade off
and you said that earlier inthis.
Mark Bonner (20:48):
Yeah.
Jamie Hodari (20:48):
You know, sort of podcast is that it's it's you
gotta earn the commute. Sonumber one for me, it would be,
it's really nice if you get offthe train from New Jersey and
your office is is two minutesaway. I think the next is to me
pizza parties and ping pong andall that stuff. They are a stand
in for something moremeaningful, which is, are we
trying to create moments,environments that kept people up
(21:12):
from their laptop andinteracting with each other? So
the pizza is not valuable in andof itself.
It's valuable if people sitaround the pizza and ask how
their weekend were and finallylearn the name of that woman
from accounting they've seen forthe last three years. That is
very meaningful. So if what yousaid if I looked at an office,
how do I know if it's vibrant ornot? How do I know if it's
(21:34):
commute worthy or not? If peopleare looking up at each other, if
people are interacting with eachother, if people are learning
from each other, I don't carewhat the lighting is.
I don't care whether the windowsare 13 feet or 10 feet or
whatever. That's a commute orthe office. And if everyone is
sitting isolated and heads down,that they could have done at
home.
Mark Bonner (21:55):
Let's take a couple of questions from the audience.
Given that RTO mandates arestill a reality for many
organizations, how should weinterpret occupancy metrics
often used as evidence thatemployees want to return to the
office when in fact they don'thave a choice?
Jamie Hodari (22:11):
This is where I, this is what goes back to what I
was saying before is that Ithink there are extreme examples
where like literally you getfired the next day. If you don't
go five days, okay, those peopleare gonna go five days a week.
But a lot of companies that hadnominal relatively strict
policies. The actual days a weekthat people are in doesn't look
that different from ones wherepeople are given their own
(22:32):
choice. Because at some pointit's just becoming so
overwhelmingly true that youhave people who never want to go
to the office at one extremeoutlier.
You have people who want to workfor their living room for the
next decade at the other. Lowe'smight be 3% of the country and
the vast majority of people wantto go two, three, maybe on
certain weeks, four days a week,and don't want to go five days a
week and you see that regardlessof what the overlying policy is.
Mark Bonner (22:55):
Okay. Couple more questions. Is there any data
that you've seen, Jamie, on howcompanies are doing that have
implemented a 100% return tooffice?
Jamie Hodari (23:08):
No. No. Data on does that impact the bottom
line? Does that impactproductivity? I I have a
personal preference for forslightly more, you know, open
workplace policies.
But I can't tell youdefinitively one way or another
what the business impact of afive day a week RTIs. I do think
(23:28):
for what it's worth, thebusinesses that have had the
confidence to do that, thebusinesses that have chosen to
do that are often highlysuccessful businesses that are
in highly paid industries thatfeel I'm JPMorgan. I can do this
if I wanna do this. So I thinkthat would confound some of the
variables.
Mark Bonner (23:46):
I've I've looked at some of the data and then look,
the the truth is it's a littleearly to say. And yes, like the
huge caveat which you justmentioned, which is we're
talking about major companiesthat pay incredibly large above
average salaries. You know,whether or not it's more
productive or it works in termsof their bottom line, I think we
need a little more time there toreally understand the
(24:06):
difference. I think the real bigquestion is for all of the
companies that are nowhere nearthe fortune 500, which are the
majority of companies inAmerica, middle market companies
that have about a 100 employeesor less. And I think there needs
to be more data done on that.
So we'll have to see.
Jamie Hodari (24:23):
One thing I would say on that point about data is
this is where I am so excitedabout the next evolution of the
office and the missing piece ofthe conversation we're having,
which is in business, you managewhat you measure. And right now,
the state of physical productsis we're far behind digital
products and certain businessprocesses in terms of what we
(24:45):
measure as outputs. Basically,people do surveys of employee
sentiment to figure out if theylike the office or not and some
very rudimentary productivitymetrics which I think in the
long run. Yeah. Are going to beambiguous.
If I were running a 100%company, I would say, why do we
have an office? For thatcompany, it might be, I wanna
(25:06):
increase trust between mypeople. I wanna increase the
number of ties someone has withthe business and I wanna
increase the amount ofbrainstorming or creative
sessions people have wherethey're not just sitting in
eight straight hours of Zooms.And then you should measure
those three things. Like mostwhat what what I would do as
most of these companies is notsay productivity in the grand
(25:27):
sense, but what is a series ofreal world outputs that matter
to me as a company, And I wantto spend the money to have a
workplace and then hold usaccountable for saying, did we
actually see movement in thosemetrics that I've decided matter
to me in this business?
Mark Bonner (25:41):
So, Luke, one more question from the audience. It's
a good one. I think it's kind ofrelated to what you just said,
Jamie. You know, I know a partof your remit at CBRE is to look
beyond the horizon a little bitand to see what come what's
coming next for the market. Andso this question from our
audience is, do you think wewill work differently in the
office in the future?
If so, what might that looklike?
Jamie Hodari (26:03):
I think that we will work it's so hard to make
pronouncings out of the future.Here's a couple of things.
Number one, I think the trend isin the direction of a more
peripatetic, episodic, stitchedtogether version of work. We've
moved away from a world whereyou badge in, you go to the 30
Ninth Floor, you sit at Desk 51for nine hours, you go down, you
(26:27):
go home. People work for twohours, they go to a yoga class
in Bryant Park, they go back fortwo or three hours, they might
meet a friend for lunch, theymight do their grocery shopping
and come back for one finalcall, and they or they might do
their one on one in a parknearby.
That movement, that sense thatmy work is stitched together
with other parts of my life isprofoundly meaningful and
(26:48):
energizing to people and I thinkyou will see more of that. And
then the second is, it is, whenwe talk about hybrid, people
tend to mean a hybrid policy ofwork from home and, and going
into office. But I thinkworkplaces are gonna become more
and more hybrid in the sensethat you are going to be a
combination of in person withsome set of people and half the
(27:10):
people will be dialing in fromsomewhere else. And so we just
have to get better and better atthat modality. Because right
now, that's a weak part ofoffice.
That that how do you make itwork? For the six people in the
room together and the four thatare dialing in Yeah. The
technology is not yet there tomake that a frictionless,
wonderful experience.
Mark Bonner (27:27):
So let's end on this because this is a little
bit more forward gazing. Look.Let's be honest here. The macro
picture here is sobering.Effective rates still down 12%
from 2019.
NOI off 30 to 40% in somemarkets. Office CMBS
delinquencies near 6%, thehighest in a decade. But under
the surface, something moreinteresting is happening. The
(27:50):
sector is shrinking. And maybethat's the point.
Less volume, more intentionperhaps, fewer buildings, maybe
better buildings. Maybe theoffice isn't dying. Maybe it's
molting. Are we witnessing acomeback or a controlled
reinvention in your perspective,Jamie?
Jamie Hodari (28:10):
I think you can say definitively the office is
molting the bottom. I said 20%earlier, but let's say the
bottom 10% spaces that arereally unusable as an appealing
workplace people would want tocome to. And I would argue
that's a good thing. You want tomold products that don't have
product market fit and thatdon't serve a need for
(28:31):
customers. And buildings are notworth something if they're
empty.
Like, the bricks and steel areonly meaningful when people use
that building and make it comealive. So I think it is okay to
mold that, and I think that willbe replaced by, again, slightly
more dense central workplacespeople want to go to that are
vibrant. And that also is agreat thing cause you are gonna
(28:52):
have more people who walk inevery day or three days a week
and say I'm in a place thatgives me energy and a place
that, to my earlier phrase,enriches my life. So good
riddance, if you molt the stuffthat was not working for people,
grinding them down, was makingthem feel anonymous, was making
them feel demotivated, and youreplace that with stuff that
(29:12):
makes people feel enriched andenlivened.
Mark Bonner (29:16):
I'm so glad I got office molting trending in
commercial real estate in thisprogram, Jamie.
Jamie Hodari (29:20):
It's good a word. I like that.
Mark Bonner (29:22):
That's our show for today. Jamie, thanks so much for
taking the time.
Jamie Hodari (29:26):
Thank you.
Mark Bonner (29:27):
Got big Halloween plans?
Jamie Hodari (29:30):
Are we still on?
Mark Bonner (29:32):
We're still live, dude.
Jamie Hodari (29:33):
Oh, I have a three and a one year old, and I'm so
excited to take them trick ortreating because I'm I it's my
favorite holiday, and now I getto, like, experience it through
their eyes again. And and andit's just we we live in
Brooklyn, and it's, like, it'sthe best day of the year.
Mark Bonner (29:52):
Good. If you miss any part of this conversation or
want to catch earlier episodes,you'll find every show on
biznel.com or in your favoritepodcast feed. Just search First
Draft Live. We'll be back nextweek. Until then, have a safe,
spooky Halloween, and maybedon't check your office vacancy
rate in the dark.
This is First Draft Live. GoTigers and have a great weekend
(30:14):
y'all.
Alright. Welcome to First Draft Live. I'm Mark
Bonner, business analyst editorin chief coming to you live from
New York. It's Friday, October31. It's Halloween y'all, but
there's no tricks today on theprogram, but maybe a treat.
The office has finally stoppedfree falling. For the first time
since 2019, national officevacancy actually ticked down
(00:30):
barely to 22.5%. Attendancemeanwhile remains well below pre
pandemic levels with mostcompanies still seeing roughly
half their workforce in on anygiven day. And new construction,
a rounding era, starts atdecades lows with fewer than a
million square feet breakingground in Q2 alone. That's
(00:50):
compared to tens of millions inthe pre pandemic cycle.
So yes, technically the marketis recovering, but emotionally,
it's still in therapy or maybejust wearing a really good
costume. The cubicle's dead.Hybrid is the new default. And
what used to be a Monday throughFriday ritual is now a choice,
(01:12):
one that landlords, CEOs, andcity mayors on both sides of the
Atlantic are all trying toresurrect. And that's the real
story here.
It's not where people work, butwhy they bother showing up at
all. That's what today'sconversation is about. The
reinvention of the office, thepsychology, the culture, the
money behind its second act. Fewpeople have had a better view of
(01:35):
that transformation than myguest today, Jamie Hodari. He
built Industrious into one ofthe world's largest flexible
workspace brands, a company thatbet early on partnership over
leases and community over squarefootage.
Now as CEO of CBRE's BuildingOperation and Experience
division, He's helping thebiggest landlords in the planet
(01:56):
reimagine what an office isactually for. Jamie Hidari,
welcome to First Draft Live.
Jamie Hodari (02:03):
Thank you for having me. And to your point on
Halloween, my favorite of allthe holidays.
Mark Bonner (02:09):
Good. So let's try to unmask this issue then. So
for years, we've obsessed overwhere people work, at home,
hybrid, at the HQ. Now we'reasking something a little harder
today. Why gather at all?
No doubt about it. Humans stillneed to connect, to learn, to
collaborate, to belong, to spendmoney. That never went away and
(02:30):
it likely never will. Theproblem is the office stopped
earning that right to somedegree. Vacancy at 22 and a half
percent, that just isn't anumber, it's a mirror.
And it reflects a product thatperhaps hasn't totally caught up
to the people it needs to servetoday. So Jamie, what does the
modern office still give us thatremote work just cannot deliver?
Jamie Hodari (02:54):
Let me start by saying, I like I I I kinda like
your point about for years wewere talking about our people
back. Are they not gonna beback? Are they hybrid? And and
we've kinda reached anequilibrium. Like, you you just
look at the data and people areback around three days a week.
And so now there's probablystill some remaining debates
over exactly what does that looklike and but it's to me, there's
(03:16):
a luxury now of getting to belike, okay. For the most part,
that's solidified. Now thequestion is, what do they do
when they're there? Why wouldthey go there? What are we
trying to offer workers in TheUS in exchange for for for
showing up and be and being partof something?
And I think what I would say onthat front is that the pandemic
(03:39):
kind of revealed that you don'tneed to be in the office to be
productive in the narrow sense.And so that that was, know, for
many companies, that was theirprimary argument for why you had
to come in. You get you get workdone here and you don't get work
done at home and that's justbeen disproven left, right, and
center. Right. So, that opensthe space now for for something
(04:00):
different.
We should say you're coming into feel connected to the
institution you're part of.Right. To unlock creativity, to
unlock connection to yourcolleagues, to unlock your own
sense of connection to yourwork. But it is a more
ephemeral, I think, I wouldargue much more deep and much
more meaningful set of things,but it is not, you know, hours
(04:21):
of labor input to widgets oflabor output because the office
has not proven to be especiallycentral to that particular
equation.
Mark Bonner (04:29):
Right. And the statistics kind of have told us
now that we're five years beyondthe pandemic that, like, on one
hand, what was said is you can'tbe successful unless you're at
the office. You can't bepromoted unless you're at the
office. You can't learn how togrow into middle management or
executive level managementunless you're at the office.
You're not gonna get the bigassignment if you're not at the
office.
And the data has told us that'snot necessarily true. It's at
(04:52):
least an open question. You canbe productive to your point.
There have been studies likefrom McKinsey that have said,
actually some of theseworkforces have been more
productive depending on how youwanna measure perspective.
Certainly salaries are inquestion.
That's for that's sort ofanother matter here. But I think
the bigger issue that you'retalking about here is that like
this massive social construct,which at least in, you know in
(05:16):
The United States over the lastfifty years, we all went to an
office or a place of work fivedays a week. And so really
essentially what we're talkingabout here is we're talking
about white collar internetbased work. Having to show up at
a place that was developed inanother era. Some of these
office buildings that we'retalking about are thirty, forty,
maybe even 50 years old.
Some of them have been renovatedwith a lot of bells and
(05:38):
whistles. But I think they'llit's it's a fair question to say
perhaps society has evolved at adramatic pace beyond the
original design and purpose ofwhat a traditional office
building is. And I I wonder, assomeone who's lived and breathed
this world for many years,Jamie, what you think of that.
Jamie Hodari (05:56):
I think it's a very fair point. I think what I
would say is the the you you Ithink a lot of that former
generation. First, let's justacknowledge when you say 22%
vacancy. You know, you this is agiant three fifty million
person. You know, the the verybig country and when you give an
aggregate number, what that canobscure a little bit is really
(06:20):
bad offices are really empty andgood offices are more full than
than in the past.
There is more demand. They haveless vacancy than any point in
the past. And so there's thisreally extreme sort of shining
of a light on the fact that ifyou can create a workplace
people want to come to, that ismore in demand than ever before.
(06:41):
And if you're in a locationpeople don't want to go to, if
the building has no naturallight, it's challenged in a way
it never would have beenchallenged before. So then the
question is to your point, okay.
Well, what makes the places thatpeople that work in 2025 and
2026? What makes those placestick? I would say the first is
at a philosophical level, theoffices that work right now are
(07:02):
democratic. They are not builtin a coercive top down what's
gonna impress the CFO or what'sconvenient for the CEO way.
They're built from a point ofview of what does the deputy
head of performance marketingwant when they walk in that
door?
What makes them want to get onthe subway, you know, five days
a week or at least a few days aweek and I think those things,
(07:27):
they're softer. They're aboutbeing welcoming. They're about
enrichment. And I think they'realso more about the way offices
are run than in the past. In thepast, people really talked about
office buildings in a staticway.
Is it marble? Is it not? Is itthis many square feet? Is it
this many square feet? And Ithink we're now in an era where
it's much more, okay, know, thatthat is one of the components,
(07:47):
but it's more about when you getthere, what's happening?
Are you having interestinglectures at lunch? Is there good
food or not?
Mark Bonner (07:53):
Yeah.
Jamie Hodari (07:54):
Is the music the right volume? Are you having
interesting collisions withpeople that that you wouldn't
get if you were at home? So thatwould be the other piece that
they're that that I think theoffices that are really pulling
people in. It's not just aquestion of the physical plant.
It's is it being run with an eyeto how someone wants to spend
their day?
Mark Bonner (08:13):
Right. And we'll get into amenities and and some
of what we're what you'retalking about in those class a,
a plus, new offices or the orthe ones that have been
renovated. I I guess the otherthing I think about a lot here,
Jamie, is that, like, there'sbeen so much focus on workers
and what they're willing to door not do. And you mentioned
democratic decision making.Right?
(08:34):
But, I mean, the people who makethe decisions about office space
have decided they need less ornone at all. At least that's
what the data is starting toshow us. I don't think the
office is dead, by the way.Right? I I I I see that there is
a much value in showing up inperson.
Five days a week, I don't know.Three days a week could be zero.
For some people, maybe, but I Ithink it's somewhere in the
(08:56):
middle, and I think that's whatthe data is showing us. But if
enough people who make decisionsabout whether or not they need
or do not need office or theyneed less than they needed
before or shining shorter andshorter term leases or maybe
going away from traditionaloffice into flex, which is
something I know you know a lotabout, What do you think happens
to the $3,000,000,000,000 assetclass if those decision makers
(09:19):
just continue to make thosedecisions? Like, do you do you
expect that that'll change insome point in time in the
future?
Like, where's your head at onthis from a more macro
perspective?
Jamie Hodari (09:30):
I would say well, first to your point about many
are deciding they don't needoffice at all. I think that's a
pretty niche strategy. I wouldsay that the that the vast
majority of businesses might besaying I need less square
footage. They might be spendingthe same amount. You know?
What what like, when I was incollege, I showed up, and there
was a half price sushirestaurant, and I'm in college.
(09:51):
So me and all my friends arelike, oh, hell yes. And then we
ate there a few times, and we'relike, oh, no. Like, this is
really bad. I think I'm gonnaget sick from this.
And at some point, make thedecision, I would rather go half
as often to the normal sushirestaurant than twice as often
to the half priced one. And inthe same way, let's say you take
New York City, and you could geta giant block of space on
(10:14):
Eleventh Avenue or First Avenue.And for those of you who aren't
from New York, you're pretty farfrom the subway. That's kind of
a painful commute. You're kindof far from amenities or you
could get something on ParkAvenue right on top of Grand
Central where people can commutein and they walk right into it
and there's a zillionrestaurants when they walk out
their door.
I think a lot of people aresaying, I would rather have less
(10:34):
space and be in a great buildingon Park Avenue people want to go
to than more space that peopledon't want. I want a little bit
less often of the full pricesushi, not more often of the
half price sushi. And that, Ithink, is what what you see
happening in the numbers. Andand as a result, if you think
about New York, there was moresquare feet leased in New York
(10:55):
this year so far than at anytime in the last twenty five in
the last twenty five years. Andthat is, I think, what the trend
is gonna be.
So the problem is not the$3,000,000,000,000 The problem
is for the bottom quartile ofbuildings, the bottom 20% of
buildings. What do you do?
Mark Bonner (11:12):
Right. I mean, look, New York is a unique
place. Right? As has been saidbefore, what happens in New York
doesn't necessarily mean that'swhat happens everywhere else.
Certainly, what happens in NewYork can can ricochet around the
world as a point of influence.
But even here in New York whereI am and you are based, every
commute seems like it's anegotiation at this point.
Right? Castle data, which I knowhas been poo pooed by a lot a
(11:33):
large quarter of the industry asunreliable, but that's what
we've got so I'm gonna use it.Current data is showing that
office attendance is hoveringaround 45 to 50%. And so in this
economy of time and attention,the office has become a
subscription model and peopleare deciding whether or not they
wanna redo.
Renew. And you you brought upsome amenities. You know,
(11:54):
companies are danging danglingperks. Team days, food programs,
gym memberships, ice baths,pickleball, paddle, ping pong,
beer on tap, Quidditch clubs.You know, anything to make the
trip feel more worthwhile.
Right? What makes a person tradean hour of their life at home
for an hour of life in office,Jamie? What moves the needle as
(12:17):
far as you can see it?
Jamie Hodari (12:21):
I think at a fundamental level, and companies
need to be absolutely clued intothis, a person has to believe
this enriches my life in someway. And that can be very broad.
That can be this will help memove my career forward. That can
be this is what gets me out myfront door. And when I didn't
leave my front door, the problemis I also didn't go to the jazz
(12:44):
concert in Central Park.
I also didn't meet up with myfriends after work. And so the
the office is also a conduit toa broader life in a city that I
don't get if I never leave myfront door. There's, again,
connection to colleagues,connection to your work. Like,
the the the it's rather broad,and I think if you really zoom
out, the one commonality wouldbe my life is better off in some
(13:07):
way, for at least a few days aweek showing up and doing this.
And I think the good news is I Iwould argue the vast majority of
Americans are not sayingnecessarily I wanna go five days
a week but but the vast majorityof Americans are saying my life
is better off getting to bearound other people, getting to
be in the work a few days a weekthan having to spend all day
(13:30):
every day for the next decade ofmy life, you know, sitting in my
living room.
Mark Bonner (13:34):
Totally. And I I I hear that loud and clear, I
think a lot of people do too.That that makes perfect sense,
and it's true. That that that'sa slight pivot though from
return to office now. Right?
Which we've seen from a lot ofthe Fortune 100 or Fortune 500
companies, you know, forcingpeople to return or you don't
work here anymore. Right? Butwhat you're talking about is
(13:55):
something that let's just callit return to presence. Right?
That's a cultural pivot.
It's not a policy. That's avalue. But that's also a value
that probably takes a longertime to knead into the bread.
Right? I mean, how how do youcross how do you cross the
Rubicon on that if you're acompany and you really wanna get
back to the office, but youdon't wanna force people back?
Jamie Hodari (14:20):
One thing I mean, I think it's a great question.
And one thing I would say isthere's probably 3,000
Americans, maybe 5,000, havingto make a decision about
workplace policies. There's a100,000,000 Americans having to
say, okay. What does this meanfor me? What what what do I want
out of this?
And so the question of return topresidents and what do I want
(14:44):
out of my day at work is a muchmore pervasive, much more much
more deeper cultural questionthan what a few heads of real
estate are deciding they'regoing to sort of, you know, set
as their policy or not. And I Iwould note the policies are not
always adhered to. Part of why Ijust say people are coming in
three days a week. Is there someevidence that even when
(15:05):
companies say you gotta come infive, people are tending to come
around three anyway. So, it'sit's kind of easy to say
regardless of what a companystated policy is, people are
mostly coming in Tuesday,Wednesday, Thursday, and they're
mostly working from home onFriday and, you know, choose
your own adventure on Monday.
The the for me, like, the mostdeeply personal one is about the
(15:32):
the isolation crisis we have,and just the the fundamental
reality that people need weakties in their life. They need to
be connected to group people.They need to see other people.
They need to be exposed to newideas. They need to be exposed
to new music.
They need to be challenged insome of their comfort zones. And
(15:53):
I think the office is a reallywhen it's done right, is a
really wonderful place for that.And I think we all have memories
or moments we can look to andsay, my life was a little less
narrow, a little less small forthe opportunity to get to spend
time with other people who Ifound smart, who I thought were
(16:15):
were you know, I wanted to learnfrom. And for better or worse,
this is the main once you're outof college, that's the main
venue in American life forgetting to have that in your
life. And what a blessing thatwe get to have it in our life.
Mark Bonner (16:30):
If you're just tuning in, this is First Draft
Live. We're with Jaime Hodaritalking about the office's
identity crisis, why we stillshow up, what makes it worth the
trip? And whether this$3,000,000,000,000 asset class
is reinventing itself or justnursing a hangover. If you have
questions for Jamie, put it intothe chat. We'll get into as many
as possible.
Jamie, let's talk about flex fora second. Because, you know, I
(16:50):
that that's been a majorcomponent of your focus in this
industry over over the years.Today, roughly 60,000,000 square
feet of US office spaces rununder management or flex
agreements, triple what it wasfive years ago. It's the Airbnb
ification of office, if youwill. Shorter, lighter, more
service led.
(17:11):
But, you know, that that agilitycomes at a cost. Choppier cash
flow, new valuation math, andthen that uneasy marriage of
hospitality and traditionaloffice. Is Flex finally the
grown up model for office, or isit still a stop gap in search of
stability?
Jamie Hodari (17:28):
For me, and maybe I'm a little biased, I think
that growth rate you describedis incredibly healthy for the
real estate industry and forpeople who show up in a
building, you know, for tworeasons. One is, the main reason
(17:48):
for that growth, I think, is notabout flexible lease terms. A
landlord can offer a traditionallease on three year terms if
they want to. It's to your pointon service, it's a productized
workplace offering. And whatused to be the case is that, you
know, you have big companiesthat might have 10,000 people in
Chicago, but they might have 41people in West Palm Beach.
(18:09):
They might have 70 people inPlano, Texas. And my god, was
that a dismal office experiencewhen you worked for a small
company or one of the far flungouter reaches of a big company.
There is nothing you can do tomake a 40 person space vibrant.
(18:29):
It's basically a bunch of desksand two conference rooms. You
can't have speak easy rooms andreally elegant rooms to have
pitch meetings in and a food andbeverage program and a music
program and, you know, lunch andlearn, then lectures at lunch
and book signings in theevening.
You kinda have to get to athousand people to do that. And
so that growth of flex by andlarge for me relates exactly to
(18:51):
the conversation we're having,which is people have to wanna
get out their front door andhave a workplace experience that
moves them. And for teams ofunder, let's say, 500 people,
that's better served in asetting where you have some
shared infrastructure and sothat to me is the by far the
largest driver of that demandgrowth is basically all the
(19:12):
small offices in the countrymoving to my people are going to
be happier with some shared sortof structure than if we just try
to lease some space for 30people and throw in a couple of
card
Mark Bonner (19:21):
So one of CBRE's latest survey says 85% of
tenants rank transit access astheir top driver for this
decision. 75% site food andbeverage. You know, it's less
treadmill at noon and more getme home in twenty minutes.
Right? In Manhattan, as youbrought up earlier, trophy
assets are thriving again.
(19:43):
Leasing hit six six point ninemillion square feet in Q2.
That's the highest since 2011.But mid tier space is still
bleeding. There's stillfragility underneath the top
line. People will pay forenergy.
They'll pay for daylightproximity. It doesn't seem like
they're gonna pay for ping pong.I guess what from what you see,
Jamie, what does a commuteworthy office look like now?
(20:06):
Design, tone, experience? Like,what do you have to do here?
Jamie Hodari (20:12):
I'm gonna give you my wish list, but I have to
acknowledge, like, the noteveryone gets this. I would
start with transit access. Imean, you're right. There's
just, I think, the biggest tradeoff, but we see with
industrious, for example. Peoplewho are the industrious that
they work at is like two blocksfrom their home.
(20:32):
They basically do go five days aweek. So, you have facial
evidence that there aren't likepeople don't actually prefer to
work in their living room. It'sthe commute is the barrier and
if there were no commute, thatthat is the primary trade off
and you said that earlier inthis.
Mark Bonner (20:48):
Yeah.
Jamie Hodari (20:48):
You know, sort of podcast is that it's it's you
gotta earn the commute. Sonumber one for me, it would be,
it's really nice if you get offthe train from New Jersey and
your office is is two minutesaway. I think the next is to me
pizza parties and ping pong andall that stuff. They are a stand
in for something moremeaningful, which is, are we
trying to create moments,environments that kept people up
(21:12):
from their laptop andinteracting with each other? So
the pizza is not valuable in andof itself.
It's valuable if people sitaround the pizza and ask how
their weekend were and finallylearn the name of that woman
from accounting they've seen forthe last three years. That is
very meaningful. So if what yousaid if I looked at an office,
how do I know if it's vibrant ornot? How do I know if it's
(21:34):
commute worthy or not? If peopleare looking up at each other, if
people are interacting with eachother, if people are learning
from each other, I don't carewhat the lighting is.
I don't care whether the windowsare 13 feet or 10 feet or
whatever. That's a commute orthe office. And if everyone is
sitting isolated and heads down,that they could have done at
home.
Mark Bonner (21:55):
Let's take a couple of questions from the audience.
Given that RTO mandates arestill a reality for many
organizations, how should weinterpret occupancy metrics
often used as evidence thatemployees want to return to the
office when in fact they don'thave a choice?
Jamie Hodari (22:11):
This is where I, this is what goes back to what I
was saying before is that Ithink there are extreme examples
where like literally you getfired the next day. If you don't
go five days, okay, those peopleare gonna go five days a week.
But a lot of companies that hadnominal relatively strict
policies. The actual days a weekthat people are in doesn't look
that different from ones wherepeople are given their own
(22:32):
choice. Because at some pointit's just becoming so
overwhelmingly true that youhave people who never want to go
to the office at one extremeoutlier.
You have people who want to workfor their living room for the
next decade at the other. Lowe'smight be 3% of the country and
the vast majority of people wantto go two, three, maybe on
certain weeks, four days a week,and don't want to go five days a
week and you see that regardlessof what the overlying policy is.
Mark Bonner (22:55):
Okay. Couple more questions. Is there any data
that you've seen, Jamie, on howcompanies are doing that have
implemented a 100% return tooffice?
Jamie Hodari (23:08):
No. No. Data on does that impact the bottom
line? Does that impactproductivity? I I have a
personal preference for forslightly more, you know, open
workplace policies.
But I can't tell youdefinitively one way or another
what the business impact of afive day a week RTIs. I do think
(23:28):
for what it's worth, thebusinesses that have had the
confidence to do that, thebusinesses that have chosen to
do that are often highlysuccessful businesses that are
in highly paid industries thatfeel I'm JPMorgan. I can do this
if I wanna do this. So I thinkthat would confound some of the
variables.
Mark Bonner (23:46):
I've I've looked at some of the data and then look,
the the truth is it's a littleearly to say. And yes, like the
huge caveat which you justmentioned, which is we're
talking about major companiesthat pay incredibly large above
average salaries. You know,whether or not it's more
productive or it works in termsof their bottom line, I think we
need a little more time there toreally understand the
(24:06):
difference. I think the real bigquestion is for all of the
companies that are nowhere nearthe fortune 500, which are the
majority of companies inAmerica, middle market companies
that have about a 100 employeesor less. And I think there needs
to be more data done on that.
So we'll have to see.
Jamie Hodari (24:23):
One thing I would say on that point about data is
this is where I am so excitedabout the next evolution of the
office and the missing piece ofthe conversation we're having,
which is in business, you managewhat you measure. And right now,
the state of physical productsis we're far behind digital
products and certain businessprocesses in terms of what we
(24:45):
measure as outputs. Basically,people do surveys of employee
sentiment to figure out if theylike the office or not and some
very rudimentary productivitymetrics which I think in the
long run. Yeah. Are going to beambiguous.
If I were running a 100%company, I would say, why do we
have an office? For thatcompany, it might be, I wanna
(25:06):
increase trust between mypeople. I wanna increase the
number of ties someone has withthe business and I wanna
increase the amount ofbrainstorming or creative
sessions people have wherethey're not just sitting in
eight straight hours of Zooms.And then you should measure
those three things. Like mostwhat what what I would do as
most of these companies is notsay productivity in the grand
(25:27):
sense, but what is a series ofreal world outputs that matter
to me as a company, And I wantto spend the money to have a
workplace and then hold usaccountable for saying, did we
actually see movement in thosemetrics that I've decided matter
to me in this business?
Mark Bonner (25:41):
So, Luke, one more question from the audience. It's
a good one. I think it's kind ofrelated to what you just said,
Jamie. You know, I know a partof your remit at CBRE is to look
beyond the horizon a little bitand to see what come what's
coming next for the market. Andso this question from our
audience is, do you think wewill work differently in the
office in the future?
If so, what might that looklike?
Jamie Hodari (26:03):
I think that we will work it's so hard to make
pronouncings out of the future.Here's a couple of things.
Number one, I think the trend isin the direction of a more
peripatetic, episodic, stitchedtogether version of work. We've
moved away from a world whereyou badge in, you go to the 30
Ninth Floor, you sit at Desk 51for nine hours, you go down, you
(26:27):
go home. People work for twohours, they go to a yoga class
in Bryant Park, they go back fortwo or three hours, they might
meet a friend for lunch, theymight do their grocery shopping
and come back for one finalcall, and they or they might do
their one on one in a parknearby.
That movement, that sense thatmy work is stitched together
with other parts of my life isprofoundly meaningful and
(26:48):
energizing to people and I thinkyou will see more of that. And
then the second is, it is, whenwe talk about hybrid, people
tend to mean a hybrid policy ofwork from home and, and going
into office. But I thinkworkplaces are gonna become more
and more hybrid in the sensethat you are going to be a
combination of in person withsome set of people and half the
(27:10):
people will be dialing in fromsomewhere else. And so we just
have to get better and better atthat modality. Because right
now, that's a weak part ofoffice.
That that how do you make itwork? For the six people in the
room together and the four thatare dialing in Yeah. The
technology is not yet there tomake that a frictionless,
wonderful experience.
Mark Bonner (27:27):
So let's end on this because this is a little
bit more forward gazing. Look.Let's be honest here. The macro
picture here is sobering.Effective rates still down 12%
from 2019.
NOI off 30 to 40% in somemarkets. Office CMBS
delinquencies near 6%, thehighest in a decade. But under
the surface, something moreinteresting is happening. The
(27:50):
sector is shrinking. And maybethat's the point.
Less volume, more intentionperhaps, fewer buildings, maybe
better buildings. Maybe theoffice isn't dying. Maybe it's
molting. Are we witnessing acomeback or a controlled
reinvention in your perspective,Jamie?
Jamie Hodari (28:10):
I think you can say definitively the office is
molting the bottom. I said 20%earlier, but let's say the
bottom 10% spaces that arereally unusable as an appealing
workplace people would want tocome to. And I would argue
that's a good thing. You want tomold products that don't have
product market fit and thatdon't serve a need for
(28:31):
customers. And buildings are notworth something if they're
empty.
Like, the bricks and steel areonly meaningful when people use
that building and make it comealive. So I think it is okay to
mold that, and I think that willbe replaced by, again, slightly
more dense central workplacespeople want to go to that are
vibrant. And that also is agreat thing cause you are gonna
(28:52):
have more people who walk inevery day or three days a week
and say I'm in a place thatgives me energy and a place
that, to my earlier phrase,enriches my life. So good
riddance, if you molt the stuffthat was not working for people,
grinding them down, was makingthem feel anonymous, was making
them feel demotivated, and youreplace that with stuff that
(29:12):
makes people feel enriched andenlivened.
Mark Bonner (29:16):
I'm so glad I got office molting trending in
commercial real estate in thisprogram, Jamie.
Jamie Hodari (29:20):
It's good a word. I like that.
Mark Bonner (29:22):
That's our show for today. Jamie, thanks so much for
taking the time.
Jamie Hodari (29:26):
Thank you.
Mark Bonner (29:27):
Got big Halloween plans?
Jamie Hodari (29:30):
Are we still on?
Mark Bonner (29:32):
We're still live, dude.
Jamie Hodari (29:33):
Oh, I have a three and a one year old, and I'm so
excited to take them trick ortreating because I'm I it's my
favorite holiday, and now I getto, like, experience it through
their eyes again. And and andit's just we we live in
Brooklyn, and it's, like, it'sthe best day of the year.
Mark Bonner (29:52):
Good. If you miss any part of this conversation or
want to catch earlier episodes,you'll find every show on
biznel.com or in your favoritepodcast feed. Just search First
Draft Live. We'll be back nextweek. Until then, have a safe,
spooky Halloween, and maybedon't check your office vacancy
rate in the dark.
This is First Draft Live. GoTigers and have a great weekend
(30:14):
y'all.
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