July 30, 2024 • 34 mins
Witness the dramatic transformation of commercial real estate as we discuss the staggering fall of St. Louis's tallest tower, from a $205 million valuation in 2006 to just $3.6 million today. We bring you an expert analysis from Joe Brady, who unpacks the "urban doom loop" and the potential for city revitalization through strategic public-private partnerships. Using Detroit's impressive resurgence, fueled by investments from Dan Gilbert of Rocket Mortgage, as a prime example, Joe shares his unique perspectives on reversing urban decline.
Explore the ongoing shifts in urban development and how office spaces and retail sectors are adapting post-COVID. We debate the potential strategies banks and property owners might employ to handle the instability, drawing parallels to the "extend and pretend" tactics seen during the retail downturn. Delve into the challenges and opportunities faced by B and C office buildings in New York City, and learn from successful urban redevelopment projects in Tampa and Chicago. Also, discover the surprising real estate trends in San Francisco, where condo prices are dropping despite the city's tech dominance.
Get insights into the future of hybrid work models and the evolving landscape of office spaces. We critique the outdated notion of mandatory in-office presence and advocate for flexible work arrangements that suit diverse employee needs, drawing on examples from companies like Chime and JP Morgan.
Hosts: Sam Maule & Maia Bittner
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Maia Bittner (00:04):
Hey, thanks for joining us for another episode
of Artificially Intelligent.
I'm Maia Bittner, yourperpetual FinTech intern.
Sam Maule (00:14):
And I'm the other intern who fetches coffee, Sam
Maul e.
Good to see you, Maia.
How you been this week?
Maia Bittner (00:19):
You know I've been good.
It's very April, showers bringsme flowers vibes over here in
rural Washington State.
Sam Maule (00:29):
And just to make sure we have the US covered.
Here in Florida it is blazinghot, is it?
Yeah, blazing, blazing hot, butI picked it.
I decided to live here.
So you know you get what youget.
But there was a story, Maia, asusual this week, that caught my
attention and kind of leads usto what we're going to talk
(00:49):
about today.
And I don't know if you sawthis one, but it's coming out of
St Louis and there's an examplethere of how the commercial US
office market is just taking ahit right now.
So the tallest tower in StLouis sold for $205 million back
in 2006, and it sold for $3.6million a few weeks ago.
(01:12):
Now, I'm not good at math.
I saw that, yeah, it tends tobe, if my poor math skills are
right that former AT&T Center44-story high-rise.
That is one heck of a hit.
One heck of a hit.
Maia Bittner (01:27):
And I think I saw so it's all one space, right, it
was all AT&T and that's notreally the style of big office
buildings these days anymore.
And so I think people aresaying, look, yes, it was sold
for very cheap, but that'sbecause if you wanted to cut it
up into individual offices toserve different customers, it'd
be a pretty expensive remodel.
(01:49):
It's an old building.
Things are changing right.
Everyone's citing work fromhome as another big trend.
That's changing the demand forcommercial real estate.
Sam Maule (01:59):
So yeah, it's one of my favorite topics.
I have a good friend of mine,Hi, Joe Brady.
Maia Bittner (02:03):
Hello Sam Hello.
Sam Maule (02:05):
Maia, Joe and I yeah, I, I love Joe.
I've known him for years, Um,and let's see if I get all this
right.
Joe, a former executive withJLL, which is one of the largest
commercial real estatecompanies in the world.
Uh, a great stint at Walgreensand boots doing real estate for
them, which I'm sure was just avery pleasant experience and
(02:25):
very tough.
You were the CEO of NorthAmerica for the Instant Group,
which is a very cool company.
What was the Instant Group?
Can you give us a two-secondbrief?
Joe Brady (02:34):
Sure, the Instant Group is essentially the Airbnb
of flexible office space, sothey're one of the largest
aggregators that owns the railson which people can book
flexible office space, generallyin chunks of days, weeks,
months, and in addition, thecompany also built out office
(02:58):
space on behalf ofmultinationals, so a number of
very large clients like AmericanExpress, netflix, gsk, amazon
and so forth.
So, yeah, they're on the frontrow, front seat, seeing how the
(03:19):
world of work is changing.
Sam Maule (03:20):
Yeah, he sent me some amazing pictures about six
months ago, Maia setting up theNetflix office in Argentina.
I wasn't jealous whatsoever asI was stuck in Jacksonville,
florida.
That was a very humble brag,joe.
Thank you for doing that.
But you retired, wrote a book,did some teaching and then
unretired.
And what are you doing?
Joe Brady (03:40):
today.
So today I'm a partner with acompany called LRG Investors,
and LRG Investors was foundednine years ago in the San
Francisco Bay Area by my friendsSteve Cutter and Josh Amoroso,
and Steve had founded abrokerage company 20 years ago
(04:02):
called Lockhouse Retail Group.
Thus the LRG and Lockhouse hasreally grown into the premier
retail brokerage company inNorthern California.
They've expanded to SantaBarbara and LA and they work
with over 130 different plusretail concepts different plus
(04:31):
retail concepts.
So you know I looked at thelandscape.
I've always been connected withretail.
Sam, as you know, sit on theboard of ICSC, which is the
industry trade group, and whileI was at the instant group, I
would go to trustee meetings andrepresent daytime population.
I was representing where peopleworked, and that's very
(04:52):
important for companies likeTarget and Walgreens and also
owners of real estate, becausein the absence of daytime
population, you just have pain.
Bad things happen.
You know, and so you mentionedSt Louis, and there was a recent
(05:13):
article in the Wall StreetJournal about St Louis and how,
in addition to the AT&T Center,you mentioned.
The AT&T Center you mentionedit's really going through what
many cities are going throughright now, which is an urban
doom loop.
Doesn't sound good, does it?
(05:34):
It's a good name for thisepisode.
It's not.
But near and dear Sam to yourheart.
Detroit was one of the firstpioneers to thoroughly go
through an urban doom loop, andthe good news for other cities
is they are emerging strongerthan ever.
Now it takes a public-privatepartnership.
(05:57):
It takes a friendly billionaireFor Detroit, it's Dan Gilbert,
who's invested over $5.6 billion.
Sam Maule (06:08):
Oh and Joe, you raise a good point real quick from
Maia, so I've got to get afintech little hook in here.
Do you remember where DanGilbert comes from, ready for
this one?
Let's see if she.
I love trivia questions fromMaia because it's very rare that
I can stump her on anything.
Rocket Mortgage, the guy whoowns Rocket Mortgage and the
Cleveland Yep.
So the guy that owns RocketMortgage more or less owns all
of downtown Detroit, right?
Joe Brady (06:30):
now.
Wow, isn't that cool.
Maia Bittner (06:32):
Yeah, detroit's on the up and up.
I don't know if I would sayit's stronger than ever, but
it's-.
Sam Maule (06:36):
Stronger than it's been in 30 years, 30, 40 years.
Joe Brady (06:39):
Yeah, yeah, I mean, there was a time when
residential real estate wasvalued more for agriculture than
it was for residential indowntown Detroit, right, so
they've come up from there.
You know what we're seeing inthe St Louis market.
You know St Louis.
What we're seeing in Chicago inthe loop, what we're seeing in
the financial district and inSoma, in San Francisco and and
(07:02):
scores of other cities, is thismigration away from the central
business district in favor ofbetter business districts.
The logical post-pandemicbetter area to work is close to
home or the suburbs, and soretail in the suburbs has just
(07:23):
been really strong.
There's been a resurgence, andwhat's happening, though, is if,
before the pandemic, there werecall it, four and a half, five
days a week of people commutinginto city center using food,
beverage and other serviceretailers, that number is now
(07:47):
down to two or two and a halfdays a week, so it gets really
difficult for the food retailers, the service retailers, to
really exist on two days a week.
So many have closed.
My old company, walgreens, hasclosed many, and there's other
headwinds that they'recontending with, but the fact of
(08:09):
the matter is, you get intothis doom loop where there
aren't that many people comingdowntown ancillary services.
So revenue starts going downand the cities really have one
(08:30):
of two choices, right?
You either try to tax whoever'sleft and Boston just announced
that that was something thatthey're going to try to do or
you cut city services, and youknow you have bad and worse from
from your options.
It's not.
It's not good.
Sam Maule (08:48):
It gets back to your urban doom loop and just to make
it even more fun.
So Maia and I always look atthis from like a payments or a
banking little point of view.
And, Maia, I don't know ifyou've seen the stories it gets
back to Anytime.
There's kind of a doom story.
It's amazing the piling in thatcomes in from media.
We all get it, it's what welike to read about.
(09:11):
But Fox News and Reuters and acouple of others have talked
about this impact we're seeingon commercial real estate.
Late February there was anarticle saying that there's a
$1.5 trillion in commercialmortgage debt is due by the end
of 2025.
And I'll repeat that numberbecause it's a cool number $1.5
(09:32):
trillion.
Maia Bittner (09:33):
Trillion with a T.
Sam Maule (09:34):
With a T in commercial mortgage debt is due
and we've already seen you knowwhat's going on with interest
rates right now and what'shappening, so you know the
potential impact on banking.
The Mortgage BankersAssociation said roughly $929
billion worth of commercial realestate loans are set to mature
this year, which means you'regoing to have to refinance,
(09:54):
which means this is going to besome interesting.
I think we call it rippleeffects.
Potentially, if this bleedsinto banking and I don't know if
this is just a big bank issueIs this some of the smaller
banks and some of the communitycenters, because it gets back to
what cities are really beinghit by this and what cities
(10:16):
aren't.
Maia Bittner (10:17):
The cities being hit by this, yeah, and which
banks have exposure to thecommercial real estate in those
cities?
Joe Brady (10:23):
Yeah, I think there's another.
You know the hits keephappening, so let me pile on a
little.
Maia and Sam.
So not only will there be $1.5trillion in commercial debt
maturing by the end of 2025, butnear 50% of office leases will
(10:44):
expire by the end of 2025 aswell.
So you have this double effectthat's happening, but I do think
it's really important to takethe $1.5 trillion and
acknowledge that that right,wrong or indifferent largely
resides in regional banks.
The large money center bankshave very little exposure to
(11:08):
commercial real estate.
Even if they originated, theyprobably would offload it.
And then, even within thecommercial real estate heading,
there are multiple asset classes, some which are doing quite
well.
Retail right now is doing quitewell, and why?
(11:30):
Because it wasn't that long agothat we heard about this whole
retail apocalypse that washappening.
I often use the phrase officeis having a retail moment right
now Because, you know, postglobal financial crisis,
everyone, coupled with theincrease in technology, there
(11:51):
was this thinking that no onewould ever leave their homes
again because shopping wouldhappen and things would
mysteriously arrive at our doorall hours.
Right, and the fact of thematter is, what we see is
omni-channel retail and what wesee is the consumer is voting
(12:11):
with her wallet and determiningwhether she wants to go into a
brick and mortar store or sit athome and have something
delivered, or have it deliveredat home and have it returned to
the store, or order it from homeand pick it up in the store.
So there's been this consumerprimacy that's taken hold in the
(12:32):
retail sense and, sam I mayhave mentioned this to you, Maia
, I'll share it this constructthat before 1999 or so, when
Jeff Bezos was on the cover ofTime magazine as the first
person of the year, as opposedto man of the year what we saw
(12:52):
was shop operating as a noun.
It was a physical place, it wasthe four walls, it's where you
went.
And then, soon after, astechnology continued to
accelerate and we becameuntethered with smartphones and
so forth, shop became a verb.
It's literally a thing you do,right.
(13:13):
And what's happening nowpost-pandemic, is work is
following that same pattern.
It's going from a noun, a placewe used to go Sam would say,
I'm going to work which wassynonymous with office.
Those two are now decoupled andwork is becoming a verb.
It's a thing you do,irrespective of place.
(13:34):
So what is that place and wheredo people want to be, and what
we're finding is the consumerwants to be in healthy
ecosystems that allow live, workand play all to happen in and
around the same area.
And for suburban grocery,anchored shopping centers right
(13:55):
now they're doing great.
So if part of the $1.5 trillionalso includes retail, then
that's okay because actuallythat part of the asset class is
doing quite well and values areincreasing.
The real challenge in thatnumber is what percentage of
(14:16):
those assets are office oroffice, and I would argue that
the banks and the owners will doexactly what they did in the
retail downslide, which isextend and pretend and try to do
(14:37):
the necessary workouts andhopefully owners have enough
oxygen, ie money, that they canmuddle through this down period.
But make no mistake, there willbe creative destruction.
There's a dramatic reduction inB and C malls around the
country.
(14:57):
There will be a dramaticreduction in B and C office
buildings, in fact, in New YorkCity.
So just one last thing, sam,because I think you'll find this
interesting In New York City,70% of the building stock of the
office buildings were builtbefore the IBM mainframe, that's
(15:17):
before 1964.
Sam Maule (15:20):
You've already hit on a couple of points which made
me smile and, Maia, I know thatyou'll think this too.
When you talked about shoppingand that concept of retail being
a verb, Maia and I come out ofbanking.
Banking morphed into a verb.
What?
Around 2008,?
Maia, we talk about it there,and what's also hilarious still
(15:43):
to me is it's an.
It's a.
It's an effect that came out ofcovid, where everything shifted
desperately to online retail,everybody buying online, but
what we've seen is that thathockey stick correction going
back to the standard growth wewere seeing before COVID,
meaning the percentage of salesin the US.
(16:06):
I've just looked this upE-commerce comprised 15.6% of
total retail sales in the US in2023.
And the projections during COVIDwere ridiculous.
And we saw all the hiring.
We saw it at Google, where Iused to work at.
We saw it at Apple.
You take your pick.
Maia Bittner (16:24):
All the tech companies gearing up, because
everything was going to shift toonline, and now e-commerce is
kind of struggling.
Compared to forecast, it turnsout people have reverted back to
their very slow adoption ofe-commerce, and it was kind of
just a moment of time with thepandemic.
I wonder, though, if this is.
We're just on a cycle.
You know how fashion comes incycles.
(16:46):
It's like, famously, the 50shad a flight to the suburbs.
Then people got excited aboutcities again.
Joe Brady (17:06):
Now I'm listening to Joe talk about how, oh yeah,
people want to live like rightin with the grocery stores and
with the retail and where theywork, and have all that in the
same community and it's thatsame kind of flight to the
suburbs.
Again, not too far from whereSam and I live, there's a
project generally referred to asWater Street and a gentleman
(17:27):
named Jeff Vinnick who led backto Magellan Funds for Fidelity.
There is a connection there onthe investment side.
So he actually not only does heown the Tampa Bay Lightning,
but he built the sports arenathere as well and he partnered
(17:47):
with Cascade Investments, whichis Bill Gates' investment
vehicle, to reimagine downtownTampa and in so doing, what we
saw were multifamily housing, wesaw grocery stores come in, we
saw medical, we saw office andrestaurants and hotels and it
(18:09):
became this really veryinteresting place.
Many people didn't even realizethere was a downtown Tampa.
And but my best example, my bestexample really going from a
central business district to abetter business district or a
better living district, isChicago, where I lived for 30
(18:30):
years and you think about theloop right now which was the
bastion of finance and LaSalleStreet was just home to the Fed
and Continental Bank, and wecould talk about all sorts of
ghost stories from that era.
But as we saw, post-pandemic,the loop has really emptied out.
(18:53):
It's really frighteningly moreof a monoculture ie work than it
is a healthy ecosystem live,work, play.
But just two miles to the westand Sam, you know this because
Google helped ignite what washappening in the Fulton Market
area you have now an area thatwas originally all about
(19:19):
meatpacking and wholesaleproduce, and it was the market
for the city of Chicago thatconverted into hipster loft.
Residential Restaurantsfollowed and then, lo and behold
, google came in.
And once Google came in, we sawthis massive change that
(19:46):
happened.
Mcdonald's brought their worldheadquarters from Oak Brook down
to Fulton Market.
Nobu Hotel opened.
The restaurants are fabulous.
The rents are significantlyhigher in Fulton Market than
they are in the Loop.
So while the suburbs have beenattractive, there are good
stories that we should point toaround these healthy ecosystems.
Sam Maule (20:09):
Well then, what about ?
All right.
So Maia and I come out of thefintech world, which means we've
both spent a significant partof our lives in San Francisco,
which still is the I would say,argue the heart of fintech in
the US.
We'll go back and forth betweenNew York and Austin or Miami
(20:31):
and I would say, yeah, it'sstill especially with.
Ai right the number ofcompanies based out of San
Francisco, and yet I constantlyread about horror stories about
the property values in SanFrancisco.
Maia Bittner (20:45):
So, joe, putting on a consultant hat I'm looking
at condos in Soma that areselling for below their like
2012 sale price.
Sam Maule (20:56):
Are you serious?
Maia Bittner (20:57):
I mean the growth.
Yeah, I mean tons of them.
It's crazy to watch what'shappening, particularly around
mid-market, where the Twitterbuilding is and Civic Center
Growth yeah, I mean tons of them.
It's crazy to watch what'shappening, in particular, around
mid-market, where the Twitterbuilding is and Civic Center,
but even other parts of Soma thecondo market is just being
destroyed there.
Sam Maule (21:13):
That's amazing.
So, again, East Coast bias.
Right, I don't make it out toSan Francisco as much as I used
to, so it's everything I'mreading about this, you know I'm
it's it's.
It's fascinating to try to geta grasp on what's actually
happening, Because everything Iread is that AI companies are
flourishing there, that peopleand a lot of the technology and
(21:36):
engineers, folks that had leftto move to say, to Texas or
Florida, even you know, Denverhave been coming back.
But to hear that is.
Maia Bittner (21:45):
I think that's still true.
I think so.
I think San Francisco isbooming and it's kind of it's
what Joe is saying Like there'sareas that people want to live
in and work in and do everythingin.
It is not Soma, it is not thefinancial district in San
Francisco right, it's HayesValley, it's other neighborhoods
that people are living, working, playing.
(22:06):
I think San Francisco isthriving, particularly with AI,
just not those specificneighborhoods, which is
interesting, and so much of theindustry of San Francisco was in
the financial district for thelongest time.
Sam Maule (22:18):
So, joe, if you throw a consultant hat on, so I get
the city of San Francisco andthe mayor to bring you in to say
, okay, so what do we do withthe financial district?
What do we do with all of thisproperty that's sitting here?
Joe just left everybody.
He went out the door.
That was too hard.
Joe Brady (22:37):
That was too hard.
Yeah, I mean, I think it reallyneeds to be a thorough
public-private endeavor tofigure out what's the reason to
be in the financial districttoday.
It's not like you can move abasketball arena there, or
(22:58):
baseball, Although you know Somahas a baseball area.
I do think there are otherissues at play with some cities
around safety.
You know they've gotten intothis doom loop now where the
safety and security has beenthreatened and it's not turning
(23:24):
around quickly, and so it'sgoing to take a while to fix the
problem.
Sam Maule (23:32):
That's for sure.
We saw that in New York, though.
I mean, Joe, you and I are oldenough, right, when I was
growing up, you didn't go to NewYork.
I mean, that was and I grewfrom, and I'm from Detroit,
everybody I'm from Philadelphia,I'm from Detroit.
Joe Brady (23:43):
There you go.
Oh, there you go.
Sam Maule (23:53):
So the two of us, but you know what I mean.
And yet New York did go througha massive change and still, to
this day, it's one of myfavorite cities to go to.
Joe Brady (24:03):
It is, but it went through a bankruptcy.
Detroit went through abankruptcy.
I mean, you've had this localmismanagement.
You look around at unfundedpension plans and it's just
frankly unsustainable.
And then, putting my retail hatback on, the issue of organized
(24:23):
retail crime is a $100 billiona year problem in the US economy
$100 billion a year.
There is a Tony Soprano of thedark supply chain who is
managing the stolen goods comingout of the Walgreens and the
Targets and everything else.
(24:45):
In New York City alone, forWalgreens the number was between
80 and $100 million a year ofjust organized retail crime.
This isn't little old ladystealing a tube of lipstick.
This is a giant, hefty bagwhere arms are cleaning out
(25:09):
whole shelves of product and asa result, it's now really
uninteresting to go into any ofthose stores because
everything's locked up andthere's not enough staff and
it's just those goods get resold.
Sam Maule (25:26):
I'm not saying it's all bodegas, but you'll see
those goods resold in bodegas.
I have sat down on multipleoccasions over a bourbon to say
is there a blockchain solutionthat we could imply into the
supply chain and use with lawenforcement to track these?
Because the the, the TAM onthis is ridiculous.
(25:47):
The amount of goods actuallystolen and this is or I agree,
joe this is organized crime.
You know how do you addressthat, because this does get back
to these organizations.
Maia Bittner (25:58):
Well, and I'm a I mean, I'm a cheapskate.
So I buy a lot of stuff on eBay.
I buy stuff on Poshmarkoccasionally stuff off the
sidewalk, right and I think somuch of that is stolen.
I buy a lot of stuff onFacebook marketplace and I think
even you know I boughtsomething on Poshmark recently,
an Ember mug.
I don't know if you know thosesmart mugs that keep your coffee
(26:18):
warm all the time.
I'm a fan.
I bought an Ember mug.
It's taking forever to getshipped.
I'm pretty sure that peoplejust put up listings, they wait
for someone to buy it and thenthey go steal it and ship it to
you.
I have no doubt to buy it andthen they go steal it and ship
it to you.
Sam Maule (26:36):
I have no doubt.
Maia Bittner (26:37):
It's like a zero not zero risk, but zero market
risk, zero selling risk way togo about it.
They get the demand first andthen go take stuff off the
shelves.
So I mean, blockchain is aninteresting idea.
I do think, like all of theseonline marketplaces, have a
little bit of a liability hereand they're not really stepping
up to it.
Sam Maule (27:02):
It's like a gnarly situation and it just makes
stuff more expensive.
Here's here's what I findfascinating.
Yeah, and I'll tell you, Maia,we've talked about this on
multiple occasions.
So, joe, one of the reasons westarted the podcast is so we can
learn stuff right.
So, because the the I thinkwe've used this word ecosystem
about 20 times on the podcast,so let's keep going with it.
The ecosystem, that is payments, that is banking, that is real
(27:25):
estate.
What I love about all this isthe mingling.
We're just continually seeingthis right, that that that all
of these verticals keep startingto cross over and are so
interrelated.
So we talked about commercialreal estate and the potential
impact on banking in the US, andit sounds like regional banks
pay attention.
(27:45):
Organized crime when it comesto goods and what it's doing,
how we actually work and liveand how companies pick where
their headquarters are going tobe and how you bring your
employees on.
I work at a completely virtualcompany, Maia.
I am assuming at Chime it's veryheavy virtual.
I'm sure you've got engineersin California that are together,
(28:08):
but I don't know.
Maia Bittner (28:11):
It's probably a mix.
Chime has an office in downtownSan Francisco in the financial
district.
Sam Maule (28:16):
You go Chime there, you in downtown.
Maia Bittner (28:18):
San Francisco in the financial district.
You go, chime, there you go.
It is hybrid, I think.
So.
Like many companies, you getpaid more if you live in a
higher cost of living place andyou're going into the office, so
there's certainly likeincentives to do that.
The people who are local to anoffice go in some days a week,
um, you, the people who arelocal to an office, go in some
(28:38):
days a week, um, and I workremotely a hundred percent of
the time.
It's kind of a hybrid and it'sinteresting.
Like I, actually I don't likeworking remotely, I like going
into the office.
Sam Maule (28:49):
Oh, joe, you want to talk on that.
I agree I.
I may blend, I enjoy thebenefits of remote, but I get
people are going to hate me forsaying this I get the most done
when I'm in person.
I really get soity the energythat happens when we're together
is profound and it can't bereplaced on a screen.
Joe Brady (29:27):
The rub that I have is this notion that we need to
be in an office Monday throughFriday, nine to five.
Right, that is an industrialera construct.
Now we are operating in thekeyboard economy, in the
conceptual age, where theoutcome of our work, our ideas
(29:48):
and innovations and so forththey're not widgets.
So I believe there is a reallystrong case to be made around
hybrid and hybrid work to me isthe flip side of the coin of
omni-channel retail, where theconsumer is really at the center
(30:12):
or someone making money has theagency and autonomy, as well as
the optionality, to decidewhere to go to be the most
productive.
And again, this conversationtends to get really reductive to
the point where there's onesilver bullet.
And if you're a new parent, youhave different priorities in
(30:36):
your life and differentrequirements.
If you're an empty nester, theway I am, I have other
requirements now with agingparents and in-laws, right?
So there is a life-work balancethat's happening now and what
companies need to do is createlet me go to the I'll use it for
(30:59):
the 22nd time an ecosystem ofplaces.
Uh, where, right, it's a goodthing.
It's not a drinking game, right, sam?
Sam Maule (31:07):
we'd be blotto.
We can do that, okay we canmake a drinking game out of, but
there needs to be.
Joe Brady (31:13):
There needs to be a a network of it's almost a
network of places where peoplecan work and there needs to be.
All of this conversationdoesn't necessarily say offices
go away.
What my position is thatirrelevant, functionally
(31:33):
obsolete offices need to go away.
Functionally obsolete officesneed to go away.
And in New York City, if youlook at one Vanderbilt that just
went up, right next to GrandCentral.
Station.
They're getting rents in the$250 range and the building is
completely full.
It's filled with amenities.
You look at what JP Morgan'sdoing at 270 Park Avenue.
(31:54):
Now what's really interestingis my friends at JP Morgan hired
Norman Foster and Partners tobe their architect of this
fabulous, fabulous building.
It'll house 14,000 employees,compared to the old building
that only could house 3,000.
(32:14):
The entire first two floors aresee-through.
So you're going to have thiswonderful park area between Park
Avenue and Madison Avenue andit will be an extraordinary
space.
You know what else Foster andPartners have done?
Sam Maule (32:34):
Every Apple store have done every apple store.
I'll go figure they also.
In that case, they also didthese.
I was going to say they did thestaircase for city for their uh
office down in chelsea, um, bythe way, so if so, yeah, if you
need to learn to, if you need anarchitect, folks, I think we
just got it and also I think weactually got that landed.
(32:59):
Now it's just again.
It's fascinating to see theoverlap and to see how this
affects so many differentindustries.
It's one we need to watch,especially in the commercial
banking side, to see what thelong-term effects are.
But, folks, I hate to say it,we're out of time.
Joe, for those that want tolearn so much more about the
space, about where work isheaded about, hey, what's going
(33:22):
to happen to San Francisco andNew York?
How do they reach out to you?
What's the best place?
Joe Brady (33:42):
Uh, that is a, a new website that uh, um, I've put up
to support, uh, a book that'scoming out at the end of May
called workshop the consumercentric transformation of
commercial real estate.
Uh, we talk about a lot ofthese themes in it, and, uh, I'm
on LinkedIn as well, so lookforward to connecting.
Sam Maule (33:58):
Nothing like a good book.
Plug, folks, same for me.
If you want to reach out to me,Linkedin always easiest way to
get a hold of me.
If you want to give us ideasfor another episode, if you want
to actually dig in deeper onthese topics, Maia, how about
you?
What's the best place?
Maia Bittner (34:16):
Best place is on Twitter.
I'm @ Maia B.
I have open DMs.
Sam Maule (34:20):
I'd love to hear from you All right, everybody,
thanks for listening to thisweek and we'll see you next week
.
Hey, thanks for joining us for another episode
of Artificially Intelligent.
I'm Maia Bittner, yourperpetual FinTech intern.
Sam Maule (00:14):
And I'm the other intern who fetches coffee, Sam
Maul e.
Good to see you, Maia.
How you been this week?
Maia Bittner (00:19):
You know I've been good.
It's very April, showers bringsme flowers vibes over here in
rural Washington State.
Sam Maule (00:29):
And just to make sure we have the US covered.
Here in Florida it is blazinghot, is it?
Yeah, blazing, blazing hot, butI picked it.
I decided to live here.
So you know you get what youget.
But there was a story, Maia, asusual this week, that caught my
attention and kind of leads usto what we're going to talk
(00:49):
about today.
And I don't know if you sawthis one, but it's coming out of
St Louis and there's an examplethere of how the commercial US
office market is just taking ahit right now.
So the tallest tower in StLouis sold for $205 million back
in 2006, and it sold for $3.6million a few weeks ago.
(01:12):
Now, I'm not good at math.
I saw that, yeah, it tends tobe, if my poor math skills are
right that former AT&T Center44-story high-rise.
That is one heck of a hit.
One heck of a hit.
Maia Bittner (01:27):
And I think I saw so it's all one space, right, it
was all AT&T and that's notreally the style of big office
buildings these days anymore.
And so I think people aresaying, look, yes, it was sold
for very cheap, but that'sbecause if you wanted to cut it
up into individual offices toserve different customers, it'd
be a pretty expensive remodel.
(01:49):
It's an old building.
Things are changing right.
Everyone's citing work fromhome as another big trend.
That's changing the demand forcommercial real estate.
Sam Maule (01:59):
So yeah, it's one of my favorite topics.
I have a good friend of mine,Hi, Joe Brady.
Maia Bittner (02:03):
Hello Sam Hello.
Sam Maule (02:05):
Maia, Joe and I yeah, I, I love Joe.
I've known him for years, Um,and let's see if I get all this
right.
Joe, a former executive withJLL, which is one of the largest
commercial real estatecompanies in the world.
Uh, a great stint at Walgreensand boots doing real estate for
them, which I'm sure was just avery pleasant experience and
(02:25):
very tough.
You were the CEO of NorthAmerica for the Instant Group,
which is a very cool company.
What was the Instant Group?
Can you give us a two-secondbrief?
Joe Brady (02:34):
Sure, the Instant Group is essentially the Airbnb
of flexible office space, sothey're one of the largest
aggregators that owns the railson which people can book
flexible office space, generallyin chunks of days, weeks,
months, and in addition, thecompany also built out office
(02:58):
space on behalf ofmultinationals, so a number of
very large clients like AmericanExpress, netflix, gsk, amazon
and so forth.
So, yeah, they're on the frontrow, front seat, seeing how the
(03:19):
world of work is changing.
Sam Maule (03:20):
Yeah, he sent me some amazing pictures about six
months ago, Maia setting up theNetflix office in Argentina.
I wasn't jealous whatsoever asI was stuck in Jacksonville,
florida.
That was a very humble brag,joe.
Thank you for doing that.
But you retired, wrote a book,did some teaching and then
unretired.
And what are you doing?
Joe Brady (03:40):
today.
So today I'm a partner with acompany called LRG Investors,
and LRG Investors was foundednine years ago in the San
Francisco Bay Area by my friendsSteve Cutter and Josh Amoroso,
and Steve had founded abrokerage company 20 years ago
(04:02):
called Lockhouse Retail Group.
Thus the LRG and Lockhouse hasreally grown into the premier
retail brokerage company inNorthern California.
They've expanded to SantaBarbara and LA and they work
with over 130 different plusretail concepts different plus
(04:31):
retail concepts.
So you know I looked at thelandscape.
I've always been connected withretail.
Sam, as you know, sit on theboard of ICSC, which is the
industry trade group, and whileI was at the instant group, I
would go to trustee meetings andrepresent daytime population.
I was representing where peopleworked, and that's very
(04:52):
important for companies likeTarget and Walgreens and also
owners of real estate, becausein the absence of daytime
population, you just have pain.
Bad things happen.
You know, and so you mentionedSt Louis, and there was a recent
(05:13):
article in the Wall StreetJournal about St Louis and how,
in addition to the AT&T Center,you mentioned.
The AT&T Center you mentionedit's really going through what
many cities are going throughright now, which is an urban
doom loop.
Doesn't sound good, does it?
(05:34):
It's a good name for thisepisode.
It's not.
But near and dear Sam to yourheart.
Detroit was one of the firstpioneers to thoroughly go
through an urban doom loop, andthe good news for other cities
is they are emerging strongerthan ever.
Now it takes a public-privatepartnership.
(05:57):
It takes a friendly billionaireFor Detroit, it's Dan Gilbert,
who's invested over $5.6 billion.
Sam Maule (06:08):
Oh and Joe, you raise a good point real quick from
Maia, so I've got to get afintech little hook in here.
Do you remember where DanGilbert comes from, ready for
this one?
Let's see if she.
I love trivia questions fromMaia because it's very rare that
I can stump her on anything.
Rocket Mortgage, the guy whoowns Rocket Mortgage and the
Cleveland Yep.
So the guy that owns RocketMortgage more or less owns all
of downtown Detroit, right?
Joe Brady (06:30):
now.
Wow, isn't that cool.
Maia Bittner (06:32):
Yeah, detroit's on the up and up.
I don't know if I would sayit's stronger than ever, but
it's-.
Sam Maule (06:36):
Stronger than it's been in 30 years, 30, 40 years.
Joe Brady (06:39):
Yeah, yeah, I mean, there was a time when
residential real estate wasvalued more for agriculture than
it was for residential indowntown Detroit, right, so
they've come up from there.
You know what we're seeing inthe St Louis market.
You know St Louis.
What we're seeing in Chicago inthe loop, what we're seeing in
the financial district and inSoma, in San Francisco and and
(07:02):
scores of other cities, is thismigration away from the central
business district in favor ofbetter business districts.
The logical post-pandemicbetter area to work is close to
home or the suburbs, and soretail in the suburbs has just
(07:23):
been really strong.
There's been a resurgence, andwhat's happening, though, is if,
before the pandemic, there werecall it, four and a half, five
days a week of people commutinginto city center using food,
beverage and other serviceretailers, that number is now
(07:47):
down to two or two and a halfdays a week, so it gets really
difficult for the food retailers, the service retailers, to
really exist on two days a week.
So many have closed.
My old company, walgreens, hasclosed many, and there's other
headwinds that they'recontending with, but the fact of
(08:09):
the matter is, you get intothis doom loop where there
aren't that many people comingdowntown ancillary services.
So revenue starts going downand the cities really have one
(08:30):
of two choices, right?
You either try to tax whoever'sleft and Boston just announced
that that was something thatthey're going to try to do or
you cut city services, and youknow you have bad and worse from
from your options.
It's not.
It's not good.
Sam Maule (08:48):
It gets back to your urban doom loop and just to make
it even more fun.
So Maia and I always look atthis from like a payments or a
banking little point of view.
And, Maia, I don't know ifyou've seen the stories it gets
back to Anytime.
There's kind of a doom story.
It's amazing the piling in thatcomes in from media.
We all get it, it's what welike to read about.
(09:11):
But Fox News and Reuters and acouple of others have talked
about this impact we're seeingon commercial real estate.
Late February there was anarticle saying that there's a
$1.5 trillion in commercialmortgage debt is due by the end
of 2025.
And I'll repeat that numberbecause it's a cool number $1.5
(09:32):
trillion.
Maia Bittner (09:33):
Trillion with a T.
Sam Maule (09:34):
With a T in commercial mortgage debt is due
and we've already seen you knowwhat's going on with interest
rates right now and what'shappening, so you know the
potential impact on banking.
The Mortgage BankersAssociation said roughly $929
billion worth of commercial realestate loans are set to mature
this year, which means you'regoing to have to refinance,
(09:54):
which means this is going to besome interesting.
I think we call it rippleeffects.
Potentially, if this bleedsinto banking and I don't know if
this is just a big bank issueIs this some of the smaller
banks and some of the communitycenters, because it gets back to
what cities are really beinghit by this and what cities
(10:16):
aren't.
Maia Bittner (10:17):
The cities being hit by this, yeah, and which
banks have exposure to thecommercial real estate in those
cities?
Joe Brady (10:23):
Yeah, I think there's another.
You know the hits keephappening, so let me pile on a
little.
Maia and Sam.
So not only will there be $1.5trillion in commercial debt
maturing by the end of 2025, butnear 50% of office leases will
(10:44):
expire by the end of 2025 aswell.
So you have this double effectthat's happening, but I do think
it's really important to takethe $1.5 trillion and
acknowledge that that right,wrong or indifferent largely
resides in regional banks.
The large money center bankshave very little exposure to
(11:08):
commercial real estate.
Even if they originated, theyprobably would offload it.
And then, even within thecommercial real estate heading,
there are multiple asset classes, some which are doing quite
well.
Retail right now is doing quitewell, and why?
(11:30):
Because it wasn't that long agothat we heard about this whole
retail apocalypse that washappening.
I often use the phrase officeis having a retail moment right
now Because, you know, postglobal financial crisis,
everyone, coupled with theincrease in technology, there
(11:51):
was this thinking that no onewould ever leave their homes
again because shopping wouldhappen and things would
mysteriously arrive at our doorall hours.
Right, and the fact of thematter is, what we see is
omni-channel retail and what wesee is the consumer is voting
(12:11):
with her wallet and determiningwhether she wants to go into a
brick and mortar store or sit athome and have something
delivered, or have it deliveredat home and have it returned to
the store, or order it from homeand pick it up in the store.
So there's been this consumerprimacy that's taken hold in the
(12:32):
retail sense and, sam I mayhave mentioned this to you, Maia
, I'll share it this constructthat before 1999 or so, when
Jeff Bezos was on the cover ofTime magazine as the first
person of the year, as opposedto man of the year what we saw
(12:52):
was shop operating as a noun.
It was a physical place, it wasthe four walls, it's where you
went.
And then, soon after, astechnology continued to
accelerate and we becameuntethered with smartphones and
so forth, shop became a verb.
It's literally a thing you do,right.
(13:13):
And what's happening nowpost-pandemic, is work is
following that same pattern.
It's going from a noun, a placewe used to go Sam would say,
I'm going to work which wassynonymous with office.
Those two are now decoupled andwork is becoming a verb.
It's a thing you do,irrespective of place.
(13:34):
So what is that place and wheredo people want to be, and what
we're finding is the consumerwants to be in healthy
ecosystems that allow live, workand play all to happen in and
around the same area.
And for suburban grocery,anchored shopping centers right
(13:55):
now they're doing great.
So if part of the $1.5 trillionalso includes retail, then
that's okay because actuallythat part of the asset class is
doing quite well and values areincreasing.
The real challenge in thatnumber is what percentage of
(14:16):
those assets are office oroffice, and I would argue that
the banks and the owners will doexactly what they did in the
retail downslide, which isextend and pretend and try to do
(14:37):
the necessary workouts andhopefully owners have enough
oxygen, ie money, that they canmuddle through this down period.
But make no mistake, there willbe creative destruction.
There's a dramatic reduction inB and C malls around the
country.
(14:57):
There will be a dramaticreduction in B and C office
buildings, in fact, in New YorkCity.
So just one last thing, sam,because I think you'll find this
interesting In New York City,70% of the building stock of the
office buildings were builtbefore the IBM mainframe, that's
(15:17):
before 1964.
Sam Maule (15:20):
You've already hit on a couple of points which made
me smile and, Maia, I know thatyou'll think this too.
When you talked about shoppingand that concept of retail being
a verb, Maia and I come out ofbanking.
Banking morphed into a verb.
What?
Around 2008,?
Maia, we talk about it there,and what's also hilarious still
(15:43):
to me is it's an.
It's a.
It's an effect that came out ofcovid, where everything shifted
desperately to online retail,everybody buying online, but
what we've seen is that thathockey stick correction going
back to the standard growth wewere seeing before COVID,
meaning the percentage of salesin the US.
(16:06):
I've just looked this upE-commerce comprised 15.6% of
total retail sales in the US in2023.
And the projections during COVIDwere ridiculous.
And we saw all the hiring.
We saw it at Google, where Iused to work at.
We saw it at Apple.
You take your pick.
Maia Bittner (16:24):
All the tech companies gearing up, because
everything was going to shift toonline, and now e-commerce is
kind of struggling.
Compared to forecast, it turnsout people have reverted back to
their very slow adoption ofe-commerce, and it was kind of
just a moment of time with thepandemic.
I wonder, though, if this is.
We're just on a cycle.
You know how fashion comes incycles.
(16:46):
It's like, famously, the 50shad a flight to the suburbs.
Then people got excited aboutcities again.
Joe Brady (17:06):
Now I'm listening to Joe talk about how, oh yeah,
people want to live like rightin with the grocery stores and
with the retail and where theywork, and have all that in the
same community and it's thatsame kind of flight to the
suburbs.
Again, not too far from whereSam and I live, there's a
project generally referred to asWater Street and a gentleman
(17:27):
named Jeff Vinnick who led backto Magellan Funds for Fidelity.
There is a connection there onthe investment side.
So he actually not only does heown the Tampa Bay Lightning,
but he built the sports arenathere as well and he partnered
(17:47):
with Cascade Investments, whichis Bill Gates' investment
vehicle, to reimagine downtownTampa and in so doing, what we
saw were multifamily housing, wesaw grocery stores come in, we
saw medical, we saw office andrestaurants and hotels and it
(18:09):
became this really veryinteresting place.
Many people didn't even realizethere was a downtown Tampa.
And but my best example, my bestexample really going from a
central business district to abetter business district or a
better living district, isChicago, where I lived for 30
(18:30):
years and you think about theloop right now which was the
bastion of finance and LaSalleStreet was just home to the Fed
and Continental Bank, and wecould talk about all sorts of
ghost stories from that era.
But as we saw, post-pandemic,the loop has really emptied out.
(18:53):
It's really frighteningly moreof a monoculture ie work than it
is a healthy ecosystem live,work, play.
But just two miles to the westand Sam, you know this because
Google helped ignite what washappening in the Fulton Market
area you have now an area thatwas originally all about
(19:19):
meatpacking and wholesaleproduce, and it was the market
for the city of Chicago thatconverted into hipster loft.
Residential Restaurantsfollowed and then, lo and behold
, google came in.
And once Google came in, we sawthis massive change that
(19:46):
happened.
Mcdonald's brought their worldheadquarters from Oak Brook down
to Fulton Market.
Nobu Hotel opened.
The restaurants are fabulous.
The rents are significantlyhigher in Fulton Market than
they are in the Loop.
So while the suburbs have beenattractive, there are good
stories that we should point toaround these healthy ecosystems.
Sam Maule (20:09):
Well then, what about ?
All right.
So Maia and I come out of thefintech world, which means we've
both spent a significant partof our lives in San Francisco,
which still is the I would say,argue the heart of fintech in
the US.
We'll go back and forth betweenNew York and Austin or Miami
(20:31):
and I would say, yeah, it'sstill especially with.
Ai right the number ofcompanies based out of San
Francisco, and yet I constantlyread about horror stories about
the property values in SanFrancisco.
Maia Bittner (20:45):
So, joe, putting on a consultant hat I'm looking
at condos in Soma that areselling for below their like
2012 sale price.
Sam Maule (20:56):
Are you serious?
Maia Bittner (20:57):
I mean the growth.
Yeah, I mean tons of them.
It's crazy to watch what'shappening, particularly around
mid-market, where the Twitterbuilding is and Civic Center
Growth yeah, I mean tons of them.
It's crazy to watch what'shappening, in particular, around
mid-market, where the Twitterbuilding is and Civic Center,
but even other parts of Soma thecondo market is just being
destroyed there.
Sam Maule (21:13):
That's amazing.
So, again, East Coast bias.
Right, I don't make it out toSan Francisco as much as I used
to, so it's everything I'mreading about this, you know I'm
it's it's.
It's fascinating to try to geta grasp on what's actually
happening, Because everything Iread is that AI companies are
flourishing there, that peopleand a lot of the technology and
(21:36):
engineers, folks that had leftto move to say, to Texas or
Florida, even you know, Denverhave been coming back.
But to hear that is.
Maia Bittner (21:45):
I think that's still true.
I think so.
I think San Francisco isbooming and it's kind of it's
what Joe is saying Like there'sareas that people want to live
in and work in and do everythingin.
It is not Soma, it is not thefinancial district in San
Francisco right, it's HayesValley, it's other neighborhoods
that people are living, working, playing.
(22:06):
I think San Francisco isthriving, particularly with AI,
just not those specificneighborhoods, which is
interesting, and so much of theindustry of San Francisco was in
the financial district for thelongest time.
Sam Maule (22:18):
So, joe, if you throw a consultant hat on, so I get
the city of San Francisco andthe mayor to bring you in to say
, okay, so what do we do withthe financial district?
What do we do with all of thisproperty that's sitting here?
Joe just left everybody.
He went out the door.
That was too hard.
Joe Brady (22:37):
That was too hard.
Yeah, I mean, I think it reallyneeds to be a thorough
public-private endeavor tofigure out what's the reason to
be in the financial districttoday.
It's not like you can move abasketball arena there, or
(22:58):
baseball, Although you know Somahas a baseball area.
I do think there are otherissues at play with some cities
around safety.
You know they've gotten intothis doom loop now where the
safety and security has beenthreatened and it's not turning
(23:24):
around quickly, and so it'sgoing to take a while to fix the
problem.
Sam Maule (23:32):
That's for sure.
We saw that in New York, though.
I mean, Joe, you and I are oldenough, right, when I was
growing up, you didn't go to NewYork.
I mean, that was and I grewfrom, and I'm from Detroit,
everybody I'm from Philadelphia,I'm from Detroit.
Joe Brady (23:43):
There you go.
Oh, there you go.
Sam Maule (23:53):
So the two of us, but you know what I mean.
And yet New York did go througha massive change and still, to
this day, it's one of myfavorite cities to go to.
Joe Brady (24:03):
It is, but it went through a bankruptcy.
Detroit went through abankruptcy.
I mean, you've had this localmismanagement.
You look around at unfundedpension plans and it's just
frankly unsustainable.
And then, putting my retail hatback on, the issue of organized
(24:23):
retail crime is a $100 billiona year problem in the US economy
$100 billion a year.
There is a Tony Soprano of thedark supply chain who is
managing the stolen goods comingout of the Walgreens and the
Targets and everything else.
(24:45):
In New York City alone, forWalgreens the number was between
80 and $100 million a year ofjust organized retail crime.
This isn't little old ladystealing a tube of lipstick.
This is a giant, hefty bagwhere arms are cleaning out
(25:09):
whole shelves of product and asa result, it's now really
uninteresting to go into any ofthose stores because
everything's locked up andthere's not enough staff and
it's just those goods get resold.
Sam Maule (25:26):
I'm not saying it's all bodegas, but you'll see
those goods resold in bodegas.
I have sat down on multipleoccasions over a bourbon to say
is there a blockchain solutionthat we could imply into the
supply chain and use with lawenforcement to track these?
Because the the, the TAM onthis is ridiculous.
(25:47):
The amount of goods actuallystolen and this is or I agree,
joe this is organized crime.
You know how do you addressthat, because this does get back
to these organizations.
Maia Bittner (25:58):
Well, and I'm a I mean, I'm a cheapskate.
So I buy a lot of stuff on eBay.
I buy stuff on Poshmarkoccasionally stuff off the
sidewalk, right and I think somuch of that is stolen.
I buy a lot of stuff onFacebook marketplace and I think
even you know I boughtsomething on Poshmark recently,
an Ember mug.
I don't know if you know thosesmart mugs that keep your coffee
(26:18):
warm all the time.
I'm a fan.
I bought an Ember mug.
It's taking forever to getshipped.
I'm pretty sure that peoplejust put up listings, they wait
for someone to buy it and thenthey go steal it and ship it to
you.
I have no doubt to buy it andthen they go steal it and ship
it to you.
Sam Maule (26:36):
I have no doubt.
Maia Bittner (26:37):
It's like a zero not zero risk, but zero market
risk, zero selling risk way togo about it.
They get the demand first andthen go take stuff off the
shelves.
So I mean, blockchain is aninteresting idea.
I do think, like all of theseonline marketplaces, have a
little bit of a liability hereand they're not really stepping
up to it.
Sam Maule (27:02):
It's like a gnarly situation and it just makes
stuff more expensive.
Here's here's what I findfascinating.
Yeah, and I'll tell you, Maia,we've talked about this on
multiple occasions.
So, joe, one of the reasons westarted the podcast is so we can
learn stuff right.
So, because the the I thinkwe've used this word ecosystem
about 20 times on the podcast,so let's keep going with it.
The ecosystem, that is payments, that is banking, that is real
(27:25):
estate.
What I love about all this isthe mingling.
We're just continually seeingthis right, that that that all
of these verticals keep startingto cross over and are so
interrelated.
So we talked about commercialreal estate and the potential
impact on banking in the US, andit sounds like regional banks
pay attention.
(27:45):
Organized crime when it comesto goods and what it's doing,
how we actually work and liveand how companies pick where
their headquarters are going tobe and how you bring your
employees on.
I work at a completely virtualcompany, Maia.
I am assuming at Chime it's veryheavy virtual.
I'm sure you've got engineersin California that are together,
(28:08):
but I don't know.
Maia Bittner (28:11):
It's probably a mix.
Chime has an office in downtownSan Francisco in the financial
district.
Sam Maule (28:16):
You go Chime there, you in downtown.
Maia Bittner (28:18):
San Francisco in the financial district.
You go, chime, there you go.
It is hybrid, I think.
So.
Like many companies, you getpaid more if you live in a
higher cost of living place andyou're going into the office, so
there's certainly likeincentives to do that.
The people who are local to anoffice go in some days a week,
um, you, the people who arelocal to an office, go in some
(28:38):
days a week, um, and I workremotely a hundred percent of
the time.
It's kind of a hybrid and it'sinteresting.
Like I, actually I don't likeworking remotely, I like going
into the office.
Sam Maule (28:49):
Oh, joe, you want to talk on that.
I agree I.
I may blend, I enjoy thebenefits of remote, but I get
people are going to hate me forsaying this I get the most done
when I'm in person.
I really get soity the energythat happens when we're together
is profound and it can't bereplaced on a screen.
Joe Brady (29:27):
The rub that I have is this notion that we need to
be in an office Monday throughFriday, nine to five.
Right, that is an industrialera construct.
Now we are operating in thekeyboard economy, in the
conceptual age, where theoutcome of our work, our ideas
(29:48):
and innovations and so forththey're not widgets.
So I believe there is a reallystrong case to be made around
hybrid and hybrid work to me isthe flip side of the coin of
omni-channel retail, where theconsumer is really at the center
(30:12):
or someone making money has theagency and autonomy, as well as
the optionality, to decidewhere to go to be the most
productive.
And again, this conversationtends to get really reductive to
the point where there's onesilver bullet.
And if you're a new parent, youhave different priorities in
(30:36):
your life and differentrequirements.
If you're an empty nester, theway I am, I have other
requirements now with agingparents and in-laws, right?
So there is a life-work balancethat's happening now and what
companies need to do is createlet me go to the I'll use it for
(30:59):
the 22nd time an ecosystem ofplaces.
Uh, where, right, it's a goodthing.
It's not a drinking game, right, sam?
Sam Maule (31:07):
we'd be blotto.
We can do that, okay we canmake a drinking game out of, but
there needs to be.
Joe Brady (31:13):
There needs to be a a network of it's almost a
network of places where peoplecan work and there needs to be.
All of this conversationdoesn't necessarily say offices
go away.
What my position is thatirrelevant, functionally
(31:33):
obsolete offices need to go away.
Functionally obsolete officesneed to go away.
And in New York City, if youlook at one Vanderbilt that just
went up, right next to GrandCentral.
Station.
They're getting rents in the$250 range and the building is
completely full.
It's filled with amenities.
You look at what JP Morgan'sdoing at 270 Park Avenue.
(31:54):
Now what's really interestingis my friends at JP Morgan hired
Norman Foster and Partners tobe their architect of this
fabulous, fabulous building.
It'll house 14,000 employees,compared to the old building
that only could house 3,000.
(32:14):
The entire first two floors aresee-through.
So you're going to have thiswonderful park area between Park
Avenue and Madison Avenue andit will be an extraordinary
space.
You know what else Foster andPartners have done?
Sam Maule (32:34):
Every Apple store have done every apple store.
I'll go figure they also.
In that case, they also didthese.
I was going to say they did thestaircase for city for their uh
office down in chelsea, um, bythe way, so if so, yeah, if you
need to learn to, if you need anarchitect, folks, I think we
just got it and also I think weactually got that landed.
(32:59):
Now it's just again.
It's fascinating to see theoverlap and to see how this
affects so many differentindustries.
It's one we need to watch,especially in the commercial
banking side, to see what thelong-term effects are.
But, folks, I hate to say it,we're out of time.
Joe, for those that want tolearn so much more about the
space, about where work isheaded about, hey, what's going
(33:22):
to happen to San Francisco andNew York?
How do they reach out to you?
What's the best place?
Joe Brady (33:42):
Uh, that is a, a new website that uh, um, I've put up
to support, uh, a book that'scoming out at the end of May
called workshop the consumercentric transformation of
commercial real estate.
Uh, we talk about a lot ofthese themes in it, and, uh, I'm
on LinkedIn as well, so lookforward to connecting.
Sam Maule (33:58):
Nothing like a good book.
Plug, folks, same for me.
If you want to reach out to me,Linkedin always easiest way to
get a hold of me.
If you want to give us ideasfor another episode, if you want
to actually dig in deeper onthese topics, Maia, how about
you?
What's the best place?
Maia Bittner (34:16):
Best place is on Twitter.
I'm @ Maia B.
I have open DMs.
Sam Maule (34:20):
I'd love to hear from you All right, everybody,
thanks for listening to thisweek and we'll see you next week
.
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