Cushman & Wakefield CEO Brett White’s Answer To The ‘Billion-Dollar’ Office Return Question
Few people may be as keyed in to how office owners and their tenants are feeling right now as Brett White. The Cushman & Wakefield CEO oversees the management of 3.6B SF of commercial space worldwide. White’s position affords him a bird's-eye view of whether the precautions that different owners are taking are enough to convince their tenants that the office is still a safe, productive and compelling place to work.
On Walker & Dunlop’s weekly webcast, White and host Willy Walker dove into what measures their companies have taken to boost diversity and address inequities across the industry. White was clear that the CRE industry has a long way to go on issues of diversity. Walker then turned the discussion to the pressing question of when and how American companies would return to the office.
Here are some highlights from the conversation between the two CEOs:
Walker: So after building CBRE into the largest commercial real estate services firm in the world, you left, and I'll quote you, ‘With the intent of slowing down a bit.’ Given that you had all these opportunities to be an investor or to go into proptech or fintech, why did you jump at the opportunity to “re-create the wheel“ that you'd already created?
White: I fell into it and it was absolutely not my plan. A week after I left CBRE, I was living in Malibu, and I went into Starbucks at 8:30 in the morning. I got my coffee, I had my Wall Street Journal. I sat down and started to read, and I had this horrific feeling of, “Oh my god, I'm one of them.”
Walker: Be careful, there might be some retired people on this call.
White: All of a sudden, you feel you're irrelevant. You feel like, “Wait, is this what I really want to do?” It was very clear to me very fast that I was not in a place in my life where I can be happy at half speed.
This industry has never been comfortable with a duopoly on full-service firms. I know that many times running CBRE, we would go in, and make a global pitch for a client, a good example would be Bank of America. They would hire Jones Lang LaSalle, they would hire us and then they would say, “We can’t have just two vendors. So we're going to go hire another firm and we know you're going to tell us they're not qualified, and we know they're not qualified, but you're going to have to help them because we don't have a choice.”
So there's always been this need, I think, for more firms at the top, and we saw that need. And as I mentioned earlier, we felt we could build a different value proposition than perhaps some of the legacy firms provided.
Walker: Cushman I believe manages something like 80M SF of office space in China. What has your team seen on the ground as it relates to the reopening of office and retail and where we stand today in Asia versus the United States?
White: We actually manage 800M SF in China, which is a hard number to get my head around. We had the advantage of sitting in the middle of a mass exodus and a mass re-entry to these buildings in China before these issues were prevalent in Europe and the United States.
China is a different place than almost anywhere else in the world. The way in which surveillance and tracking is used and your ability to ask questions and to force procedures is unique. So in China, what we saw was a very quick development really by the government around technology to track people in a way that would never be accepted in the United States or Western Europe.
Walker: Why can't we set standards like that and have people adhere to them, if they want to play ball, if they want to go back into an office?
White: We can, to some extent, but let me give you an example.
Many owners would like to use their security teams and lobby concierges to do temperature checks. But immediately there’s an issue. Let's imagine that the building owner sets the temperature limit at 100.4 degrees. You let someone in at 100.2, and that person is infected and that person infects the building. Who’s liable? This issue of liability between owners and tenants and the tenants’ employees is a huge issue. And in China that doesn't exist.
In China, office utilization is about 95% right now. Now how do they do that? Because they don't social distance. Why don't they social distance? Because they have a level of knowledge around where infection is that we just can't get to, because they force people to be tested regularly in China. If they've ever been near someone who's infected, the government moves them to quarantine quarters. It’s not a choice.
We do need to do as much as we can, within the limits of law to have as much information as we can gain around where infection is and where it isn't. And if we can't do that, Willy, it's going to be very difficult for us to tell our employees, “You're safe here.”
Walker: What's your thought as it relates to aggregate usage of office space in America as we move through this crisis?
White: So that is the multibillion-dollar question. There is no topic hotter than this topic and there is no topic I'm dealing with right now that has a more diverse set of opinions.
So there are two CEOs of world-class leading banks based in New York. These are firms in exactly the same industry, doing exactly the same business who are, at least at the top, articulating very different strategies.
One of them says, “I want everyone back in the office” and tells me “We live on our culture, it is the single most important differentiator we have in our industry, and I as a CEO struggle to understand how I can inculcate this powerful culture virtually.”
Then you have an equally bright CEO, saying, “Look, I'm watching my employees right now, and they're very productive at home, and I think that a lot of them could be productive at home a lot more.”
To answer your question specifically, Willy, we've now surveyed over 50,000 people, who are employees of our clients around the world. We've asked a whole series of questions about productivity at home, productivity at work, what's working, what isn't working, “Do you want to go back or not want to go back,” and the results are very interesting. The people that most want to go back to the office are defined by two things: age and culture.
The younger you are, the more you want to be back in the office, which, by the way, was shocking to me. Gen X, Gen Y, Gen Z, they are not happy at home and they want to be in the office around the people that are their friends.
As you get into employees 50 and older, that flips, and those people do not want to go back into the office. Those employees are likely more senior, so they have more freedom in what they do for their work and are probably more worried about COVID, but age is a very big deal there.
The other big deal is culture. When you talk to employees in Italy and you ask them, a very high percentage say, “It’s impossible for me to work at home. We live differently than you live, we live in a communal environment here, we have our moms and dads living with us and we have no place to work.” In India, same thing.
I think most large companies right now believe that over the next three to five years they can reduce their footprint. And I believe that most large companies today are going to try hard to do that.
Reduced footprint could be 5%, it could be 10%, maybe as much as 20%. I don't think in general you're going to see anything more than that. But there's no doubt in my mind now that CEOs of large occupiers believe now that there's a way to more efficiently use their space.
After we have a vaccine, a lot of things will be different, from air handling to temperature checking. But I do think the density is probably going to come back close to what it was pre-COVID.
Next week, Willy will be hosting a conversation with Leslie Hale, president and CEO of RLJ Lodging Trust.
This feature was produced in collaboration between the Bisnow Branded Content Studio and Walker & Dunlop. Bisnow news staff was not involved in the production of this content.