January 27, 2021

Nothing Like A Normal Downturn: Marci Rossell Delivers The Goods for CoreNet Global and CREW Atlanta

January 27, 2021/ Ken Ashley

Economist Marci Rossell eats Federal Reserve Bank data for breakfast and labor and employment reports for lunch. She is a walking font of knowledge. The former CNBC chief economist somehow synthesizes economics, politics, culture and media into one lively and fascinating narrative.

Hey, she can make crowds laugh about economic trends. I’ve seen her do it.

And so it was in late January of the year 2021. The Atlanta Chapters of CoreNet Global and CREW Atlanta assembled - virtually - to hear Marci bring the knowledge and the all-important forecast. This is the 13th time she has done so. Every other time before Marci’s speech, there was a frenetic grip-and-grin fest of catching up in person with local Atlanta real estate friends. Then the group tucked into eggs and bacon.

This time, the high heels and ties are nowhere to be found. Instead, the Atlanta real estate community dialed in from armchairs, kitchen tables and, hopefully, a few real offices. It feels like we are turning the corner in this pandemic, but does our virtual keynote speaker agree?

Interest in what Marci has to say has never been higher. “Where do we go from here?” I could feel everyone on the Zoom saying to Marci telepathically.

This Ain’t Your Normal Market Crash

Let’s not bury the lede: “We are about to come out of the COVID Cave after a long 10 months,” said the keynote speaker. “If we haven’t been vaccinated, we know people who have, and this is very exciting.” “I am predicting a major economic recovery in the second half of this year,” Marci said.

She went on to compare this very unusual time to some past downturns:

Unemployment typically peaks after a recession, but this time the job loss was immediate.
Normal downturns happen when you have an economic shock that starts in one sector of the economy (like real estate) and then move out from there.
This time around, there was a healthcare shock that started independently of the economy and then moved inward.
All the normal forecasts we could make in a ‘normal’ downturn are pretty much out the window.
Typically, the job market is the last thing to react in a downturn, but in 2020, jobs were the first to be impacted. Currently, the unemployment rate has come back very robustly to 6.7%, though, which is lower than Marci expected at this point.
We are at about 90% of GDP and general economic activity at this point in 2021 compared to January/February 2020
Americans have had a rapid and persistent increase in the savings rate. Many started this downturn with a strong balance sheet as compared to 2009 when Americans were heavily in debt before the crisis which changes the way we look at the world.
If you haven’t lost your job, your personal balance sheet probably looks better than it has at any point in your life.
The elevated savings and strong personal balance sheets of millions of Americans are important to understanding how strong our economic recovery will be when we feel safe again.

How Covid is Transmitted…Through the Economy

We’ve all read hundreds of articles on how the virus is transmitted physically. Marci was very clear; “I don’t want to talk about anything else but solving the Covid problem…I want my life back!”

However, until Marci’s talk, I’d not given thought to how the scourge is transmitted economically.

“We pass the economic infection along through income, through wealth, and through uncertainty,” Marci said. “While income has been unequivocally negative, wealth has gone in the opposite direction. This is highly unusual.” Perhaps we have an upside to a significant downside occurrence.

“There was a massive stimulus package…really a rescue package that supported incomes and worked to keep poverty at bay,” Marci said. Another impact of the package; “savings have exploded..there are somewhere around $1.6 trillion in savings on the sideline just now,’ she continued.

How does real estate play into the great Covid crisis of 2020? “Residential real estate as a store of wealth has actually improved,” she said. “In fact, we’ve had the strongest residential market on record. Home values are up, and activity is up, which is as a result of a reallocation shock.” Marci went on to say that, “people are permanently changing the way that they live, play and work.”

Marci says that the work-from-home trend is going to be “permanent” based on survey data. This does not mean that everyone will work from home all the time, but it does mean the world of office space is going to have to be reconfigured into floor plates that can support a lot of meetings. Marci points out that these trends were already happening – Covid just accelerated it.

“People will not work from home for forever – nobody wants to work from home all the time,” Marci warned. She says we will have the flexibility to work from anywhere, but when executives call meetings we will have to be in the office – and potentially on our own dime if we are traveling from a long distance away.

It is clear that flexibility in options of where we will work is paramount to knowledge workers in 2021 and beyond. And as anyone in office commercial real estate knows, prices will fall before they rise. Supply and demand are immutable.

This Is Not Even Steven

“This reallocation shock is not evenly distributed across geographies, across income levels, or across sectors,” Marci said. She mentioned that some of the impact on hospitality could be ‘permanent’ as people alter travel habits.

In terms of income, the inequality gap continues to grow. For example, to those who make less than $27,000 a year, the unemployment rate is double digits. However, if you make more than $60,000 a year “the recession was over for you in summer.” Marci is a big believer the future government stimulus need to be much more targeted to those in real need.

Here’s Hoping

Cities like Atlanta are looking good compared to “densely packed, dangerous and expensive locals elsewhere in the U.S.,” said Marci. She said this is based on early anecdotal data, but looks increasingly to be valid,

Plus, the U.S. Senate race put all eyes on Georgia. “If you believe all press is good press, then Atlanta could benefit disproportionately,” she said. I would also point out that sweet tea and grits are still delicacies on the world stage.

“I’ve been speaking to you in Atlanta since 2008 – the start of the last downturn,” said Marci. “We’ve been through this before. I’m on my third president with you guys!”

“I know the next 5-6 months are going to be tough for all of us, but I’m looking forward to a resolution…to a 4th of July fireworks recovery!” “You have a tremendous amount of pent up demand and huge savings on the sidelines!,” said Marci.

Indeed. Here’s to amazing pyrotechnics in July and an in-person economic forecast in 2022 and beyond! I hope we can do better than fist bumps and Zoom meetings in the very near future. Pass the sweet tea, please?

January 25, 2021

Power Reads: 5 Interesting Articles That Will Help You This Week

January 25, 2021/ Ken Ashley

Each week, I select a few articles that rise above the fray and hopefully help you on your journey in leadership and the CRE world. They pull from one of four "corners": corporate real estate, technology, management science and anything positive. Each day we can become a better version of ourselves.

1. 4 Predictions For Atlanta CRE In 2021

One major effect of the coronavirus pandemic has been to freeze C-suite's real estate decision-making process, especially as their employees have shown how well they can work from home.

If a company's office lease was expiring last year, executives likely just signed short-term renewals to delay a more serious decision, Cushman & Wakefield Executive Director Ken Ashley said. That means office brokers will be busy during the second half of this year and into 2022.

“Tenant reps will have a smile on their faces in the second half of '21, because transaction activity is likely to increase,” Ashley said. “Today, executives are making the smallest decision possible, which means in real estate terms, they're extending leases for a year or 18 months. When you have thousands of executives doing the same thing, eventually the chickens are going to come home to roost.”

2. Landlords Preparing For Tenants' Return By Activating The Streets And Adding Green Spaces

As more people begin planning for a return to the downtown, some developers envision transforming the market with more outdoor spaces, permanent changes that will give workers and residents a feeling of security in a post-COVID world. Vaccines may curtail the virus’s spread, but worries about disease could persist, and properties with outdoor green spaces may have an advantage.

“We have to keep moving forward and prepare for a post-COVID world,” Peppercorn Capital owner and founder Phil Denny said.

His firm, which owns a large number of properties across the West Loop and Fulton Market, will take advantage of a vacancy at its 80K SF 240 North Ashland Ave. in West Fulton Market and transform its west side, adding green space and a new tenant entrance. Denny said 601W Cos.’ transformation of the Old Main Post Office’s rooftop into an amenity-rich green space is his inspiration.

3. Take Your Lunch Break!

In 2019, I was invited to share what I would consider a life well-lived. While 2019 looked considerably different than 2020, upon reflection, my answer remains the same:

“I’d consider my life well-lived if I took time to eat lunch during the workday almost every day. This means not at my desk, not in a meeting or while working, but connecting with someone, or even myself, while I eat mindfully.”
I’m committing to doubling down on this in 2021.

Remote working has made it nearly impossible to keep a commitment I try to stick to: to step away from work to eat lunch or go for a walk in the middle of the day. As we try to make sense of the painful year that just passed and plan for 2021 and the new normal at work, I’d like to add: let’s normalize a proper, generous lunch break — both in the remote work environment and especially when we return to any sort of regular, in-person office environment.

4. Workers will be lured back to the office, says Brookfield chief

As for office life, he argued for the importance of water-cooler conversations and their role in building a strong culture.

“In business and life there are always problems and having a personal connection with others helps you work through those situations. That’s why office spaces are important,” said Mr Flatt.

Brookfield Asset Management has been back in its New York office since June, and even took on another floor and a half because, pre-pandemic, a third of its staff would have been travelling on business. Three-quarters of the 750 New York-based staff are now working in the office, with vulnerable workers staying at home until vaccinations are available, said Mr Flatt.

5. How supply chains adjusted demand forecasts during the pandemic

"In normal conditions, the demand for some of these products and services is relatively non-volatile and, as a result, does not exhibit complex patterns," the team wrote in recent research published in the European Journal of Operational Research. "It is, thus, not very difficult to forecast. This is especially so for products in more mature markets such as pasta, rice, toiletries. However, during a pandemic, we expect the purchasing behaviors will become significantly more volatile because of consumer biases on the potential for scarcity."

The researchers used regression to look at the relationship between case numbers and a term's Google Trends index. For looking at the impact of a lockdown, they added a binary variable that is either a 1 or 0, depending on if a location was locked down or not.

The result was that the "models rightly predicted the panic buying effect and respective excess demand for groceries and electronics during the current wave of COVID-19," the researchers concluded.

Dan Mitchell, the director of global retail and CPG at SAS, said the analytics company also began adding Google Trends data to its models along with figures on COVID-19 case numbers and lockdowns.

Your success blesses others. I wish you a great a hugely impactful week!

January 19, 2021

Power Reads: 5 Interesting Articles That Will Help You This Week

January 19, 2021/ Ken Ashley

1. 300 Months

I was about to turn 28 years old and I was in a hurry to get home. I jumped in my car and pointed north towards our small town. I had to tell my Karen the good news.

After talking to 13 different commercial real estate firms over a series of months, I’d gotten an offer from the only one I REALLY wanted to join: Cushman & Wakefield. I was elated and bursting with pride.

Karen and I had dinner in our very small house in a suburb of Atlanta. She didn’t know my news, but I was positively giddy, so she knew something was up.

2. Atlanta's Tallest Tower in a Decade, Future Home of Google, Marks City's Tech Transformation

Selig Development has reached a construction milestone for the tallest office tower built in Atlanta since the Great Recession, a site where Google plans major operations. It's also notable for the city, symbolizing Atlanta's emergence as a technology center.

Construction workers topped out — or placed the final beam on — the office tower's external structure at the $530 million 1105 West Peachtree mixed-use project that includes a 64-unit luxury condominium building known as 40 West 12th and the Epicurean Atlanta hotel. The 31-story office tower stands at 434 feet tall, according to a spokeswoman for Selig, part of Selig Enterprises.

Selig started construction on 1105 West Peachtree at the beginning of 2019, a year before the Centers for Disease Control and Prevention confirmed the first case of coronavirus in the United States. At the time, demand for office space in midtown Atlanta was surging because the district’s proximity to the Georgia Institute of Technology, cultural amenities and transit accessibility made it the top choice for technology firms in Atlanta and large companies setting up major operations and innovation centers in the city.

3. Bank Economists See Brighter Days Ahead

While the American Bankers Association’s Economic Advisory Committee expects the economy to decelerate in this quarter, it says there are brighter days ahead.

The committee predicts that the US economy will grow at about 4% over the four quarters of 2021, which will be the most robust growth in nearly two decades.

As mass vaccinations across the nation bring many consumers back to stores, restaurants, movie theaters and travel, the committee members agree that the economic outlook will brighten considerably.

Additionally, the committee expects $900 billion of additional federal support to bolster the recovery. The new Congress could provide another shot in the arm for the economy with another stimulus package.

4. Atlanta Fed chief sees economic rebound with vaccine in summer

Just as the coronavirus took only a short time to ransack the economy, rapid distribution of vaccines could spark the start of a strong recovery by summer, according to the president of the Atlanta Federal Reserve Bank.

But don’t expect a rush by the Fed to lift interest rates any time soon.

In a wide-ranging interview with The Atlanta Journal-Constitution, Raphael Bostic said uncertainty is restraining businesses now. But the attitudes of companies and consumers alike are being shaped by the pandemic, so as effective vaccines are distributed, spending will pick up, he predicted.

“I think the economy will respond pretty strongly, and we’ll see a strong rebound,” Bostic said. “Right now, my team and I, our models project that will start more robustly in the summertime.”

5. The Metrics You Should Be Watching in 2021

When the Bureau of Labor Statistics (BLS) publishes its monthly jobs numbers, the world takes notice. Markets move and politicians tweet. But for commercial real estate professionals, K.C. Conway, chief economist for CCIM Institute, thinks there are more insightful indicators that, taken together, would provide a better understanding of what’s ahead for the CRE industry.

First, he suggests focusing on two forward-looking employment reports that precede the monthly BLS jobs report: ADP’s National Employment Report and Challenger, Gray & Christmas’s monthly job cuts report. ADP foretells what is happening with private employers, whereas the Challenger, Gray & Christmas numbers provide insight as to where the size of the workforce of private employers is headed ― and the subsequent demand for CRE space. “CRE rents and occupancy rates rise and fall on what happens with employment,” notes Conway.

But those aren’t the only places industry professionals should be looking for information on what promises to be a turbulent 2021. Conway suggests following transportation metrics such as airline passenger counts from the Transportation Security Administration and rail traffic from the American Association of Railroads. As goes the business traveler and intermodal rail traffic, so goes the travel and leisure industry and supply chain, an area that impacts consumers, retailers, manufacturers, and logistics infrastructure alike.

Your success blesses others. I wish you a great a hugely impactful week!

January 13, 2021

300 Months

January 13, 2021/ Ken Ashley

I was about to turn 28 years old and I was in a hurry to get home. I jumped in my car and pointed north towards our small town. I had to tell my Karen the good news.

After talking to 13 different commercial real estate firms over a series of months, I’d gotten an offer from the only one I REALLY wanted to join: Cushman & Wakefield. I was elated and bursting with pride.

Karen and I had dinner in our very small house in a suburb of Atlanta. She didn’t know my news, but I was positively giddy, so she knew something was up.

Over spaghetti and meatballs, I told her all about it. In great detail. Cushman & Wakefield was going to be our big break. I was going to slay dragons and we were going to make it big.

There was one issue, though: I was to work 100% at risk in a commission only environment. There was no limit to my upside, but my earnings downside was…zero.

Even though they offered, I never wanted a “draw” (a loan, essentially) and I was prepared for the risk. We had no kids and Karen had a good job at EY. In those days, there was no real training program at C&W, but I had a degree in sales and sales management. However, any way you sliced it, the risk was extraordinary.

Suddenly, as I was slurping noodles, Karen held up her hands. After 30 minutes of me talking she had heard enough and she had something to say. I thought she was going to talk about the social plans for the weekend.

Her mouth was tight, but her eyes sparkled and she looked right into my eyes. She finally spit is out…“I’m pregnant!” I was happy and terrified in the same moment. “Uh, that’s great!” I said with true enthusiasm but I felt a pang in the pit of my stomach.

I knew I had nine months to make it. Or not. In the business of commercial real estate.

The In Between

After the Great Revelation of Karen’s pregnancy, I called a number of friends to ask for help with side jobs. I started valeting cars the very next weekend, working till 2 AM on Friday and 4 AM on Saturday. I managed property on the side for a few owners. I joined the local fire department, and after training, worked shifts part time for pay. I would basically do anything legal to build up our cash reserves. Babies are expensive, afterall.

Meanwhile at work, things weren’t going so well. I was cold calling my brains out in a gritty industrial area of Atlanta, but I couldn’t hit a lick. I had been selling things since I was in second grade, and I was good at it. But it is immensely hard to talk to a decision maker and build trust when you are so young and still learning about your chosen field. I can clearly remember the dual fear of not making any meetings but also the concern of what to say if a decision maker picked up the phone.

I’ve never been so depressed in my life. The rejection was omnipresent, and I couldn’t sleep at night. Every morning, I stared at myself in the mirror and wondered what the hell I’d gotten myself into. And I thought about my wife and unborn baby and the requirement that I perform to take care of them. The responsibility and pressure to succeed was overwhelming.

I Quit

After eight and half months without a penny of income, I had had enough. I was going to quit.

It was Friday and I marched into my manager Mike Elting’s office. I told him all my troubles and he listened carefully. At the end of my speech he took office his glasses and paused. He looked directly at me and quietly said, “Bring me your deal sheet.”

I ran to my cube and grabbed the document. I handed it to him, panting. Mike looked at it and finally looked up at me. ”Hmmmm, he said, you have some potential here.”

Then he asked me a strange question. “Ken, do you know what sunk cost is?” I stammered, ”Sure, we studied that in Econ, but what does that have to do with this situation?”

“You’ve spent nearly nine months of your life here making no income. How long would it take you to make this back in a regular salary job and what would your salary be?”

I took a guess and we did the math together. It would take four-and-a-half years to make back the past eight-and-a-half months of “at risk” comp IF I could get other employment - immediately.

Mike gently said, “Why don’t you stay around a little longer and see if you can be successful?”

Surprise!

I thought about my conversation with Mike for a long time. i sat in my car in the garage and debated the issue in my head. I didn’t realize it at the time, but this was literally a life changing decision either way. Finally, I cranked up my car and headed home.

The next morning after a very restless night of sleep, I had made a decision. I took Mike’s advice for two reasons. One, his confidence in me meant everything. I can’t tell you how important a few supporting words from a senior person are in the life of a young broker. Mike is a great listener and a leader that just makes you feel good when you are around him.

Second, I played out a conversation in my head. I’d have to tell my father that I had quit and that I was a failure. I simply couldn’t bring myself to do so no matter the risk to my income. My dad’s opinion of me was paramount. I would park even more cars and find more jobs. That morning, I looked at myself in the mirror with a new resolve. I AM GOING TO MAKE IT I said out loud. I hit the road to the office with a new resolve and a commitment like I’ve never felt before in my life.

About two weeks later I got a call I hadn’t been expecting: a deal was moving ahead! I felt like parading around the office and I wanted to cheer as if the Georgia Bulldogs had scored a touchdown. Instead, I shouted under my breath and pumped my fist in the air. The day the deal made is still one of the better days of my life.

Karen was elated too. She wanted her man to make it, and I could see the relief in her eyes as I experienced my very first success in commercial real estate. I had my confidence back!

Karen and I talked about the money from the surprise deal. We had lots of needs but one was more important than all others. I took some of the commission dollars from my first deal and went to an estate sale the next weekend.

We used the money to buy the four-poster bed we sleep in to this very day. Real estate at first caused me to sleep poorly, but in the wink of an eye, I was sleeping like a baby!

300 Months Later

Well, I’ve been at Cushman & Wakefield for 25 years this month - 300 months. Our dreams DID come true; I’ve been blessed with great clients and teammates. We’ve done OK, Karen and I. We ended up having four great kids and still love each other very much. Our oldest son Jonathan got engaged to be married recently, which of course we are thrilled about. Yes, the same child that Karen mentioned in our “real estate spaghetti” dinner.

And I still feel that desire to continue to succeed, but it's much more about winning to support my team and those around me. The bottom line is I wake up unemployed every morning and it’s up to me to do the right things on the path to winning and executing for our clients.

In the evening, as I make my way to bed and look at the beautiful four posts we bought with my first commission dollars, I think about the impact we all can have on others in ways we may not realize. Mike Elting will always be a hero to me. His clutch advice and quiet confidence in me saved my real estate career. But there are many others that helped me along the way and for that I am so grateful.

Now it is my turn to help others. I frequently take calls with young people who are trying to get started or are new in the business. Reaching back down the ladder is a sacred obligation.

And to clear the record, the modern-day training and support at Cushman & Wakefield is industry leading. I take great pride in my company’s top position in our industry regarding the careers of young people. I know our young brokers absolutely know what to say when the decision maker takes their call.

Oh, and one more thing. Marrying well is so critical for life success. I love my wife with all my heart and her support thousands of times in our marriage has made all the difference. Growing old(er) together has been one of the greatest things to happen to me.

It’s been a great run and I look forward to many more years of real estate, gray hair, and all. And I now fully understand in Technicolor the concept of sunk cost; thanks Mike!

But I also now know the return on investment for a calculated risk + hardwork + a strong dose of mentorship. That equals 25 wonderful years at C&W, an amazing family and a pretty terrific bed.

January 11, 2021

Power Reads: 5 Interesting Articles That Will Help You This Week

January 11, 2021/ Ken Ashley

1. Finding Answers To The Future Of Remote And Office Work

I work as an office tenant representative broker. Yes, I make my living when people lease office space. Lately, people have had sympathy in their voices as they delicately ask, “How is your business?” The next question is usually, “What do you think the future of the office will be?”

The answer to the first question is that business is way down as we make our way through the fourth quarter of 2020. Executives have a fear of (long-term) commitments. I'm witnessing companies signing short-term renewals when they can and dumping space via sublease or lease buyouts at a frantic pace. Executives are wisely making the smallest decision possible with all the uncertainty afoot. I don’t blame them a bit – they need to be wise stewards of corporate resources. My job is a little lonely just now.

But what about the second question, regarding the future of the office?

One way to look at a problem is to look at the opposite reality and conceptualize the issue from a reverse approach. In this case, this means looking at the opposing reality of everyone in the world will work from home forever.

2. The Future of Offices When Workers Have a Choice

Coronavirus will not kill the office. If anything, it figures to be more dynamic than ever. The ability to work remotely will not drive most people away from cities and offices, but it will enable many to live and work in new ways and places — while causing its fair share of disruption.

Even before the pandemic, there were signs of trouble with the office market in the handful of cities where the “creative class” had been flocking. In 2018, net migration to New York, Los Angeles and San Francisco was negative, while the U.S. economy grew at a healthy 2.9 percent. Creative magnets like London and Paris were experiencing similar declines.

The explanation for the declines — mostly high housing costs because of severe limits on new construction — obscures other forces that were destabilizing the traditional office market. In the middle of the 2010s, Amazon, Facebook, Google, Apple and others started splitting their headquarters into multiple locations.

3. Office Landlords Will Be Squeezed by Secondhand Market

Scratch the surface though and these markets are becoming tougher for landlords. Few businesses will commit to a new lease until they understand how remote working will change their real estate needs, so competition for tenants is intensifying. Any company that is willing to sign a 10-year lease in central London today can get up to 28 months rent-free, compared with the 24 months on offer before the pandemic.

Landlords’ next challenge will come from tenants that are beginning to unload space they no longer want. Although companies cannot break leases without reputational damage, they are able to sublease all or part of their offices—an option that both Twitter and Airbnb have used recently.

Rents typically begin to fall when this secondhand supply reaches 30% of total office vacancy, according to property experts at Green Street. Sublet offices are offered at a discount, pressuring landlords to slash rents in the primary market. Subleasing activity is already at this 30% threshold in San Francisco, numbers cited by Green Street show, while tenant-controlled space on offer in Austin, Texas, and Seattle is more than double the rate both cities recorded at the peak of the global financial crisis. So-called grey space is approaching one-fifth of vacant supply in Manhattan.

4. 2020 Was The Manhattan Office Market's Worst Year This Century

Manhattan saw its slowest year for leasing since the start of the 21st century, with just 20.5M SF leased in all of 2020, according to Savills. While some hold out hope that the widespread distribution of the COVID-19 vaccine will usher in a recovery in 2021, what that will look like is still largely uncertain.

“We feel like we are limping off stage,” SquareFoot President Michael Colacino said. "That’s how [2020] feels to me."

While leasing volume increased nearly 50% between Q2 and Q3, it took a hit in the last three months of the year, decreasing 13.4% from Q3, according to Colliers International.

5. These Tech Companies Are Paying Workers the Same Rates Across U.S.

Tech workers and employers alike are beginning to question location-focused pay scales. A handful of companies are moving to abandon them altogether.

In setting pay without regard for location, tech companies including Reddit Inc. and Zillow Group Inc. are making a potentially expensive gamble to retain talent and gain a hiring edge. The move can entail maintaining relatively high salaries of employees who are relocating, and adopting a revised scale for new hires. Though it is early, the move challenges a long-held, but not universal, notion that where people live should determine what they make.

Some big tech firms including Facebook Inc. were clear early on in the pandemic that people moving away from the Bay Area to less expensive cities would see a pay cut. Payment platform Stripe Inc. offered one-time bonuses for workers who moved out of San Francisco, Seattle or New York—and agreed to a pay cut of up to 10%.

Your success blesses others. I wish you a great a hugely impactful week!

December 11, 2020

The TI Conundrum

December 11, 2020/ Ken Ashley

The modern workplace is expensive to build. Technology alone can add millions of dollars in cost to an office buildout. Even though construction costs have pulled back since the pandemic began, costs to build the sticks and bricks in an office are near historic highs.

The Grand Bargain

Landlords are willing to make a great tradeoff: if the landlord gets near his or her asking rental rate, then ownership is often willing to ladle in huge concessions in the form of free rent and something called a tenant improvement allowance (TI).

TI allows end users to go a long way towards building handsome spaces with the latest technology with little to no “out of pocket” cost. Fold in the free rent and sometimes, in strong credit situations, the building owner will agree to “turnkey” that bougie office space at no out of pocket cost to the tenant.

And so it went. The landlord gets higher face rates on the building with long term credit tenants. All this equals huge value for ownership and allows advantageous refinance or sale options.

FOT

Now that 2020 has happened and executives are wisely being very cautious with capital, there is a strong sense of a “Fear of Term.” FOT means many companies are trying to either (a) dump space in any way possible, or (b) commit to the shortest term possible.

“Let’s see if we get a little paint for an 18-month term extension,” an executive told me recently. “Oh, and see if you can get the landlord to take back all the space on 22, while you are at it.”

His Needs Her Needs

In 2019 and for many years prior, the Grand Bargain between landlords and tenants worked. Now that corporate America is being understandably cautious stewards of company resources, something will have to change.

I’ll not extensively debate here the need for office space in 2021 and beyond as we have seen ad nauseum, the argument about how much office space we will need going forward is raging now. I fully believe most companies will find the pendulum always swings in the office space demand game. It’s swung VERY hard one way now, but it will swing back once we settle down from our health crisis.

But what are corporate executives to do once they have clarity on the other side Covid 19? If they are only willing to commit to extremely short terms, they will confront some pretty extensive tradeoffs and very high costs. I tell people that committing to very short terms is the real estate equivalent of eating out at every meal. It’s easy and delicious but pretty hard on the bank account.

Approaches

Let’s assume we are post COVID-19 and also further assume you are in the majority of American companies that WILL come back to some level of office use. You have some options in your decision making for near term lease expiration dates.

Of course, you can kick the can down the road and extend in place for 18 months. But that old space may not work (too dense) or it could now be in the wrong location to attract and retain the best talent.

So what if you need to locate into a new space?

First, the end user can write the check themselves for build-outs. However, it’s somewhat counter intuitive to commit to a 24-month lease and spend millions of corporate capital required to make the space look and feel right.

Second, executives can work with their broker to negotiate termination options. Companies are much more likely to be successful in markets like San Francisco, Los Angeles and New York given the obvious shift in leverage to tenants. Be aware that a termination option kills value as investors will only recognize the lease term up until the termination date. Also, termination options can have nasty fees attached if they are deployed.

Third, corporates could examine a serviced office approach. Flex work providers like WeWork would be happy to talk about “enterprise” solutions. Many landlords are developing their own “white label” flex work options as well. Translation? You can take occupancy of fully furnished office space with a very short term of say six, 12 or 18 months. These are great options with two drawbacks: you will have to take the space largely as is, and the monthly cost will be well above the traditional real estate market rates.

Finally, in 2021, wily executives can stare deep into their crystal ball. They can evaluate business risk based on their years of experience. They can order their brokers to maximize leverage and know that for the vast majority of corporate America, the need for office space is not going away. Then they can take advantage of the office market equivalent of a Black Friday sale…and commit to medium term (five to seven year or even a 10-year look with flex options).

Given the current sale on office space in many U.S. cities, the results of a reasonable forward commitment will likely be fantastic. Buy low, sell high.

And when and if you do, I bet even your CFO will smile at the results.

December 07, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

December 07, 2020/ Ken Ashley

1. The Very First Office Building In The World

Over 90% of the workforce at the time were agriculture workers. When the remaining 10% of businesspeople, lawyers and military types needed to convene, they had three options. They could meet in the palaces of the ruling elite (stuffy), meet in each other’s homes (kids under foot), or coffee houses (loud).

James needed his leaders to meet and work with breathtaking speed to build the fleet. He faced another very specific challenge with his meetings–security.

Early in 1722, James had a then revolutionary idea. The Royal Navy could build its very own office building. At that time, buildings were built for religion, royalty, residential or retail. This new idea could really shake things up.

On March 5th James presented a proposal to the boss which would start a trend that continues today, nearly 300 years later. He asked for permission to build a three story, U-shaped brick building. It would have private offices for senior military officials and an ornate board room for the most secret of meetings. Thomas Ripley was commissioned as the architect for the project and created a likeness for the boss to see.

2. After Record Online Shopping Spree, 'All Heck Breaks Loose' For Apartment Owners

Black Friday spending jumped 22% year-over-year to $9B, according to Adobe Analytics, and the firm projects American shoppers to spend more than $180B this holiday season. Shipping volume is expected to rise, with upward of 30% of residents receiving packages daily, up 10% from pre-pandemic level, according to Package Concierge.

Even the shipping companies delivering those packages are feeling overwhelmed, as UPS announced Tuesday it would limit shipping volume for large retailers including Nike and Gap to keep up with e-commerce delivery demands, The Wall Street Journal reported.

The wave of cardboard boxes is expected to crash this week as Black Friday and Cyber Monday shipments begin to arrive, and apartment complexes even only a few years old will find themselves without enough places to put the packages, developers said.

3. Reinventing the Leader Selection Process

Addressing a class of West Point cadets in 2011, Secretary of Defense Robert M. Gates asked bluntly, “How can the army break up the institutional concrete—its bureaucratic rigidity in its assignments and promotion processes—in order to retain, challenge, and inspire its best, brightest, and most-battle-tested young officers to lead the service in the future?” The question was, he said, “the greatest challenge facing your army—and frankly, my main worry.”

The secretary’s concern was not ill founded. In a 2009–2010 survey of 22,000 soldiers, 20% said they were serving under a toxic leader. Another survey showed that fewer than 50% of army majors believe the service promotes its best members. (The picture in the corporate world is similarly bleak. In one study, researchers estimated that half of senior executives were failing in their leadership duties. Another found that 16% of managers were toxic and 20% were incompetent.)

In response to such feedback, the army designed an entirely new process for selecting battalion commanders—its first executive-level position, typically attained 17 to 20 years after an officer has joined the service. It chooses approximately 450 a year, each of whom is responsible for the training and development of 500 or so soldiers.

4. Real Estate Shows How Amazon Won 2020

Black Friday shopping mall foot traffic was down 52%, according to Sensormatic Solutions, but online sales were up 22%, data from Adobe Analytics showed. COVID-19 has turbocharged the move toward online retail, and so Amazon’s real estate take-up has also accelerated dramatically.

To zero in on one of its largest markets, where good data exists, Amazon leased 14M SF in the UK this year up to the end of November, according to Savills. That is more than three times its take-up in 2019 and almost twice as much as its previous annual high, the 7.9M SF it leased in 2016.

When it comes to online retail, Amazon is the market as far as real estate is concerned. Savills data showed the company accounted for 82% of all e-commerce leasing in 2020 and 30% of the total logistics markets.

5. Seven Books That Will Change Your Life

I find new revelations of meaning. I skim through their pages and read highlighted paragraphs and sentences that resonated with me during the first pass.

Sometimes, a book crosses our paths when we are not ready to meet it; its message goes right over our heads. This is what happened when I picked up number two on this list the first time I tried to read it, the second, and the third. Not until the fourth time, after my life took a turn, did I understand its wisdom.

The following seven books I revisit at least once a year to keep my noblest impulses alive and remind me of what is essential for living well while amid a world that is chaotic.

Your success blesses others. I wish you a great a hugely impactful week!

December 03, 2020

The Very First Office Building In The World

December 03, 2020/ Ken Ashley

It was March and James Berkeley was under considerable pressure. His boss, George who happened to be the King of England, was upset that both Holland and France seemed to have a better navy. Germany was gaining as well.

It was cheaper to ship goods by water than over land, which had long been known. But King George the First was much more concerned with political power and the ability to grow his empire than shipping costs. The King didn’t just want to rule England, he wanted to dominate the known world.

As Spring approached in that year – 1722 – the King knew he had to get the Navy right for his ambitions to be fulfilled. But he had some disadvantages. The archipelago that is England was rainy, lacked natural resources and was largely irrelevant in world politics.

James was the top Navy guy – the Lord of the Admiralty – and he faced a huge challenge in just communicating with his team. The Royal Navy was growing quickly in terms of people and complexity. James was ramping things up quickly. He had to keep operations running smoothly but also oversee the design and construction of what would become the world’s greatest Navy for nearly 200 years.

Ye Old Starbucks

James needed his leaders to meet and work with breathtaking speed to build the fleet. He faced another very specific challenge with his meetings–security.

Early in 1722, James had a then revolutionary idea. The Royal Navy could build its very own office building. At that time, buildings were built for religion, royalty, residential or retail. This new idea could really shake things up.

Not long after the proposal was presented James got some really good news. The King loved the idea and signed off.

Plans were drawn and a contractor hired. It took a while, but four years later in 1726 a building known with the functional name of “The Admiralty” was delivered.

The portfolio expanded over the years with other buildings being constructed in the same area.

Tally Ho

Great Britain continued to invest heavily in its Navy for centuries to come. Other European fleets rose and fell, but the Royal Navy dominated the world scene with remarkable success for centuries.

James pulled it off after all and his boss was most pleased. Likely a good thing to keep the King happy. Plus, James and the team could meet in the board room and stay out of the King’s palace with all of its hangers on. Loose lips sink ships.

Now known as “The Old Admiralty” building, the original building still exists – including the amazing board room. I guess they built them right back then – both ships and buildings.

James, worried about creating the world’s finest fleet of ships, ending up also commissioning a whole new architectural function that land lubbers would love: the office building.

I did lots of reading in order to tell this story. If you are interested, here are some of my sources:

November 30, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

November 30, 2020/ Ken Ashley

1. Hurricanes and Redwood Trees

It was early September of this year and two hurricanes were about to make landfall at the same time. This has never happened before in recorded history.

And as these storms were doing their damage, amazingly, three other hurricanes formed. We had a total of five storms in the Atlantic and the Gulf. This has also never happened before in recorded history. Welcome to 2020 - We are in Jumanji level 10.

Hurricanes, of course, can cause huge damage. This is true in real life, but it is also true as a metaphor. And hasn't life in 2020 felt like massive storm after massive storm has buffeted us? We had to deal with worried clients and teammates, scared family members, and very concerned children and parents. We have had social unrest, economic crisis and a political firestorm from all sides. Many of us felt like we had to lead when we were scared ourselves. When the entire family - corporate and home -is looking for leadership and you are dealing with your own gremlins, how do you stand in the fore and face down the metaphorical hurricane?

One answer is this: when your root system connects with other root systems, you will be immovable.

2. The Resurrection of the Office Phone Call

TWENTIETH CENTURY FOX/EVERETT COLLECTION

Call it the Goldilocks theory of the pandemic workplace.

Nonstop Zooms and video meetings are too taxing. Emails and Slack hold companies together, but written text can never capture the nuance of human conversation. What’s the answer? The humble phone call.

“A phone call is in many ways the happy medium,” says Marissa Shuffler, associate professor of organizational psychology at Clemson University. “It’s perfect for one-on-one discussions and has just as much richness as a video call, without overwhelming you with visual information.”

3. Silly Sweaters Aside, Workplace Holidays Will Be Different This Year

The holiday season will be much different in 2020, meaning that managers and HR staff need to potentially rethink policies on time off and staff get-togethers in an era of Zoom and working from home.

"It’s still super important for companies to do something in terms of community building and bringing employees together," HealthKick CEO Erika Zauner told HR Dive.

Perhaps the most important move is for leaders to check in with staff more often to gauge their stress, anxiety and mood. Many of the practices established at the beginning of the coronavirus pandemic may have slowly been swept aside, but with a traditionally stressful holiday season being supercharged by the events of this year, and many celebrating without family and loved ones, it’s especially important to open the lines of communication.

4. Here’s Where the Future of Worker Engagement is Heading

The modern workplace has changed irrevocably, but not in the ways we expected. All the same principles and requirements are intact, but the way we go about achieving goals and interacting with one another are evolving.

Interacting with physical spaces (conference rooms, doors, workstations) is still a thing, and it won’t be long before many remote operations fold back into the office, reinvigorating traditional workplace experiences. But that doesn’t necessarily mean things are going back exactly as they were.

Low-touch connectedness is key, with more contextual and yet distanced experiences spread throughout a physical location. To support this type of agility in the workplace – IoT is a desirable way to achieve it.

5. Though Offices Still Sit Largely Empty, Office-Using Jobs Are Returning

Some of the strongest sectors for employment growth nationally in October were the office-using professional and business services, financial activities and information sectors. These industries combined accounted for between a quarter and a third of all jobs added in October, depending on whether the data has been seasonally adjusted. For this job growth update, we took a deeper dive into office-using employment by market.

With so many office workers still operating from home, the notion of office-using employment may seem somewhat anachronistic at this time. However, it’s important to look at these jobs since they typically represent higher-paying professional and technical services positions that help drive demand for high-end multifamily, retail and of course, office space.

Office-using employment is highly correlated with office demand, so any sustained softness in employment for that sector could point to a weaker post-pandemic performance for office properties in a given region.

Nationally, office-using employment fell by 7.8% from February to April, but has increased by about 5.5% since. The sector overall remains down about 2.8% from the February peak.

Your success blesses others. I wish you a great a hugely impactful week!

November 19, 2020

Hurricanes and Redwood Trees

November 19, 2020/ Ken Ashley

This period in 2020 has been painful for so many, in part because we have so little control over what is happening around us. Normally, we are the type of people who are in charge of what is going on. But given the happenings since mid-March, a feeling of victimization and helplessness can quickly spread if we are not careful and vigilant about our emotions.

Which is why I want to share a story with you about some record-breaking storms and some record-breaking sized trees. Yes, storms and trees.

It was early September of this year and two hurricanes were about to make landfall at the same time. This has never happened before in recorded history.

Hurricanes, of course, can cause huge damage. This is true in real life, but it is also true as a metaphor. And hasn't life in 2020 felt like massive storm after massive storm has buffeted us? We had to deal with worried clients and teammates, scared family members, and very concerned children and parents. We have had social unrest, economic crisis and a political firestorm from all sides. Many of us felt like we had to lead when we were scared ourselves. When the entire family - corporate and home -is looking for leadership and you are dealing with your own gremlins, how do you stand in the fore and face down the metaphorical hurricane?

One answer is this: when your root system connects with other root systems, you will be immovable.

Have you had the opportunity to see a Redwood forest? Several years ago, Karen and I toured the Muir Woods national monument near San Francisco. My jaw dropped and I could barely process the beauty and massiveness of the great redwood trees. We walked around and I began thinking back through my world history and remembering things that were happening in the year 1000 or 1200 when these trees were saplings.

Redwoods are the largest trees on earth. Over thousands of years they can grow to incredible heights of 300 feet tall, a total of 30 stories. They can grow to be 30 feet in diameter.

But here's the thing, despite the enormity of their size, redwood roots are very shallow. In fact, a 30-story tree may have roots that are 4-5 feet deep. So how do they weather storms? How does the tallest tree in the world deal with extreme headwinds?

Even though they are tall and big, and despite the shallow root system, the roots grow WIDE. And as they do so, the roots interconnect with other redwoods. And as those connections form, the bond grows tighter and tighter. In fact, those enormous trees are virtually immovable and protected from even the strongest winds.

We are all in this together as a community. You and your friends – in fact all of us have a collective struggle - but we have started joining at our roots. And the more entangled they become the more we become UNSTOPPABLE.

Let's expand at the root level and reinforce our ability to withstand even the strongest storm. And when we do, we will be able to be the leaders so many in our midst need. Your workmates and your family will know they can rely on you. Because you are the tall tree in the forest, connected to many other tall trees.

Strong roots joined together will get us through COVID 19. In fact, joining together will get us through ANYTHING.

Stay strong, grow tall, and join hands with your friends. This is the success strategy for any storm.

Credit to David Walters, Senior Pastor at Alpharetta First Methodist for first sharing these ideas in his sermon. I’m glad to be able to add my personal spin and share with a different audience, David. Thank you.

November 16, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

November 16, 2020/ Ken Ashley

1. Here’s When Experts Say Things Could Get Back To Back To Normal After Coronavirus

While the vast majority of experts agreed widespread immunization— roughly 70% of the population, epidemiologists believe—is the best way to beat the coronavirus pandemic, there’s uncertainty as to when that scale of vaccination can be achieved.

Dr. Anthony Fauci, the top infectious disease official in the U.S., told CNN on Sunday that he sees the country returning to a more normal version of life by between April and July, if “the overwhelming majority of people” elect to be inoculated.

Ugur Sahin, a co-founder of BioNTech, Pfizer’s partner in developing its vaccine candidate, told the BBC’s Andrew Marr Show on Sunday that he believes that things could feel more normal in a year’s time, and thanks to vaccine efforts “we could have a normal winter next year.”

2. The Upside of Your Public Speaking Jitters

Contrary to popular belief, the secret to confident public speaking is not about getting rid of your nerves. The key is to reframe your anxiety as excitement.

Professional performers know that a certain amount of nervousness can be incredibly helpful. It keeps you focused and prompts you to spend your time preparing as opposed to procrastinating. As a former opera singer turned speaker, entrepreneur, and singer/songwriter, I’ve mastered physical and mental techniques that help me center myself and prepare to perform at my best in front of thousands of people. I now coach clients through a pre-speech ritual that includes breath work and visualizations to calm any nerves and get into the right mindset to deliver a presentation with confidence and authenticity.

A few years ago, my team and I led a leadership communication training for a large financial institution. One banking manager in particular was incredibly anxious about public speaking. Despite the fact that she had a warm personality that lent itself well to speaking, the idea scared her to the point of near paralysis.

3. The Coming Evolution in Warehouse Development

As consumers demand faster deliveries, warehouse operators are making investments to keep up.

Already they’re buying technologies like automated storage and retrieval systems. Soon, drones and autonomous vehicles will likely contribute to more efficient and responsive supply chains and greater productivity for industrial assets, according to a new report from NAIOP.

But logistics technology won’t be the only innovative upgrades. According to report authors, Steve Weikal, lecturer, researcher and CRE Tech lead, MIT Real Estate Innovation Lab, and James Robert Scott, lead researcher, MIT Real Estate Innovation Lab, innovative approaches to distribution are driving the adoption of multistory warehouses and micro-distribution centers.

4. Race for Space Pushing Up Suburban Rents

Big companies that own single-family homes are raising rents at the fastest rate since they emerged from last decade’s foreclosure crisis, capitalizing on a rush for suburban housing.

Though millions of Americans are still struggling to pay rent and at risk of eviction, the bet on six-figure-earning suburbanites by companies such as Invitation Homes Inc. and American Homes 4 Rent has so far been pandemic-proof.

Occupancy of the hundreds of thousands of houses collectively owned by these companies is at record highs. Timely payments are in line with historical rates. Tenants are accepting rent increases instead of moving out. New renters hunting for home offices and outdoor space are paying up to move in.

5. This U.S. Region Will Pay You $10,000 To Move There (And Give You A Bike, Too)

These days, it’s not just about making a fresh start. By making a big move, you might be able to get rich at the same time. Northwest Arkansas has just announced that it will pay new residents $10,000 to move to an area that is known as one of the best places to live in America, thanks to its low cost of living, outdoor activities, world-class arts institutions and a per-capita income that’s 14% higher than the national average. It’s similar to programs created by a village in Italy, the city of Tulsa, Oklahoma and the state of Vermont, which have all made headlines by offering to pay people to move there.

The latest get-rich-quick scheme has been created by the Northwest Arkansas Council, which is investing in a plan to lure new residents. The council hasn’t revealed how many applicants it will accept, but it is putting more more than $1 million toward the Life Works Here initiative.

In addition to the $10,000 stipend, the perks will include a street or mountain bike so that new residents can explore the area’s 162 miles of paved trails and 322 miles of mountain biking trails, not to mention the Ozark Mountains. Not into biking? You can choose an annual membership to one of the local cultural institutions like the Crystal Bridges Museum of American Art, which was started by Walmart heir Alice Walton, America’s richest art collector.

Your success blesses others. I wish you a great a hugely impactful week!

November 09, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

November 09, 2020/ Ken Ashley

1. My First Cold Call

I kept driving past the Dooley’s and soon pulled into the parking lot of a nearby strip mall. My breathing started to get elevated and my palms a little moist as I realized what I must do. I had to knock on Coach Vince Dooley's door and ask for his help.

I was going to make my first cold call.
Vince Dooley was a man I had never met in person and to say that he was a hero in the State of Georgia is an understatement. I might as well be knocking on the front door of the White House. The stakes were huge, and I had no backup plan.

I summoned all the courage I could muster and put the car in gear. I pointed the Bonneville back towards the Dooley estate and soon pulled into the driveway and walked up to the door. My heart was beating quickly as I rang the doorbell.

2. Why The Global Economy Is Recovering Faster Than Expected

The economic impact of coronavirus continues to surprise. In the spring, previously unimaginable shutdowns pushed economic activity to unimaginable lows. After the initial shock, however, perhaps the biggest surprise has been how fears of systemic meltdown remain unfulfilled — the initial bounce back was far stronger and sooner than expected, and some sectors of the U.S. and other economies have seen complete recoveries to pre-crisis levels of activity.

While the stronger-than-expected recovery aligns with the business experience of many leaders we speak with, they still wonder what drove the gap between expectations and reality — and whether it can last. To answer these questions, we need to look at various recession types and their drivers, how Covid-19 fits in, and what this cycle’s idiosyncrasies are.

As the coronavirus forced the economy into shutdown, a brutal economic contraction unfolded, breaking many (negative) records in the process. Yet, the sustained impact was broadly overestimated — both systemically and cyclically — as the intensity of the shock fueled widespread economic pessimism.

3. Coworking making a comeback amid work from home fatigue

According to the latest Coworking Market Report, the coworking spaces industry is expected to shrink from $9.27 billion in 2019 to $8.24 billion in 2020 due to the covid-19 pandemic. However, recent developments seem to suggest the worst may be over for the industry.

The big news in coworking this month is all about the surge in memberships coworking operator WeWork experienced in September.
A WeWork spokesperson reported that they sold 13 times more All Access passes in September than they did in August. They’re also seeing four times more single desk bookings.

WeWork and other coworking companies are taking advantage of this renewed interest in shared spaces.

4. Why Workplace?

Throughout the COVID-19 pandemic, business press headlines have declared a range of impacts on the workplace, from the end of the office as we know it to the absolute necessity of in-person workplaces like never before.

Looking to industry itself reveals similarly divergent responses. As just one stark example, Facebook presents the seeming paradox of committing to remote work as a permanent option for its employees while simultaneously doubling down on millions of square feet of new prestige office space on Manhattan’s West Side. How can we reconcile such extreme contradictions?

We believe it comes down to “why.” Why do we go to the office, and why is the communal workplace important?

To understand how executives in our networks are thinking about this issue, we have hosted a series of roundtables.

5. Come for the Desk, Stay for the Pool

With the coronavirus pandemic relentlessly pounding the travel industry, major hotel operators such as Marriott International Inc., Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. are dipping their toes into the personal-office business. With many people growing bored of working in isolation at home but unable or reluctant to return to their workplace, hotel rooms offer a change of scenery, a quiet setting and regularly sanitized public spaces.

Some hotels are promoting day passes at reduced rates while others offer longer-term packages for seven days or more that waive resort fees or include a complimentary second room for guests’ children.

“The long-term trend of how we fill hotels will likely shift,” said Peggy Fang Roe, global officer of customer experience at Marriott. “We’re seeing increasing leisure travelers, but it’s not 365 days and it’s not going to fill all of our hotels.”

Your success blesses others. I wish you a great a hugely impactful week!

November 06, 2020

My First Cold Call

November 06, 2020/ Ken Ashley

One Saturday morning, I was driving around Athens, Georgia. I was behind the wheel of my trusty hand me down 1984 Pontiac Bonneville. My mind wandered thinking about my plans for…a wedding engagement.

Karen was the girl of my dreams; smart, breathtakingly beautiful and she laughed at my jokes. Really the perfect combination. She is the smartest woman I had ever met except that she would hopefully marry me.

The question of "how" occupied my thoughts for days. As you can imagine, I wanted it to be special and memorable, but also not a copycat kind of approach. And in the dark days before YouTube, Twitter and Facebook, ideas were a lot harder to come by.

Athens is home to the University of Georgia and the Bulldogs. Karen and I were both in the Redcoat Band; she in the flag line and I was a brass player. We loved everything about the Redcoats and Georgia Football.

Football in the south is nearly a religion and the spiritual leader is the head coach. In those days, the great Vince Dooley had the helm. He now has the field at the stadium named after him.

My Bonneville happened to take me by Coach Dooley's house (everyone in town knew where he lived). I slowed a little to look up the hill at the Coach's impressive looking estate. Then a flash popped into my mind with searing clarity...what if I could ask Karen the big question on the 50-yard line of the UGA football stadium? THAT, would be the ticket!

I kept driving past the Dooley’s and soon pulled into the parking lot of a nearby strip mall. My mind raced with thoughts about Karen. My breathing started to get elevated and my palms a little moist as I realized what I must do. I had to knock on Coach Vince Dooley's door and ask for his help.

I was going to make my first cold call.

Vince Dooley was a man I had never met in person and to say that he was a hero in the State of Georgia is an understatement. I might as well be knocking on the front door of the White House. The stakes were huge, and I had no backup plan.

Coach Dooley's wife Barbara answered. She was famous too and almost as widely known as the Coach. She looked at me with some suspicion; a lanky college kid likely up to no good. "Can I help you?," she said. "Mam, can I please speak with the Coach?" I muttered. She paused, and after a moment of evaluating the situation opened the door. "Come on in." She said skeptically.

Just like that, I was walking down the hall of Coach Dooley's home. From idea to reality in 15 minutes.

I remember every detail of the walk in the house. The walls were lined with pictures of the Dooley’s with all manner of major celebrities. The walls were half beadboard and the floors hardwood. Finally, we reached the den where the great man was sitting. Coach Dooley was wearing Khaki pants and a white tee shirt and sitting in an easy chair. He was, of course, watching a ball game with reading glasses on his forehead.

After a short intro from his wife, the Coach looked at me and said, "Son, how can I help you?" I managed to spit out, "Coach, can I borrow the stadium?"

He looked a little puzzled, made a funny face and said, "You're gonna have to tell me a little more than that." I smiled a slightly embarrassed and nervous smile and told him about Karen. We were both in the Redcoat band, I explained. I am second generation UGA and had attended football games since I was 3 years old. We love the university and I love her…one big Bulldog love milkshake.

"So, let me get this straight, you want to use the football stadium to get engaged?"

"Uh, yes sir," I said. "Well, that's a first," said the Coach. He went on to say, rubbing his chin. Finally, he looked me right in the eyes and said "you can't do it during a game, of course, but I'll allow it when the venue is empty." I beamed.

He wrote down a number and said, "Call Tony on Monday and he will get things set up." I wanted to hug the man. He was very friendly and sympathetic but ready to get back to his Saturday. I thanked him profusely and retreated.

A Marriage Made In Between The Hedges

Tony was on top of it and soon we had a plan. I would take Karen to dinner the following week - on Sunday, May 12th, 1991. The University Police were tasked with unlocking the normally highly secured stadium. They would not only leave the gate "false locked" but turn off the fabled laser field alarms.

I met Karen for dinner at DePalmas Italian Cafe - it is still in business! Karen later said she could tell something was up because I didn't finish my meal.

After dinner, I suggested a stroll through campus on a beautiful spring evening. We talked about how we met and how our relationship had grown. We talked about our hopes and our dreams. My stomach churned as we got closer to the hallowed hall of UGA football.

Finally, we made it to the stadium. I tried the gate and, well, it opened! Karen was horrified. My second major sales job was to convince my law-abiding girlfriend to break the law. Finally, after some cajoling, we walked in. The stadium was grand and magical at night. The stillness of the evening was a counterbalance to my beating heart.

As we made it to the field and those supposed alarms, I had to again convince her that we were OK. I grabbed both her hands and looked right into her eyes. "Do you trust me?" I said. She slowly nodded yes, and we stepped on the field.

I'll remember the next two minutes for the rest of my life. We strolled down the field and I wanted to clap my heals like a happy Irishman. As we approached the 50-yard line I spotted the goods. A single red rose with an engagement ring on it. The person who was to be my best man was part of the advance team that placed the set up ahead of our arrival.

"Well, what is this? " I asked Karen. She spotted the items and quickly processed the situation. A tear formed in her eye. I knelt on one knee and asked for her hand in marriage.

"YES!" she said, and the deal was sealed. My world was rocked, and I felt at the same time great relief and tremendous excitement.

And then we heard a ROAR. A number of our friends who were previously snuck in and hidden in the upper deck of the stadium jumped up like cheerleaders after a big play. I felt like spiking the ball and yelling, "Touchdown!"

Now, four wonderful kids and nearly 28 years later I think of this special few days with warm remembrance. Life has been kind to Karen and me and all these years later we still love each other very much. We’ve lived a wonderful life together and have some quarters yet to go.

But I'm also reminded that taking measured risk - social and otherwise can pay big dividends. Forcing yourself to deal with stretching your comfort zone can open new doors in life. Crossing the threshold of the Dooley household was temporarily discomforting, but ultimately life changing in multiple ways.

Sometimes young people in my business ask, "Does cold calling still work?

My friends, a wonderful marriage, four kids and two pugs are all living proof that the answer is YES!

November 02, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

November 02, 2020/ Ken Ashley

1. Inside Amazon’s quest to use less cardboard

Inside an Amazon warehouse, when an order gets ready to ship, a worker doesn’t just make a decision about what package seems best. Instead, a suite of machine-learning tools analyze the combination of items that are shipping and choose the size and type of packaging—or whether a box is needed at all—as part of the company’s ongoing quest to shrink its giant packaging footprint.

The company won’t share how much cardboard it uses in a year, though as the world’s largest online retailer, the number is huge. One recent analyst estimate suggests that Amazon shipped 415 million packages in the month of July, for example.

But the company says that over the last five years, it has managed to reduce the amount of packaging used per shipment by roughly a third, eliminating 915,000 tons of packaging material, or the equivalent of 1.6 billion boxes that it would have otherwise used. In the last two years, its software has allowed the company to avoid shipping more than 500,000 tons of waste.

2. Mentoring During a Crisis

Shortly after September 11, 2001, I (David) stood in the cafeteria line at work, anxieties still swirling in my mind. I happened to see one of my mentors, a senior member of our department; after we exchanged hellos, our conversation quickly turned to current events. I remember he said two simple – yet powerful – words: “It’s scary.” Almost instantly, my fears began to settle, replaced by a sense of connection. Knowing I wasn’t alone made a difference.

From our combined ~50 years of experience mentoring healthcare professionals before the Covid crisis, and now during it, we’ve learned just how important mentors can be—especially for those on the front lines. For months, doctors, nurses, grocery store workers, postal carriers, and many others have been navigating physical danger, complexity, and uncertainty, with no end in sight. Now more than ever they need emotional support.

But they can’t always turn to their managers, who may be consumed with solving problems and overwhelmed with keeping their organizations running. Workers may also fear that managers, who hold the key to future advancement, may view a request for help as a weakness. Thus you as a mentor can play a critical role, providing them with a stabilizing force, someone who can help talk them down when they’re triggered, scared, burned out, or confused—all off the record.

3. Increasing Demand for Cold Storage Spurs Spec Projects, Institutional Investment

Online grocery sales represented just 3.9 percent of all grocery dollars spent at the end of 2019. By May 2020 that figure had increased significantly, says Kroner. He predicts that in response to rising demand, grocery chains’ supply-chain infrastructure will evolve, mirroring many of the lessons e-commerce direct-to-consumer, supply-chain models have developed since 2010. These lessons include establishing separate facilities for merchandise going to physical stores and those operating as e-commerce fulfillment centers. This will have a significant upward impact on demand for cold storage space, Kroner says.

Long before the pandemic arrived at U.S. shores, in May 2019, real estate services firm CBRE estimated that the number of consumers buying packaged food items online would rise from about 50 percent to 70 percent, creating demand for an additional 75 to 100 million sq. ft. of cold storage space over the following five years.

That estimate did not reflect the current surge in online grocery sales, nor did it take into account the need to replace obsolete cold storage facilities. The average age of U.S. cold storage buildings is 42 years, with more than 78 percent of the total inventory built prior to 2000.

4. The Economic Rebound Is Coming in 2021

The recovery is coming, but it won’t start until next year. The Real Estate Economic Forecast fall survey from the Urban Land Institute with 43 economists and analysts and 37 real estate organizations forecasts a varied recovery that will begin in 2021 and last through 2022.

Industrial and single-family assets are expected to perform the best, but the real estate market overall should holdup better than initially expected. Overall, the recession is expected to be short-lived. “The worst fears of earlier this year have mostly eased. As of now, leading real estate economists are signaling that resilience and underlying strength will likely win out over uncertainty and risk,” said William Maher, principal at Maher Strategies, in a statement.

The results of the survey, which is conducted semi-annually, expect GDP to decline 5% this year but increase again in 2021. Respondents forecast 3.6% GDP growth in 2021 and 3.2% GDP growth in 2022. The 2020 GDP loss is an improvement compared to the prior survey, which estimated a 6% fall in GDP this year. However, the previous survey was also more optimistic about GDP growth in 2021 and 2022, forecasting 3.9% and 3.6% respectively. Employment follows a similar trend. This year, the survey expects jobs loss to total 9 million, but—like GDP—job growth will begin in 2021 and 2022, growing by 3.5 million and 3 million jobs, according to the survey. By the end of 2022, unemployment could fall to 5.5%.

5. These Are the Perks Companies Use to Get Workers Back to Their Offices

At the headquarters of SL Green, a real estate company in Manhattan, employees walk the halls with masks on, line up with proper spacing for free lunch and sit at cubicles behind plastic barriers that rise up well over six feet.

Birthday parties are celebrated in the office — but over Zoom, with snacks available to be picked up and eaten by employees in front of their computers. Workers can even bring their children into the office for remote schooling, to be supervised by tutors paid by the company.

“They each have their own offices,” Francisca Lopez, a property accountant, said of the setup created for her 6-year-old son, Ian, and a handful of other children out of empty office space. “It’s the best incentive for me to come to work every day.”

Your success blesses others. I wish you a great a hugely impactful week!

October 26, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

October 26, 2020/ Ken Ashley

1. TikTok Studios, Zoom Rooms and Co-Working Spaces Are the New Must-Have Home Amenities

When Ric Bucher, a television and radio basketball commentator and writer who is a familiar face on Fox Sports, finished a roughly $40,000 office remodel in his Half Moon Bay, Calif., home, he wondered if it was worth it. His workspace, completed about three years ago, was soundproofed, professionally wired, attractively lit, and rigged with professional-grade cameras and microphones. The idea was that if he ever needed to record a podcast or tape a television segment from home, he could.

“It was a very expensive proposition, and we asked, ‘are we doing the right thing?’ ” Mr. Bucher, 59, said of conversations with his wife, Corrine Bucher. Then the pandemic hit. Now Mr. Bucher is able to tape and record studio-quality segments for national Fox Sports shows and for his podcast. “There is no question that it has been a huge benefit to my career,” he said.

Mr. Bucher’s renovation, with its focus on making him look and sound good on camera, may have once seemed specific to his unique profession. But today, developers and home builders believe that the future, even after the virus is under control, will involve a lot more work from home, videoconferencing, and remote collaborating.

2. Here Comes the Life Sciences Land Rush

The office, as we’ve been told many times, is over. As the coronavirus pandemic drags on in the U.S., millions of white-collar workers remain homebound, companies are shedding their HQ spaces, and the viability of downtown business districts — and even whole cities — is in doubt due to the ongoing economic devastation of Covid-19.

But most people who work in the life sciences — pharmaceutical, biotech and other medical research fields — can’t do their jobs from their couches or backyard sheds. For them, the pandemic has helped fuel a real estate scramble.

In the last two months, pharmaceutical giant Bristol Myers Squibb announced plans to take over 360,000 square feet in a forthcoming development in Cambridge, Massachusetts, while across the river in downtown Boston, biotech firm CRISPR Therapeutics will be leasing 263,500 square feet of a development dubbed “The 105.” Those deals underscore the bullishness around this sector, which has attracted billions of dollars in institutional investment.

3. Brookfield Weighs $3 Billion Life Sciences Real Estate Portfolio Sale

Brookfield Asset Management Inc. is exploring a sale of its life-sciences real estate portfolio, and seeking about $3 billion, according to people with knowledge of the matter.

The Toronto-based alternative asset manager is working with advisers to sell roughly 2.3 million square feet of life-sciences real estate it acquired as part of its 2018 purchase of Forest City Realty Trust Inc., said the people, who requested anonymity because the information isn’t public.

A Brookfield representative declined to comment.

4. Apartment Rents Are Plunging in the World's Richest Cities. It's Time For You to Negotiate

In the world’s big financial centers — from New York to Toronto to London to Sydney — rents for city apartments are plunging.

International students who normally bolster demand are stuck at home and young renters — the most mobile group in real estate — are finding fewer reasons to pay a premium to live in what is, for now, no longer the center of things.

“You’re daft if you aren’t negotiating lower rent right now,’’ said Tim Lawless, Asia Pacific head of research for data provider CoreLogic Inc. “Supply is high and occupancy has fallen off a cliff.”

5. Commercial real estate investors predict price recovery in 2021

Commercial real estate investors predict up to a 10% fall in property value as a result of the coronavirus pandemic, but prices are expected to recover by next year.

According to a survey of 325 directors and investors, 39% expect commercial real estate assets will fall between 5% to 10% in value in 2020, whilst nearly 31% expect a fall of 10% or more as a result of the pandemic.

However, 90% of the respondents expected asset prices to go back to pre-pandemic levels by 2021, according to the survey carried out by Duff & Phelps.

Your success blesses others. I wish you a great a hugely impactful week!

October 19, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

October 19, 2020/ Ken Ashley

1. Hustle as a Strategy

Mark Christopher was a very senior and well-respected broker at Cushman & Wakefield, and I was – well, I was wet behind the ears. I had been in the real estate business less than two years and I was banging my head against the wall cold calling small industrial tenants in a grungy Atlanta industrial submarket.

I was beginning to make some traction, but like so many young people in our business I had a strong fear of failure and an unhealthy case of self-doubt.

We both walked to the office elevator right at 7:30 PM on that Thursday. I’m sure Mark had had a long day. At that time, I didn’t know him as a person, but I sure as heck respected his reputation. When we boarded the elevator, he looked right at me and asked how it was going. I said with a little too much enthusiasm “Busy!”

Mark smiled and said with intensity, “Ken, but are you GOOD busy?” I didn’t really know how to respond, because I was working so hard, I felt I was doing the right thing every day. I thought about the many administrative tasks I had done that day and I stammered, “I’m not sure what you mean.” The doors opened, and we got off the elevator.

2. The Future of Workplace Amenities Is Knowledge

To compete for top talent, employers have traditionally offered workplace amenities such as corporate gyms, gaming lounges, nap rooms, and other in-office perks. But today, after months of working from home, our expectations of the workplace and what it means “to work” and “be in a place” are facing an unprecedented shift.

As we navigate this shift, workplace experience is taking center stage — driving whole narratives on what “experience” should look like for each employee in a more hybrid work model, one that merges the best of “work” and “home” and looks to extend beyond physical space to support employees more holistically.

As more businesses embrace flexible work, things like employee choice and well-being are taking precedent over the physical amenity spaces that companies once offered. Instead of valuing things, employees are more likely to value great workplace experiences. Things like equity, mentorship, and learning are moving up the list of employee priorities now that our work and home lives have become seamlessly and intentionally interconnected.

3. Manhattan Emptied Out During the Pandemic. But Big Tech Is Moving In.

Facebook has just leased enough new office space in Manhattan to nearly triple its current local work force, including at one of the city’s most iconic buildings, the 107-year-old former main post office complex near Pennsylvania Station.

Apple, which set up its first office in New York a decade ago, is expanding to another building in Manhattan. And Google and Amazon are stitching together corporate campuses in the city more quickly than anywhere else in the world. Amazon paid roughly $1 billion in March for the iconic Lord & Taylor building on Fifth Avenue.

Despite a pandemic that has ravaged New York, hollowed out many of its office buildings and raised fundamental questions about its future, the four companies collectively known as Big Tech are all significantly expanding their footprint in the city, giving it a badly needed vote of confidence.

4. Time To Ditch Those Awful Zoom Calls, CEOs Say

Early during the pandemic lockdowns, in April, many were touting the benefits. James Gorman, CEO of Morgan Stanley, said his bank would need much less real estate in the future because even though he was a fan of having teams together, "we've proven we can operate with no footprint."

Now members of the C-suite have gone full boomerang on Zoom meetings. After finding them awesome and productive at first, they're now questioning how much they really achieve and are suggesting they lead to a sterile work culture lacking in imagination.

"What we as human beings need, want, seek ... is human contact," Nadella says. He was speaking at a virtual conference organized by The Wall Street Journal last week.

5. San Jose Unveils New Plans for Google Megaproject

Google’s proposal for a massive mixed-use development at the western edge of downtown San Jose, Calif., has taken a step forward with the city’s public release of revised plans and environmental documents for the roughly 80-acre project.

The search giant’s resubmitted application offers new details of the Downtown West Mixed-Use Plan, which calls for as much as 7.3 million gross square feet of office space, 4,000 units of new housing and up to 500,000 square feet for retail, cultural and arts uses.

Google’s updated project submittal, available on the city’s website, is accompanied by a 1,350-page draft environmental impact report. The Mountain View, Calif.-based firm formally submitted its proposal for the project in October 2019.

Your success blesses others. I wish you a great a hugely impactful week!

October 15, 2020

Hustle as a Strategy

October 15, 2020/ Ken Ashley

The day was April 17th, 1997 and I took an elevator ride that would change my life.

I was beginning to make some traction, but like so many young people in our business I had a strong fear of failure and an unhealthy case of self-doubt.

We both walked to the office elevator right at 7:30 PM on that Thursday. I’m sure Mark had had a long day. At that time, I didn’t know him as a person, but I sure as heck respected his reputation. When we boarded the elevator, he looked right at me and asked how it was going. I said with a little too much enthusiasm “Busy!”

He stopped in the lobby and again looked right at me with a brilliant smile and a piercing gaze and said, “Come by my office in the morning. 8:00 A.M. sharp.”

Thus, began a mentor relationship that completely retooled my way of thinking. I quickly transitioned from industrial tenant rep to office. Mark let me sit in his office and just listen to him talk to clients. I was in heaven. His trust in me did wonders for my self-confidence.

His unwarranted kindness in spending time with me is something I think about often. I will be attempting to pay forward his investment in me for the rest of my life.

Fake Busy

In our short time together, I learned much from Mark Christopher, and I want to share two formative lessons here today.

On our first day together, Mark sent me a copy of a September 1986 Harvard Business Review Story entitled “Hustle as A Strategy.” The article posited that, “…A vision is only as good as the energy, resourcefulness, and professionalism that combine to service every customer and every new opportunity every day.”

As I’ve thought about this piece and Mark’s wisdom over the years, I’ve learned to question myself about “Fake Busy” vs. “Good Busy.” Because we are performing a lot of tasks every day, and because we call ourselves busy does not mean we are being productive.

Clarity about where you are headed is essential so you can say “no” more often than you say “yes” to non-mission critical tasks. Don’t allow “fake busy” to give you comfort. Hustle in the wrong direction is not hustle at all. Plus, I think saying “no” is a true super power that so many do not possess.

Provide Exceptional Service

The second lesson is simple on the face of it: be a true service provider. Provide excellent, amazing service and clients will remember. In a word….hustle. As a tenant rep, my mission is to help others with their mission and to do so with a huge bias towards action.

Here are four specific things that I focus on in client relationships:

1) The digital nod. I acknowledge client’s emails within ½ a day even if I need to work to get an answer. They are trusting us with an important relationship, and I want them to know I am listening and responding as quickly as humanly possible.

2) Call them before they call you. When working on an assignment I don’t want the client to have to call me to ask how things are going. I call them frequently when we have meaningful updates to report. Sometimes I just call to chat and say hello. Relationships matter.

3) Do the lifting. Manage the meeting notes, offer to create presentations to more senior management and to boards of directors. Deliver value by supporting the client.

4) When sending proposals and financial runs I work to give an honest opinion as to what the data means. They are hiring you because you are an expert; so, share your expert opinion.

In short, the client should be delighted to work with you. We have done our jobs when our client gets bonused, promoted or complemented internally. It’s all about our hustle to help them with their hustle.

Planning is great, but hustle, and massive action is required to win a football game or develop a true business relationship.

A postscript: Sadly, Mark Christopher died a year after our elevator ride from an aggressive form of cancer. He was 42. He left behind a wife, two kids and a devastated mentee. I think of him often. And I try to honor his memory by repaying his investment in me to those young in their career.

Helping others is hustle too. And I know I have a sacred duty to do so.

I hope Mark can somehow hear this, and I hope is smiling his brilliant smile. Mark, I am trying hard to be GOOD busy. Every. Single. Day.

October 12, 2020

Power Reads: 5 Interesting Articles That Will Help You This Week

October 12, 2020/ Ken Ashley

1. Death Reports of Retail and Office May Have Been Greatly Exaggerated

Panelists representing the industrial, office, retail and multifamily sectors of commercial real estate made the case for investment in their respective sectors at NAIOP’s CRE.CONVERGE, the virtual conference taking place this week.

In a real-time audience poll, the attendees cited industrial as the sector they would be most likely to invest in. However, much of the discussion pointed to the upsides in what, so far in 2020, has been mostly seen as a negative story for the other sectors.

Wade Achenbach, executive vice president, Portfolio Management at Kite Realty Group, said that retail may be the sector everyone loves to hate, but all that means is that it’s at the bottom of a cycle that is going to rebound.

2. Microsoft CEO Says Remote Work Can Feel Like ‘Sleeping at Work’

Microsoft Corp. has been a major beneficiary of the work-from-home boom spurred by the Covid-19 pandemic. But Chief Executive Officer Satya Nadella is realizing the pitfalls of being away from the office for so long.

Online meetings can make employees tired and make it difficult to transition from a work mindset to private life, the executive said at The Wall Street Journal CEO Council on Tuesday. "When you are working from home, it sometimes feels like you are sleeping at work,” he added.

Video meetings can be particularly enervating, the CEO noted, citing brain studies on the subject. "Thirty minutes into your first video meeting in the morning, because of the concentration one needs to have in video, you are fatigued."

3. Not All Virtual Tours Are Created Equal

For commercial real estate brokers, working from home means spending hours touring space virtually. The once-nascent technology has exploded in popularity as brokers struggle to view listings for the few deals getting done during a global pandemic. What they’ve found is that not all virtual tours are created equal. The term ‘virtual tour’ has become a catch-all, understanding the difference can help owners, brokers, and tenant reps alike.

Before COVID, virtual tours were a ‘nice-to-have,’ something that showed a commitment to technology more than the space itself. Large landlords began to use the technology to attract corporate relocations, unable to easily schedule tours. In residential real estate, virtual tours quickly became the norm. For commercial real estate, adopting the technology required a crisis. Now, virtual tours have quickly become ubiquitous in the commercial real estate space as well.

The pandemic has been a game changer for companies offering virtual touring technology. Prior to 2020, Zillow, Redfin, and Matterport were navigating choppy waters. At the start of the pandemic, Redfin and Matterport were laying off employees. Meanwhile, other virtual tour providers have been hiring just to keep pace with growing demand. “Our sales are up 15 times year-over-year, we’re working hard to take it all on,” Bryan Colin, CEO of virtual tour technology VirtualAPT said. ”We’re growing our team as fast as possible.” See VirtualAPT’s demo video here.

4. The Next Generation of Office Communication Tech

HBR Staff/Yaroslav Danylchenko/Cactus Creative Studio/Stocksy

Most knowledge workers in 2020 are familiar with mixed reality tools like Zoom, Teams, and Slack that enable them to meet in virtual locations. By merging real and virtual worlds to produce new environments, employees who relied on in-person office interactions as recently as nine months ago now meet on virtual tropical islands, virtually “stand” in front of presentations beamed around the world, or maintain banter and team spirit with timely GIFs and emojis mixed into their workday messages.

But these experiences are just the tip of the iceberg of mixed reality offerings. Augmented reality technologies have become regular features in product offerings, along assembly lines, and even in surgeries. Now, with 42 percent of American full-time employees working from home for the foreseeable future as the pandemic lingers, new forms of mixed reality technologies are creating mainstream virtual substitutes for offices, and redefining the future of work in the process.

These new mixed reality applications can help companies cut costs and boost revenues. Many companies we work with are using them to shrink their real-world office footprints by about a third on average and energize far-flung employees, many of whom are already more productive while working from home with no commute.

5. Enough of Zoom—Office Happy Hours Return

They made do for a while with Zoom happy hours. But as coronavirus cases eased, office workers at KDG, a professional technology services company in Allentown, Pa., were eager to get together for drinks in person.

Meeting on the building’s outdoor deck, about 35 employees, all still working from home, brought their own booze. Food was individually packaged. Those attending had to stay six feet apart, and bathroom doors were labeled as entrances and exits.

“Once we decided to do it, we were very clear that if you’re going to come to the happy hour, here are the rules. They’re not breakable rules,” says the company’s chief executive Kyle H. David.

Your success blesses others. I wish you a great a hugely impactful week!

October 05, 2020

Bookmarks: 5 Interesting Articles That May Help You This Week

October 05, 2020/ Ken Ashley

Each week, I select a few articles that rise above the fray and hopefully help you on your journey in the CRE world. They pull from one of four "corners": corporate real estate, technology, management science and anything positive. I welcome your comments on these articles.

1. Zoom Towns

Let’s start with one assumption. Most Americans work in jobs that will require them to eventually return to the office or some sort of physical location. Many are working on location now because they are “essential” (healthcare workers and firefighters) or because they have some type of service function associated with their job (custodial, delivery or security). Cushman & Wakefield CEO Brett White said recently in Fast Company that 90% of office using workers will eventually be….back in the office.

However, a small segment of the workforce is uniquely situated to work remotely in the emerging “dynamic workplace” most of the time. For those knowledge workers who (a) have control of their schedules and (b) are usually highly compensated, an interesting new trend is developing: Zoom Towns. These are small, pretty locals that suddenly have a pep in their step. And the a torrent of inbound knowledge workers, high powered consultants, lawyers, technologist and other experts are discovering remote locations - almost en mass.

These Zoom Towns are burgeoning bucolic locations that were previously seen as too remote for many in the prime of their careers. Most viewed them as vacation locals before Covid. Examples include Lake Tahoe, the Hamptons, Bend, Oregon and Butte, Montana. Forbes reports these towns as some of the tops in terms of Zillow traffic.

2. Despite a shift to work from home, the office market will recover

Despite a shift to work from home, the office market will recover

An estimated 10% of workers are expected to work from home long-term even after the coronavirus pandemic, compared to only 5% before the pandemic. The shift to remote work is expected to have long-lasting impacts on office usage, but experts say there’s still hope.

Economic and population growth in the next five years are forecasted to expand the office market in the U.S. and make up for pandemic-related losses by 2025, according to analysts at Cushman & Wakefield, a Chicago-based commercial real estate services company.

“Expect the office market to make a full recovery despite these headwinds. And that’s really the result of our analysis, not something we just engineered,” said Rebecca Rockey, Cushman & Wakefield’s global head of forecasting and co-author of the study.

3. Broker's Bet on Herself Pays Off in Las Vegas

At the end of last year, just as the first cases of a novel coronavirus surfaced in China, Las Vegas broker Natalie Wainwright gambled that it was the right time to leave the comfort of a global real estate services company to start up a new division at a boutique firm.

Just as Wainwright was ramping up at her new job as vice president and beginning to build the office tenant rep division at Logic Commercial Real Estate, the World Health Organization declared the coronavirus outbreak a global pandemic. A week later, the Las Vegas Strip shut down and companies across the country emptied their offices and told employees to work from home.

"It made me nervous," Wainwright said in an interview. "I had come to Logic and needed to rebuild a business, and I had just hired someone the week before."

4. A New Work Paradigm: Rethinking Office Space

We know the office of the future will change, but to what extent? The longer the COVID work from home protocol continues, the more uncertainty there is. In March, we thought working from home would be a short-term thing, now six months later, we realize that this pandemic has transformed the way companies operate. It’s incredible how much impact remote working has had on our society.

We know ways of working will never be the same. Many jobs and many people will simply not return to the office. They will continue to work remotely with high productivity and have no desire to return to the office. The time they previously spent in their commute is happily spent with family, and they find life more “balanced.” These companies will see a reduction of working space within the office and will explore how to use space previously devoted to workers differently.

On the opposite side of the spectrum, not all work can be performed productively or successfully remotely. Not all individuals desire to work from home.

5. Fed Pushes Net Lease Cap Rates to New Lows

While the total number of net lease transactions fell 19% year-over-year in the third quarter, cap rates in the single-tenant net lease retail, office and industrial sectors reached a new all-time low in the third quarter of 2020, according to the 3rd Quarter Net Lease Research Report from The Boulder Group.

In the third quarter of 2019, the net lease sector saw 16,245 transactions trade for a total of $61.1 billion, according to The Boulder Group. In Q3 2020, 13,136 transactions trade for a total of $44 billion.

Compared to the second quarter of 2020, cap rates compressed by 19, 10 and 11 basis points respectively for retail, office and industrial. The retail sector experienced its largest cap rate decrease since 2014 as private and 1031 exchange investors aggressively sought the lower-priced assets this sector provided.

Your success blesses others. I wish you a great a hugely impactful week!

September 30, 2020

Zoom Towns

September 30, 2020/ Ken Ashley

However, a small segment of the workforce is uniquely situated to work remotely in the emerging “dynamic workplace” most of the time. For those knowledge workers who (a) have control of their schedules and (b) are usually highly compensated, an interesting new trend is developing: Zoom Towns. These are small, pretty locals that suddenly have a pep in their step. And the a torrent of inbound knowledge workers, high powered consultants, lawyers, technologist and other experts are discovering remote locations - almost en mass.

If you think about it, the rapid advance of cost-effective and reliable tech communications tools is transforming how some knowledge workers work. Video platforms will continue to improve quickly and I’m sure a whole host of new technology is being invented right now during this incredible time.

Maybe a whole new life waits for some who have the inclination, expertise and the means to pull up stake.

Small Town Life: It Ain’t Cheap And Check the WiFi

But small town life may not be all it’s cracked up to be. According to Bloomberg and Zillow data, the Hamptons experienced a 25% increase in price and Lake Tahoe is up 50%. Also, these remote locations may or may not be able to handle the huge increase in telecom and cell phone usage. I taught a virtual class last week and one of my co-faculty was located in a Colorado ski town. Bandwidth is constantly an issue, he reported.

A Business Insider article authored by Erin McDowell reported on going the other way: she moved from a small town to New York City. Erin points out that for many big town dwellers there can be a real culture shock to moving to a small town. Restaurants can be sparse, and you might have quite a little drive to the grocery store - don’t forget the milk.

I’m also hearing anecdotal reports that all sorts of businesses are getting backlogged in these small communities from contractors to plumbers. So, look before you leap.

Other Factors

As I talk to executives around the country, they are all intensely interested in the topic of Zoom Towns. Some talk wistfully about their personal desire to move to their own private Idaho. But others wonder about leadership and economic issues.

For example, should high power knowledge workers earning big coin in SFO or Manhattan be offered less of a salary if they move from very expensive housing markets to much less so? If the wages stay the same, is it “fair” that they effectively get a huge economic bonus while others who are tethered in the big city?

Corporate leaders also worry about culture when some of their top performers are mostly or entirely remote (after Covid, of course). They talk about mentorship in a remote environment and wonder how things will work in 2021 and beyond.

The Great Covid Experiment

What an interesting time. For all of history before now people had to live where they made their income. Miners lived near mines, farmers lived on farms and factory workers lived near the plant. For a certain demographic, the current disassociation of where you live and how you make your living will be an interesting trend to watch.

"If remote work becomes a bona fide long-term option especially with the pandemic, that could reshape the U.S. housing market by opening up homeownership to people renting in expensive parts of the country," said Zillow economist Jeff Tucker on the Zillow site. "However, it's unclear how many people would make the move to buy their first home. Proximity to work is just one of the factors people consider when choosing where to live. Other factors may keep them from moving including proximity to friends and family, cultural and natural amenities, and their kids' schools.”

Zoom On

So, Zoom Towns will certainly help micro economies of small towns grow quickly. They will help many small businesses such as restaurants and the aforementioned contractors and plumbers in those areas have some record years. And this will be an interesting experiment for the individuals and the families of those able to pull it off.

But corporate America is watching this trend with some trepidation. They love their top performers and know they are gone on business travel in normal times. Having them gone nearly 100% of the time as a default could be challenging.

The Zoom Town in-migration will be fascinating to watch over the next couple of years. The philosophy of office use is changing faster than at any other time of my career.

I’m not planning to move anywhere extremely remote. But if you do, I hope you’ll let me crash in your spare bedroom. I’ll bring news of the big city and of course some great wine. We can catch me up on all the small-town gossip you are sure to hear.

And ironically, we won’t have to use Zoom for a discussion, for once.

Ken Ashley

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3. Take Your Lunch Break!

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4. Race for Space Pushing Up Suburban Rents

5. This U.S. Region Will Pay You $10,000 To Move There (And Give You A Bike, Too)

1. My First Cold Call

2. Why The Global Economy Is Recovering Faster Than Expected

3. Coworking making a comeback amid work from home fatigue

4. Why Workplace?

5. Come for the Desk, Stay for the Pool

1. Inside Amazon’s quest to use less cardboard

2. Mentoring During a Crisis

3. Increasing Demand for Cold Storage Spurs Spec Projects, Institutional Investment

4. The Economic Rebound Is Coming in 2021

5. These Are the Perks Companies Use to Get Workers Back to Their Offices

1. TikTok Studios, Zoom Rooms and Co-Working Spaces Are the New Must-Have Home Amenities

2. Here Comes the Life Sciences Land Rush

3. Brookfield Weighs $3 Billion Life Sciences Real Estate Portfolio Sale

4. Apartment Rents Are Plunging in the World's Richest Cities. It's Time For You to Negotiate

5. Commercial real estate investors predict price recovery in 2021

1. Hustle as a Strategy

2. The Future of Workplace Amenities Is Knowledge

3. Manhattan Emptied Out During the Pandemic. But Big Tech Is Moving In.

4. Time To Ditch Those Awful Zoom Calls, CEOs Say

5. San Jose Unveils New Plans for Google Megaproject

1. Death Reports of Retail and Office May Have Been Greatly Exaggerated

2. Microsoft CEO Says Remote Work Can Feel Like ‘Sleeping at Work’

3. Not All Virtual Tours Are Created Equal

4. The Next Generation of Office Communication Tech

5. Enough of Zoom—Office Happy Hours Return

1. Zoom Towns

2. Despite a shift to work from home, the office market will recover

Despite a shift to work from home, the office market will recover

3. Broker's Bet on Herself Pays Off in Las Vegas

4. A New Work Paradigm: Rethinking Office Space

5. Fed Pushes Net Lease Cap Rates to New Lows

Ken Ashley CRE

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