How One Major Brokerage Firm Is Going Back to the Office
Flexibility, Efficiency and Affordability Are Driving Avison Young’s Approach
For the past 18 months, the notion of companies adopting a permanent hybrid approach to their workforce has fostered significant consternation among commercial property owners — but they haven’t been the only ones lying awake at night, as visions of shrinking office footprints danced in their heads.
Commercial real estate brokers, and the firms they work for, have also regarded the hybrid approach as a potential existential threat; which is why it may seem surprising that Avison Young, the 11th largest commercial real estate brokerage firm in the world, has embarked on a hybrid approach for its downtown Los Angeles office with other locations potentially to follow.
To gain a better understanding of how Avison Young came to this decision for their downtown Los Angeles office, LoopNet spoke with Chris Cooper, a principal and regional managing director of the firm’s Southern California offices. Cooper oversaw the development of one of Avison Young’s first hybrid offices, which will be located at 601 S. Figueroa Street in downtown Los Angeles.
During our conversation, Cooper explained why Avison Young is transitioning to a hybrid-focused model in Los Angeles; how the firm’s clients have responded to the decision; and the reasons he’s still keenly optimistic about the future of the office market.
“The hybrid model — this utilization of space on an as-needed, where needed basis — really was coming for us in the markets well before COVID. ”
Chris Cooper, regional managing director, Avison Young
Why did Avison Young decide to take a hybrid approach with their workforce?
Everybody thinks of the hybrid model as a byproduct of COVID, but that's actually not entirely true. The hybrid model — this utilization of space on an as-needed, where needed basis — really was coming for us in the markets well before COVID. There just wasn't a lot of urgency behind it. People were sticking their toe in the water, but not feeling compelled to spend a significant amount of money on the redesign and reengineering of their existing or future space. COVID was a catalyst to expedite the hybrid model.
The hybrid model has two primary components. The first one is, “I'm not going to go to the office every day, five days a week from eight to six. I'm going to go into the office maybe every day, but just for a few hours, or I'm only going to go into the office Monday, Wednesday, Friday.” So, you have a frequency component.
And then the second component to a hybrid office environment is the utilization of space. And what's happening is that the hybrid space is really being tailored to the professionals’ day-to-day activities. So, we look at our space — I affectionately refer to it as my live/work/play environment — and our professionals can go in there, though we don't want them living there obviously, but we want them to have this multidimensional experience where they can have client events, meetings, interactive video calls, pitch rehearsals, one-on-ones, team meetings, all these different things. So, a lot of our functionality in the space will accommodate these multidimensional utilizations.
“It's not always just design, but it's flexibility through the landlord’s provision of FF&E; its term, it is the ability to move to different assets of the same landlord seamlessly. ”
Is this an approach that Avison Young is planning to implement nationally or is it going to be more selective than that?
The overall national/global plan is still underway and is being led by our Avison Young Americas Workplace Intelligence team. The group helped our Southern California region put together what I would call the preliminary space design, the concepts, the functionality and how people will interact with and use the space. And then, we turned it over to IA Interior Architects to really fill in the blanks.
Our Los Angeles office is one of the first Avison Young locations to implement a hybrid approach. Of course, we're taking great pride and [expending] great focus on this in Los Angeles. We want to set a good example. You do need a reasonable amount of space — about 7,000 square feet and above to really implement the multidimensional hybrid workplace vis-a-vis the design we're working with to create a flexible office solution that is advantageous for employees and from a business perspective. But I will tell you that in our smaller offices, whether here in Southern California or throughout the country, we are executing on a flexible office solution that is extremely advantageous to Avison Young.
For our smaller offices, we could bring on a new team or two and suddenly we are out of space. So, we need a flexible workplace solution. We’ve completed three leases here in Southern California with the Irvine Company, because they can provide us with what they call a “Flex Workspace+.” The office is built out and includes all the FF&E [furniture, fixture and equipment]. We can select the furniture, as well as all kinds of different FF&E amenities, including AV [audio-visual] capabilities and the like.
And if we grow again — we bring a team in or we do an acquisition — we can just amend the lease and restack in the building or move to one of their other projects. It is such an amazing win-win, and we never worry about, “oh, goodness, we're going to have to sublease our space because we just outgrew it.” That is also part of the hybrid workplace strategy.
It's not always just design, but it's flexibility through the landlord’s provision of FF&E; its term, it is the ability to move to different assets of the same landlord seamlessly. And when you take that all together, it's the exact same thing that we're telling all of our occupier clients. And, in fact, we're telling our investor clients — our clients where we handle the agency leasing — that they need to think about how they provide flexible workplace strategies and solutions for their tenants. And, we have to migrate away from the typical, “we're going to do a seven to 10-year deal and spend $180 a foot on improvements.” Tenants are very careful as they reenter the market, and they want to know that the landlord is their partner in this.
Let me ask you about that. Obviously, as Avison Young is a commercial real estate brokerage firm, you have many owner representation clients that you're serving on an agency basis. Were there any concerns about the message that this choice sent to the market and those clients?
It’s quite the opposite, I think, on two fronts. Number one, we are creating an environment where people want to come back to the office because they say, “that's really cool. I'm not coming back to a sea of cubes and these sort of pedestrian square offices that everybody hunkers down in and locks the door.” We’re a very collaborative, open-door culture, and so everything you will see in the office is glass: glass walls, glass doors, glass partitions.
Also, remember that hybrid does not necessarily mean I'm only coming in two or three days a week. I may come in every day. I'm just not there from eight a.m. to six p.m. My marketing coordinator might be there; my property management accounting team might be there all day long, but the brokers, the project managers, the consultants and our innovation analysts are out in the field. If they're not out in the field, they're not doing their job.
Yes — we would love to have everybody come back full time. And I think, over time, people will do that. But, in the meantime, you have to create an environment where people say, “I'll come in every day, but I just want to come in the morning or in the midday, or a little in the morning and a little in the afternoon” for different reasons and different functionality.
One thing I will tell you: I was down in our San Diego office yesterday and our managing director there meets with the office once a week — he calls it a stand up. And he goes around the room and people will talk about something good that happened to them that week, a win or something in their lives that they’re grateful for. It's just a way for people to bond and stay together. And the overarching comment was, “I didn't realize how much I missed you guys until I got back here today and was able to sit down with you.”
How is this new approach affecting your footprint? Is it growing, shrinking or remaining static?
From a numbers perspective, it shrinks it a little bit. You become more efficient.
Let's say you have 60 full-time employees in your office. You don't necessarily need 60 desks in that office. You will have private offices for your principals or senior partners, and you'll have workstations for people that need to come in and do the marketing and the finance, etc., but we're going to have lots of drop-in space and huddle rooms.
We have five different huddle rooms planned for our downtown L.A. office, and each one has a different functionality. They will all have sophisticated AV, so you can have a video call. But one will be furnished with soft seating, just to sit and have a one-on-one casual meeting with somebody. Another one will be set up with a table, so that we can rehearse a pitch. Another one will be very AV focused, much more sophisticated, so we can go in and have a really good video call with a client. Another one will be more of a team meeting room — a little bit larger with more seating. So, each huddle room will be selected based on what the function of the meeting will be.
We anticipate people may come in from the field, need a huddle room for a call or a meeting, and then be on their way to go see clients or prospects. And that's why you can begin to shrink the footprint a little. Our offices are going to all be the same size, for those who receive private offices. They will be very functional, but they will not be large and opulent.
Another thing we've done that is very interesting — it's small, but it’s important — is that in each of the workstations, there will be these pull-out seats. They'll almost look like little file cabinets, but they have really nice cushions on top.
That way, if a team member wants to come and sit next to or talk to somebody at a workstation, they don’t have to stand over them, which is very awkward. Rather, just pull out this little cabinet on casters and sit down on it. And you can look at their screen together. Then, if they want to put what they’re working on up on a big screen, they merely unplug their laptop, walk into a huddle room, plug in the laptop again and up it goes on a 60-inch screen. It's just a continuous focus on functionality and purpose.
I also think landlords are going to have to get a little bit smarter, for instance, with parking. One of the challenges that we're all facing is that you're paying $250 to $300 a month for a parking pass. But if somebody is only coming to the office twice a week, that's kind of a bitter pill to swallow. So, we talked to a lot of our landlord clients about creating a per diem utilization. You still have a parking card, but you’re charged a special rate because you’re a tenant.
But getting back to your earlier question [about our footprint], we are certainly working with our occupier clients on portfolio optimization and how to get efficient and how to use space more wisely.
We have to put our money where our mouth is. We have to be leaders by action. We are growing in downtown L.A. We've been bringing on new brokerage and property management teams, but we can continue to accommodate them with less space because we're smarter with our space, we're more efficient with it and we don't have a bunch of wasted space that has no utilization purpose.
Have you received any feedback from clients or from other brokerage firms about this choice that has surprised you?
No, not really. I talk to a lot of brokers in the market, and they think it's very cool. Our senior brokers still want to know that they have private offices. They deal with a lot of confidential information, and I think, to some extent, it’s a cultural thing. One of the things that really sets Avison Young apart is that we are principal-led and owned. We have voting shareholders and those shareholders are all brokers and other senior people in the organization.
So, we can't just sit there and say, “you’re all going to live in an open plan, and you’ll love it.” And some of our other competitors have done that. And it's caused great consternation and disappointment amongst their senior brokers. What we said was “what's important to you?” And the senior brokers said, “look, a private office is very important to us. It does not have to be 15 by 15, but I need to know that I have somewhere I can go and make my private calls and the like. I'm happy with huddle rooms and collaborative areas where I can get with my team. But I just need to know that at my stage in my career, I have my office.” And we respected that.
We also have drop-in, or we call them flex, offices. I'm personally setting the example for everybody. Once our Irvine office moves at the end of the year, I will not have my own office. I will have my laptop. And as I travel to the six Southern California offices, I will go in, I will find an empty office, I will plug in and I'm off and running. And that's really the model. It's kind of ridiculous for me to have the big corner office because I'm the regional managing director; again, that’s yesterday. I'm trying to set an example for my clients, and for my brokers and for all 150 people in the region that we have to be out amongst the clients and our colleagues.
And as shareholders, as principals, it's our money. If we can find ways to reduce our footprint, but remain comfortable and very functional, that's what we should do.
“As human beings, we want to be around one another. We want to share thoughts and collaborate and be social. We're just going to do it a little differently, and our space is going to have to accommodate that. ”
We've touched on some of these elements over the course of our conversation, but how is this approach impacting your design choices? And what are some of the design elements you're really excited about in the new space?
In the front of the space, we're making a pretty significant investment, and I would say the biggest functionality design element is that we will not have a reception area or main lobby.
You will walk in from the elevator lobby, and you’ll see tremendous views, floor-to-ceiling glass overlooking Santa Monica — the water and the mountains and the Hollywood Hills. It's going to be very dramatic.
But, as you walk in, it will not be a lobby. It will be a cafe. It will be a bar with beautiful stools. And then this area will have an espresso machine, a wine refrigerator, a regular refrigerator, dishwasher, the whole thing — a real functional sort of café, pantry and entertainment center.
So, when entering the space, you're walking into a place where you're immediately embraced by the buzz and the culture and energy of the office.
Off to the left will be two conference rooms with all kinds of state-of-the-art AV systems. And there will be an accordion wall between the two conference rooms, so that we can slide it and tuck it back and roll the conference room table pieces 90 degrees and make one long conference room. The glass that separates the conference rooms from the café space will accordion all the way back to the wall, so you could combine the conference centers with the café area to make one big area for a client event.
The other thing is, because of the magnificent views, we put all of the private offices on the interior, and we put the workstations and, more importantly, pods of soft seating along the glass perimeter. So, it'll be a very warm and inviting design for people.
What do you anticipate is the future of the office leasing market over the next 12 to 24 months?
Our data analytics team is doing a lot of analysis of what's going to drive decisions, based on things that are not necessarily 100% focused on real estate, like the level of vaccine utilization, or where the millennials are living now and where are they willing to commute to.
My view is this: I think that in the next 12 to 24 months, leasing activity and velocity are going to pick up. What we are seeing, both with large and small occupiers, is that people are getting more and more comfortable in making decisions. And that's the big key.
I think that occupiers will reduce their footprint for two reasons. Number one, they will become more efficient and use space more wisely. Number two, I think they're going to go to a kind of a hub and spoke [model], where the hub is a more regional space that people can come to, and then the spoke goes out to either a flexible office solution, like a small touchdown ready office or a WeWork, or they can work from home and come into the hub when they need to.
So, yes, there will be, in my opinion, a reduction in occupier space requirements. But I think that the decisions are now going to start being made now. Velocity is picking up; leases are getting done. And as we move forward, beyond the 12 to 24-month period, I think office leasing will thrive again.
Because at the end of the day, as human beings, we want to be around one another. We want to share thoughts and collaborate and be social. We're just going to do it a little differently, and our space is going to have to accommodate that.
This interview has been edited for concision and clarity.