Workwars

This entry originally appeared on February 8th, 2023 using the mirror.xyz platform and has been permanently stored onchain and signed via ArWeave.

It started with a declaration of war on the office. Nobody asked for it, but everyone wanted it. Freedom. Freedom to get the work done that needed to be done in a way in which was chosen by the individual contributor, aka the employee. The employees, armed with productivity statistics, dug in their heels….at home.

The battlefield was Commercial Real Estate. Office assets were called into question. The obvious first - OpEx, CapEx, and the inability to annunciate the true ROI. The responses were inconclusive and weak. Serendipity. Culture. Collaboration. Mentorship. More of the same, and reminiscent of the phrase, “Nobody ever got fired for buying an IBM.” It was a predictable defense, formulaic it was not.

What hasn’t been mentioned enough is the impact the buried heels have on Capital Markets - Commercial Mortgage Backed Securities - more specifically. CMBS are secured by mortgages on commercial properties. They come in the form of bonds and the underlying loans are typically contained within trusts. The loans act as collateral, with principal and interest passed on to investors in the event of default. The mortgage loans are typically considered a non-recourse debt - meaning they’re only secured by the asset itself - so nothing personal. This is why we see investors ‘handing over the keys’ and walking away from underperforming buildings. Underperforming buildings are those that can’t maintain occupancy metrics. We’ll have a chance to revisit this later in the year as delinquency rates are expected to double (and some even predict triple) by the end of 2023. (Fitch Ratings) This is why tenancy matters.

Back to the ROI discussion and the collective office groan.

Since finance, accounting, and procurement couldn’t make sense of it in a spreadsheet, HR was called into the Principal’s office and things got worse.

Office sentiment, survey responses, and feedback from employees exposed another chink in the office armor - design discontent and lackluster office experience.

The collective delivery of office environments received a failing grade. Everything from the commute to parking, coffee, furniture, layout, privacy, lighting, occupancy, productivity, IAQ, and especially temperature was called into question. Leadership wanted to know the who, what, where, and when of the office. Nobody knew. Very few STILL know. The systems that inform this line of questioning were either not in place or not being used properly enough to answer the questions. Simply put - the reliance on intelligent space metrics was completely human and nobody was there to look around.

The whole process needs an overhaul. Brokerage, Design, Tenant Improvement, FF&E, A/V - all of it. Ground up or better yet, maybe remote-first?

Back to the war.

The battlefield, although seemingly disturbing for bricks and mortar, is actually far more grotesque in the cloud. Orion Growth pivoted from place to platform in 2020. Spurred mostly from necessity but partially from curiosity, we became a cloud service provider and dove head-first into Microsoft Azure AD. We crawled into the licensing trenches between Microsoft, Amazon, and Google. It didn’t take long to realize these three giants were in the arena battling for the title of largest landlord - not Blackstone, Prologis, and Duke like we thought. Data storage is the real capitalization rate, not self-storage IRL. The fact that employees wanted to stay home only fueled the fight.

Covid exposed the application conundrum. This app was for this, and that one was for this…but this one doesn’t talk to that one and this one isn’t secure, so it’s not compliant. I don’t have this one on my phone, and you only like the desktop version of that because you’re more comfortable at your home computer. I can’t remember if my work password will work without being on a VPN or if I need to sign in to the work network from home. I suppose I’ll put in a work ticket with IT since it’s probably just a settings issue. Why can’t my iPhone just sign me into the network and let me share the google doc from Sharepoint with the London office? I keep hitting the button, but it doesn’t work.

Ugh. 1000 days of battlefield hell for the folks in IT. Frontlines - a multi-theater bloodbath. A LOT laid down their keystrokes and moved to a less hostile environment. The intelligence briefs didn’t add up. Sometimes the infrastructure is too far gone and the command unit doesn’t get your request for support. Sometimes it’s best to find a new landscape - especially when most of the company infrastructure resembles a Rube Goldberg machine after an earthquake.

Reparations and the Great Rebuild

This is where we go from past work/workplace to current and future. This is somewhat accurate and a lot speculative….but informed. After the trauma, the healing begins. We start to see what matters - and we start to measure new things in new ways.

Microsoft vs Google: This is who we’re left with in the arena. Not because Amazon lost, but because Amazon was disqualified. They were great at sales, distribution, and storage - but they offer nothing of value in terms of broader business solutions. So far, they’re staying in that lane.

Google has all the personal data of the world. Microsoft knows how we’ll need to use it.

The analogy was made that Google is ‘all-on’ by default (making their UX feel better) while Microsoft is ‘all-off’ by default (making their software more secure). This is an interesting trade-off, seeing that one company is focused on internet-based services like search, email, maps, and advertising while the other is focused on enterprise software and productivity tools.

They likely agree on a few basic principles - but disagree on how they’ll get there.

Interoperability. Current systems are largely disparate. They’ve grown from proprietary-stack data systems to open source in a less than efficient way. The applications that support the ecosystem need to work across the stack. Software stacks have to go. Consolidated platforms are the future. (SaaS beware)

Security. A complete and total mess. Security needs to be redefined in terms of both definition and user preferences. Some say identification should move to a self-sovereign model. Google loves its user preferences and trackable metadata because they’re a marketing company at heart. Microsoft loves its security preferences because they’re an enterprise software provider that believes off-by-default and on-by-understanding is best practice.

Informed models through transfer learning. This isn’t a simple input-output equation the app store can solve. Microsoft’s investment in OpenAI for language modeling and Activision/ Blizzard for immersive experiences aren’t smoke and mirrors. The chatbot version of ChatGPT is already incorporated into Teams premium for meeting settings. Their AI was built into Azure as Azure was being built. Google’s recent investment in Anthropic and its model, Claude, will help with access and organization of their cloud. Some say this announcement illustrates Claude is an afterthought while OpenAI was natively intertwined with Azure AD.

The future is building

There’s a lot here to unpack, and even more to contemplate. How does all this play into the future of work? How does this impact CRE and RTO? Are future investments better made in support of distributed teams or consolidated workplaces? These are then new challenges for CRE / Workplace Strategy Leaders. It’s complicated, and it reaches far beyond a balance sheet and shareholder value. Considerations now include DEI, ESG, EQ vs IQ, EE, UeX, and CeX. Interdepartmental thinking requires systems models over symptomatic treatment. It’s time to build not buy. The future of work is really more about what we want for our whole future. For our kids, for our communities, and for our caregivers. This isn’t a simple equation.

#TotalTenancy™ #OrionGrowth

Photo by Hugo Jehanne on Unsplash