We were recently featured on CoreNet Global’s What’s Next podcast, where CoreNet’s Senior Vice President of Knowledge and Research, Tim Venable, interviews Patrick Flynn from TIAA Bank and Steve Soldavini from Preferred Office Network to discuss coworking and flexible office solutions.
You can listen to the podcast now or read the transcription below.
Welcome to What’s Next, CoreNet Global’s Podcast that puts members on the mic for thought-provoking, profession-shaping conversations and commentary. In this episode, our Senior Vice President of Knowledge and Research, Tim Venable, interviews Patrick Flynn from TIAA Bank and Steve Soldavini from Preferred Office Network. The three discourse a few of corporate real estate’s trendiest topics: coworking and flexible office solutions.
Tim: Welcome, Patrick and Steve. Thank you very much for joining us for this podcast to discuss one of the biggest trends in corporate real estate today, that being coworking, shared spaces, and flexible office solutions. This is a great topic to be talking about because it’s something that’s so relevant for so many of our member companies and to help them come up with the right answer to their office solutions and portfolio solutions, so thank you very much for joining, and Patrick you’re with TIAA Bank, just tell us a little about your role there and what you do.
Patrick: Sure, my title at the bank is Real Estate Development Project Manager. I work with the bank’s business units and lines of business to locate and secure business space throughout the country in areas that we need it, regional markets and so forth.
Tim: OK, cool, great thank you, and Steve you’re with Preferred Office Network, so tell us how long you’ve been with the company and a little about your role there.
Steve: Right, yea, so I’ve been with Preferred Office Network since 2011, so it’s been 8 years now, and I’m in business development and account management of national accounts, and basically we find companies like TIAA bank and other corporate accounts that have a need for flexible office solutions, and we hook them up with those spaces all across the country.
Tim: OK great, well this again is such a huge tend in our profession today. Companies have such a need for flexibility and the idea of being able to have this kind of solution to their needs is very much popular today. So, Patrick let’s hear a little bit more from you about how TIAA bank has used this kind of model, a shared space model or a flexible officing model, over the past few years. Why was that the right choice for your company?
Patrick: Well, it actually fits so perfectly into our business model if you will. It’s very important for the way that we had operated that, and continue to operate, that we’re able to establish a temporary presence in markets, and for most cases this is to test those new markets or in other cases it’s where a market is decided it’s going to be permanently established, and then while we build out and grow leased space/long term leases we usually tap into the temporary market there and make sure that our people have a great place to work in the interim so that there’s a seamless transition once the leased space is ready. So, it’s been a great resource for us for that. We used to leverage a different national provider for this, but we went through a process where we wanted to have sort of a preferred vendor if you will, so about three years, three to four years ago, we went through an RFP process to really establish that, and that’s when PON (Preferred Office Network) came to the table with some really good ability to negotiate and to meet our needs, so we were really quite pleased.
Tim: Excellent, OK. So, it gives you the flexibility and it gets you up and running quickly when you need to set up in a new market, right?
Patrick: That’s correct, and the temporary nature of being able to get into the space very quickly, sometimes, Steve, we’ve done this sometimes within a week, actually, you know, got into a space, and then to be able to have a predictable time when we can leave and that commitment be as short as possible, that’s been really good for our business model.
Tim: Exactly, and in which markets do you operate, Patrick, and in which cities are you located in? It’s probably quite a few.
Patrick: There’s quite a few, yes. Particularly our home lending branch of the bank, it’s still very important with any type of lending, whether it be commercial or residential lending, that we actually be where the people are. So, yes all over the country, specifically in areas where there’s a high concentration of either commercial opportunities or residential opportunities. The specific need that we had was a little different maybe than some other companies that may need to have been in a bustling metropolitan area; whereas, with our home lending model we needed to actually locate these offices in the bedroom communities. So, it was very important, like let’s say a market like San Francisco, we do have a presence downtown, but in the bedroom communities such as Palo Alto, Los Altos, and San Jose, that’s really where we would be looking to place our people, whether it be a permanent lease or even a temporary presence would be out of those bedroom communities. So, it was great to be able to have that opportunity to set up there temporarily.
Tim: Well, the ability to get up and running in a week is tremendous and I know tremendously helpful to companies like yours. What’s the typical size of a typical office in this type of setting? How many employees are in that type of office?
Patrick: Usually if it’s that we’re actually building a team in a new market we may enter the temporary space with really only like one to three people. There have been situations like up in Michigan, Steve, didn’t we place like 19 people in temp space?
Steve: I think, it was in the teens, I do remember that.
Patrick: That was definitely an outlier, so usually it’s a very small team that we’ll start out with, so the ability to have those small but very nicely appointed offices was great.
Tim: Alright, great. In thinking back, Patrick, on the experience, there are other providers out there of flexible office space and coworking-type spaces, and obviously we hear a lot about that in the news these days and make a lot of headlines. What were some of the reasons that led you to choose Steve’s company to work with you in this way?
Patrick: Well, we were very thorough in vetting the contenders during our RFP process and PON was able to really kind of listen to our needs and were very responsive to those needs in a couple of areas would be in the ability to make their time frame flexible. In some cases, we had 30-days’ notice to vacate and that was very important to us to have that small time frame, but another big item there was not only was the pricing fair and very competitive but PON’s accounting system was simplified. It was very easy to understand what you were getting into because I had to have budgets approved for all of this. The competitors had a lot of hidden fees, and a lot complexities in how they charged their fees. Many times there were grave inconsistencies from market to market as the centers were individually managed and so we would be getting conflicting communications from center owners as opposed to the national office that brought us the pricing in the first place. It just, it got to be very cumbersome and very difficult to navigate, and when PON was able to just really kind of make it, “Look, here’s what you’re going to pay. Go ahead and get your budget approved for.” It just made my job a lot easier.
Tim: OK, great. Makes perfect sense. So, you’ve had this working relationship for these past few years and it sounds like you had good, solid reasons for working with PON, as you say, at that time, what about since then? So, you’ve got several years of experience under your belt, what are some of the strengths of the relationship? Tell us a little more about that.
Patrick: It’s really important to me to have a consistent point of contact, if you will. Ever since I joined the bank six years ago, Steve, you were running the account then. I haven’t had to deal with really anyone else in PON but Steve. When we dealt with the competitor, there was a period where the point of contact changed about two or three times within a six-month period. That makes it very difficult to acclimate yourself to a new personality and a new business style, and so I was really impressed by that consistency there with that. That really helped, and then as time went on, PON was able to increase their portfolio, because the difficulty that we faced in the beginning was that some of the other national providers had a larger portfolio than PON did, but it was obvious that they were going to work right away to make sure that there were more markets in the portfolio and so forth, and so that was noticeable from a customer standpoint that they put a lot of emphasis on that. There were also some custom options as well where Steve had gone out when we needed to be in a certain area, and they didn’t currently have a location in their portfolio, that they would approach certain landlords and see whether or not they could be brought in, and then actually kind of make that in real time. There were a couple of markets that that really helped us.
Tim: OK, excellent. Steve, your thoughts about sort of the working relationship over these past few years?
Steve: Yea, I would agree with Patrick. To have one point of contact too, from my side was great as well, and as I started working with them, that Patrick and I had built a relationship and I got to know everyone who was involved on their side, you know Mike and Eugene and some others, but Patrick and I – it was one of those things that when he needed something, I understood what their needs were, and our whole company has really been built on trying to be very client-focused, and knowing what Patrick needed without having to go into long, drawn-out conversations and asking a lot of questions, it really sped up the process for us. And for me to be able to find him something, like you said, there were times where we got things done within a week, and that would be from the first point of, “I need something in this market.”, to a signed agreement and someone moving in. That has been great. So, we’ve built that relationship over that period of time, but what the relationship with TIAA Bank did with us when we won this RFP, and he’s right, we had always had a focus on “we need to expand our network of locations”, it really put an even bigger focus on it for us to where we had clients that would tell us “we love what you’re doing for us, but we need you to be in more spots”, I mean “we need you to be everywhere” basically, is what they want, and so we set out to do that, we’re in the process of doing that, and Patrick saw that evolve to where now we’re the second largest in the country, so it’s something that we know that if we don’t have space for our clients, no matter how good we do everything, if there’s nothing we can provide for them, then we don’t have anything to give them. So, it’s been great, the working relationship between TIAA Bank and us, not just between Patrick and I, but understanding their accounting team, their accounts payable and our accounting team, getting everyone in sync together so that when we set these up, when they move into a new market with us, we know what their process is, not just for getting an agreement signed, but we also know what the process is for them to get the budgeting secured, and then being able to make that initial payment, and then set up recurring payments. We understand as corporate accounts, which is all we work with, we know that that’s a process, and at some points it may take longer than others, especially when it’s a brand new location, and so our accounting teams have also worked very well together to make sure that those things were in sync, and we’ve had one point of contact on either side there too, so they’ve gotten to know each other just as well as Patrick and I have over the years, so it’s really worked out great.
Patrick: There was a milestone there where we were able to migrate away from having to actually Fedex a paper check overnight to where our accounting systems were then were able to speak to each other and have all of these transactions take on a digital profile. That sped things up incredibly and it eliminated an entire step for me for actually having to do the physical work of getting that check, and I say that because I’m on the 8th floor and Finance and Accounting is on the 28th floor, and that’s actually – you have to switch two elevator banks, so it’s just one of those things that really helped once we were able to get that evolved.
Tim: OK, excellent. So, obviously this type of officing model works well for TIAA Bank. Steve, undoubtedly you have other types of corporate clients, so from your perspective, what other types of companies or what other types of functions or operations these days are really benefitting from a more flexible approach to their office space like this?
Steve: Yea, you know it’s interesting, I do have a lot of clients that are in the banking and financing industry, but I’ve seen over the years since we first started attending CoreNet Global Summits and hearing back and forth from some of the real estate executives over the years, kind of the change in their perspective on how to use this flexible space, to where in my mind, I think it’s a great option for any company that may have a sales team in a certain market. That’s a similar situation to what Patrick was talking about, maybe testing a market and moving a group in there to not want to commit to a long- term space, to say you know what, let’s go with a temporary space and we can use a coworking or shared office environment to give our group of 10-15 or even more people a touch-down space to where they could come in, if they’re field sales people especially, to where they could come in and get some work done in an office in a couple of hours and set up their day, and then get out on the road to where they don’t really need to have a structured, leased space where it’s your standard, conventional-type office, and so – the sales groups obviously – and then there’s a lot of others who are starting to come around more so to this shared/coworking environment – technology companies I think in the past had been a little shy about moving into it, worried about maybe some security issues in some of these centers, not knowing enough about what they do. But the way they’re set up nowadays, the internet security within these coworking spaces is very high-standard, and it’s giving these people who are back at corporate a secure feeling about putting their people in these coworking locations. Some of them, like the finance and banking and lending institutions, still need a private, lockable space, which you can have inside a coworking center, and still have the flexibility to come and go as you need. I think more and more eyes are opening up to it. Some of them are trying to change the culture and it’s taking a long time to get out of the standard, you know, conventional space model, but I think as they start putting their foot in the water, they’re seeing that in a lot of cases, it’s increasing their productivity of their people, by being able to be a little more flexible with the way they work.
Tim: OK, Patrick your thoughts on that? Any further thoughts on how companies like yours would benefit from this type of approach?
Patrick: Well, yea, like Steve had mentioned, you know, I guess forever there was always the notion that a company that was national or had a national presence had to have these really tall buildings and where they had this high visibility with branding and so forth, and that really is sort of evolving now, and I guess the major push for that is probably the growth in the digital world. Let’s take banking for instance itself. I’ll bet you you’ve been to a bank, to a physical bank, less in the last year than you did in the previous ten years before that, and that’s because so much more is being done on our Smartphones and so forth, so we have to respond to that as far as our real estate commitments because you know, it’s quite an investment on the corporate level, but we also then have to be able to respond, us and our parent company, to where the lines of business that have to be regionally placed and have to be face-to-face with those customers we’ve got to also make sure that we have the option of being in those markets physically, and it’s…but that is changing, no one is going to be building a skyscraper in every city that they’re in. They’re going to want to be looking for options that are very quickly onboarded and then really, if need be, can be vacated as quickly as possible to respond to changing needs.
Tim: OK Patrick, it sure sounds like your view looking forward would be that for companies like yours and others you probably see demand for this kind of flexible solution/coworking probably increasing. It certainly seems to be the trend right now. Is that your view looking ahead?
Patrick: I think, and because of the growth of technology and the digital world for all industries, not just banking, that this need will increase, and so they’re also going need to have those resources.
Tim: Exactly. Steve, your thoughts on that? Demand for this type space, either increasing or decreasing? I’m going to guess you think it’s going to increase.
Steve: Yea, I would definitely say that it’s going to increase. And it’s interesting, over the last 8 years I’ve seen when I started with Preferred Office Network, we were coming out of an era where corporate America was in a space where they had, you know, there were a lot of layoffs, the markets were all down, they had leased space, and some our clients had floors of leased space, that were empty. They couldn’t sublet it because the economy wasn’t good enough, and so they got into this mindset of, “I’m not going to enter a market again and make that mistake, so I need to test the market.” And Patrick had said it earlier, it’s just the perfect idea is to say, “Let me go test this market. I want to move in and make sure this is going to be a profitable market before I start to commit long-term dollars in real estate in that market.” And I think the other thing that would lead, and I think that’s still in the back of everyone’s hea,d and I don’t think anyone is going to want to get caught up in what happened in ’07 and ’08 or whatever again, but I think another thing that’s going to lead to the increase is something that what these centers are able to do now as far as the IT setups that held back some of the clients of the past – and TIAA Bank when we set up our relationship with them, they had IT standards that we committed to that every time they moved into an office it had to be able to be set up a certain way for compliance reasons on their part and regulations, especially being in the industry they’re in with banking and finance and dealing with people’s personal information. We’re able to do that now. These centers are set up to that, if there’s certain ways you need your office to be set up so that the IT is, it’s singled out, no one has ability to even use shared equipment or whatever it may be, the centers are capable of doing that, and I think that will increase the safety aspect and the corporate real estate executives will start to be able to approve more of these flexible spaces because their IT departments will be able to sign off on it and say, “You know what, this space works for us. We’re not in a liability situation if they’re working there because we have everything regulated, and we’re still in control of the information,” and I think once some of these that are trying to change their internal culture get to that point and realize “you know what, it’s safe to put them out there,” it’ll continue to increase.
Tim: OK, fantastic. Glad to hear that. Let’s see gentlemen, as we wrap up, I do have one more question. Obviously the flexible officing solution is here, it’s growing, it’s going to continue because of the flexibility imperative in terms of corporate drivers and the things that they’re trying to achieve, but beyond that, what will workspace look like ten years from now? Can you share your vision of what the office is going to look like a decade out?
Patrick: I think it’s actually going to strike a really healthy balance to meet business needs to take on the form of people working from home, a lot of alternative workplace strategies, a growing presence of working from the road, if you will, like out of hotels and so forth with the VPN capability and then with this particular option of having this flexible office space, but having a very decent office where you can do some client-facing business along with then what will be left of the traditional large-scale presence and large visibility presence. So, I think right now it’s changing, and it’s probably going to take on a healthy balance of all of those. Do you agree, Steve?
Steve: Yea, I would agree with that, too. I mean, I’ve seen even over the past 5 years, I’ve seen certain companies jump to one side of an overall commitment to shared workspace and then dial it back a little bit, and I think there’s going to be, like Patrick said, it’s going to be a conglomeration of all of those, with people working in different environments in different markets, too. Certain markets lend themselves to the different aspects of how you can office just because of what’s available there, and so that’s going to be a lot of what makes people depend on how they do it, but I think the corporate real estate executives are seeing that there can’t just be one specific way that we office people anymore, just to secure the talent that they’ll need in their companies, some of the employees are going to kind of demand to have some options as to how they work in certain locations, and to be able to have the knowledge of yes, of how to run a conventional space, how to select, and how to utilize a coworking and shared office space environment, which people fit the model to work from home or on the road, those type of things, they’re going to learn more about each one of those aspects and utilize them more so that they can be more efficient, and I think it’s got to be that way. You can’t just pinpoint one way anymore to say this is how we’re going to office; it’s definitely going to be just as Patrick described.
Tim: OK, alright. Well, excellent thoughts there as we wrap up and thank you very much for that. So, Patrick and Steve, thank you again very much for talking with CoreNet Global and sharing your thoughts on this podcast. We appreciate it very much.
26:58 This concludes this episode of What’s Next. Want to record a podcast of your own? Have an idea or point of view you’d like to share? Visit corenetglobal.org to learn more.