Julie Greco 0:00
Work is all around us. It defines us. The future of work impacts nearly every person on our planet and the ILR School at Cornell University is influencing policy and practice around the world. In this episode of "Work! Exploring the future of work labor and employment," Dean Alex Colvin speaks with ILR alumnus Spencer Levy, Chairman of America's Research, and senior economic advisor for CBRE.
Alex Colvin 0:28
It's a pleasure today to be speaking with Spencer Levy, he's the Chairman of America's Research for CBRE. Spencer, welcome to the podcast.
Spencer Levy 0:36
Thank you for having me, Alex.
Alex Colvin 0:38
Maybe you could explain for our audience, just a little bit, what exactly that job involves. What do you do.
Spencer Levy 0:42
Sure. Well, I am the Chairman of Americas Research and the chief spokesman for CBRE, which the largest real estate company in the world on real estate matters, and what I do is I study real estate. And when I say I study real estate I study office buildings, retail, hotels, you name it, I study it. And one of the reasons why I'm very fortunate to be here today with you, Alex is because during my studies in the last year, which have been extraordinary for all of the COVID reasons you can imagine, it brought me back to ILR, my alma mater from 92. I said you know what we're studying labor issues I studied 30 years ago, and let's go back to the source, let's really dig into the decades of terrific research on this. And now that's exactly what we're doing. We're combining our own surveys, our own research with some of the great work that Cornell and some of the other terrific academic institutions have done on the future of work, which is why I'm delighted to be here today.
Alex Colvin 1:40
Well, we're glad to have you and it's interesting question here. At ILR we teach our students a lot about different aspects of labor relations but you know you're in the real estate world, what are the things that you remember from, from your time here from your studies that you've ended up using or drawing on in your work?
Spencer Levy 1:57
You know, it's interesting how I use different elements of it, over time, but the areas that I used consistently were the organizational behavior classes, macro and micro because I've been at four or five different companies and everything that I saw, good and bad, I saw in the classroom first. I certainly use all of my HR learning in the classes, but interestingly and this is not a knock on ILR but the the most memorable professor I had was a gentleman by the name of Richard Kaplan, who taught Ag Ec 101. And what I remember about that class is not just what he taught, but how he taught. I also among many things I teach public speaking, and I say find your north star, who do you want to be like because I want to be like this guy Richard Kaplan because it wasn't just the substance of how we spoke, it was the way he spoke, the way he communicated so the summary of the answer is, I remember my classes but I also remember the professors who impacted me and the way they communicated and he was number one.
Alex Colvin 1:57
And that really is something that's great for the students. Cornell is this incredibly complex diverse University and so you know, it maybe the wines class or oceanography, that inspire you. It's that that range of things you discovere in college.
Spencer Levy 3:09
You bet. Well I, I was gonna mention the wines class too, but we can talk more about that next time we meet in person up at Cornell
Alex Colvin 3:17
Yeah, it's still incredibly popular here but obviously in the days of COVID, a little more difficult to do. It's an inherently in person class. So one of the things we've been talking a lot about at ILR is the future of work how work is changing in the real estate world. You know, I know you're thinking a lot about this question of the future of the office which is really a central part of the work and how we think about it. So, what are you thinking about in the direction of the future of the office and what's that going to mean for the world of work.
Spencer Levy 3:51
Sure. Well, the office, much like retail, much like all forms of real estate have been evolving for hundreds of years, so it's not, it's not new that we're going to see changes to office because of COVID. But what we are going to see is what's known as an acceleration of trend, of previous trends, that had existed, and some new ones. So the acceleration of some of the trends that had existed, was the, were demographic was the movement of people. Movement from people from some places like New York, California, New Jersey, the places like Florida, Texas, Tennessee, Raleigh, Denver cities like that. Right? That accelerate. We're gonna see more of that. Right. You also saw a trend of people moving from cities to suburbs, living there. Now that had happened previously, millennial had already disproportionately been moving to suburbs, so we're gonna see more of that. So that's the movement of people. But then you want to get to the essence of what's going to happen to the physical plant of a building and the space within that building and how will that impact work. Well, the trend that we had seen pre-COVID was known as densification. We saw more and more people in less and less space. And that trend is now going to reverse you're going to see more space for the same people for health and safety reasons, and they're going to be other health and safety changes, including better HV AC, better janitorial services. But then the trillion dollar question, and it is a trillion dollar question, given how big the space is, is how much will work from home impact the need and the design of office space. And we've done many studies on it, McKinsey has, KPMG, as I'm sure Cornell has, in fact I know you guys have, because I've read some of them. So, and by the way they're excellent by the way, and so, the, the answer is nobody knows for sure what percentage that people are going to be in the office less. Some people say all 10% less some people say 20% less. Nobody is going to know until people are feeling safe again and there is a new normal. Now I will point to places like Sydney, Australia I'll point to places like Singapore, where I have the data sitting here on my screen to my right, and where they have controled the disease better, there 90% plus or minus back. So is that the model, or will it be less than that? So we won't know for sure, but there will be some demunition in the amount of office, we're going to use, and the location of that office to be in some of these suburban locations but also to be in some of these secondary cities. But this is not throwing New York or San Francisco under the bus because there's another study we did that found that the most highly educated, highly productive folks are still disproportionately going to go to New York, going to go to San Francisco so even though they're going to have competition from the Austin, Texases, this is the world, they're still going to be the places to be for some of the most talented, most highly educated.
Alex Colvin 6:43
One of the things as an employment scholar that really interests me about this is that there seems to be kind of a tension that you really see playing out between where the where the companies where the employers want people, and how to organize that, and that sort of the demand factor from employees. You know, we hear these, these stories about people who want to be located in more lifestyle locations, right? You know you mentioned some of these smaller centers, right, where they can, you know, get the lifestyle things they want. We're even seeing that frankly up here in the Finger Lakes. We've had this influx of people from the New York City area during COVID you know snapping up real estate, residential real estate properties.
Spencer Levy 7:24
There's fewer nicer places on the planet, let me tell you, from May through September, then up by Cayuga's waters. It's beautiful up there.
Alex Colvin 7:32
Yeah, yeah, so long as you're not shopping in February right? That's the key. In a ice strom. Yeah, how much how much of this you know do you think is being driven by, you know, sort of individual people's desires. How much is it kind of pull by that? How much is it the company's still driving things?
Spencer Levy 7:51
Well let me, let me, I guess there's two perspectives there. One is the employees perspective. One is the employers perspective, right? And so the from the employees perspective, they want more live/work/play environments. They want more balance in their lives and that's why cities like Denver, are on the list because the ski mountains are two hours away Salt Lake City, Park City is an hour away. You live in Southern California the beach could be closer than that. I remember when I was a young associate in a law firm in New York City, I got to the office at seven in the morning left at 11 at night had a crummy little office and I ate crummy little food. And you know what? I was happy as heck! I do I was happy, because that's all I knew, I thought that was the, I thought that was the peak of the mountain for 24-25 year old recent Law School grad. And now they want to have more balance and so that's the employee's perspective. But now we have to go to the employers perspective. And going back to my ILR training you always need to look at both. And from the employers perspective, they want their employees to be happy, but more importantly they want their employees to be productive and productivity is the, the magic, the secret sauce, because it's impossible, let me restate that, it is extremely difficult to measure productivity. It's very easy to measure efficiency, that's why you see so many corporate real estate leaders focus on cost and efficiency rather than productivity, but so let's assume for the moment that your employee wants to be in this live work and play environment like a Denver or Salt Lake City or someplace in Florida. Well, are they going to be as productive, and if they're not, are you going to pay them as much. And if they are not in the corporate headquarters are they going to be treated differently and dare I say it worse in the people who are in the corporate headquarters. And there's this new my new favorite word which I'm going to mispronounce is presenteeism, where you treat the employee in the office, better than those that are outside. By the way that's not a new phenomenon that's been happening forever. And even though I'm here to promote Cornell ILR, there was a great study by Stanford University on this, which talked about in 2015 when they did a study and people that were working from home lost out on promotions. They didn't learn the networking skills, they didn't learn the communication skills. So, these are bridges we're going to need to cross now as work from home becomes more prevalent.
Alex Colvin 10:16
So we obviously are dealing with this a lot as a university because we're in the business of in person education. It's an inherently personal, a campus experience. But as you look across all these different kinds of markets and different asset types, do you see variation in this area where you see more change and less change.
Spencer Levy 10:37
Well you do and there's certainly going to be not just regional differences here in the United States, there's going to be cultural differences, globally. It's going to be different in Singapore than it is going to be in Paris. But, but not as much difference as you think. Because ultimately, the biggest companies are global at this point. And they're going to be measuring their employees by the same measure of productivity. Now, they may treat them somewhat differently in certain places, from a, allowing them to work from home more than, and by the way that that is really the question mark right now. How much do you make this an employee choice, and how much do you make this a mandate to be in the office certain times. And now some of our preliminary studies, because CBRE has done our own studies, found that choice is the preferred way to go for your employees if you can give them that choice, but I think many corporate CEOs are now seeing it differently, because they are seeing falling, in the beginning, we saw a lot of what they perceive to be productivity, they're now seeing that fall off. So I think we're seeing more and more corporate CEOs saying you know what we really need our people in the office today, not just for the fall off in productivity, but to create this corporate culture of whatever enterprise they're trying to promote. So, yes, regional difference by country, by state in the United States, I mean we can talk red and blue if you'd like, but the point is, is that ultimately there is going to be different treatments of employees, but the employers I think are the pendulum, which has swung totally towards employee choice, maybe six months ago, I think that pendulum is now swinging back, like you know what as corporate leaders, we're going to have some say in this, in order to maximize the productivity of the enterprise.
Alex Colvin 12:17
It's interesting when you're talking about that question as the CEO thinking about the productivity of the workers and the value of having them in the in person, we're in a period when there's been this enormous technological innovation. We're talking over zoom I think many people now zoom is central to their work lives. But that suggests that maybe there's some counter occurrence that the technology has limits in terms of how it's going to transform things. What's your take on how technology is, is impacting the real estate of the world at the office, and directly, Indirectly, how do you think that's gonna play out going forward.
Spencer Levy 12:57
Well, I'll answer it from both sides of my mouth. A lot. And a little. A lot because right now we can operate to a greater extent, remotely and but that's just knowledge workers folks. We can't, if you were a property manager, you have to be at the property, right? If you are a service worker you have to be at the restaurant. You have to be the driver of the train. So we're only talking about a subset of workers now that can truly do zoom and things like that. And we are and we're doing it as best we can is, and it's going pretty well. But let me ask you a question now Alex. You could go home tonight and have a nice meal and have a glass of wine. Wouldn't you rather have that at Rullof's in downtown? You know, with some of your students talking about the thing of the day with a pitcher of beer. Of course you would. And the reason is because it's a better environment to be in a restaurant, than to be in your home, although I'm sure your home is lovely Alex. It is a better environment to learn, to teach, to get the subtleties and the office is no different. So, the expression that I use all the time, is that the office, for decades, for many knowledge workers, has been a want, not a need. Why do people want to go to offices? For the same reason they want to go to restaurants, even though they don't want to have to. For the same reason they want to go to hotels, even though they don't have to. Because it makes them better in all the ways that make us human. In the work context, its productivity, its collaboration with people, camaraderie. And in the retail context, it is very similar things camaraderie, networking, meeting people and these aren't going to change. The basic human emotions are not going to change. Which brings me to my other part of the question about, yes, technology has changed things, but it hasn't changed humans basic emotions, where, and where did I learn that? From my organizational behavior classes that I LR, when I was learning about Max Weber. I had a terrific professor, I forget her name, but she was terrific, and talking about how they were trying to understand the psychology of the average employee. You know what? It hasn't changed in 100 years.
Alex Colvin 15:13
Yeah, it's funny you talk about, professors, you know I certainly see that as Dean of the school, you know, I'm able to do a lot of the formal stuff or formal meetings and so on over zoom. But what I've really noticed is, I'm not getting those drop bys, the casual conversations, those spontaneous cup of coffee.
Spencer Levy 15:30
Coffee is really valuable.
Alex Colvin 15:32
It really helps. Yeah, yeah you don't hear that set of things that, that you chat about over coffee or a beer in this in this setup, and so yeah, you know. It's interesting we certainly use the technology in academia for a long time you know we, data analysis, all those kind of good tools but, but we are really missing something with not having that in in person interaction.
Spencer Levy 15:55
Can I go back to the last point you just made there Alex if I could. Yes. You said data analysis. Okay, that's all we do around here, is data analysis right and I've had more debates with my colleagues, even as recently as yesterday, over the value of data that is collected during the pandemic. Because, if you were collecting data during the pandemic that said employee preferences are X, employer preferences are Y and they were conducted and they were collected a year ago, there gonna be very different today by the same people. And so that's where human judgment still has a role. I can give you, I'll give you one horror story if I could, Alex. And the one horror story was in the Self Storage arena. The Self Storage arena, many people have outsourced their pricing models to algorithms for large companies. But in any event, the algorithms back in March of last year said, because we are in the middle of this crisis, you need to drop rents by 40%. Well guess what? Demand for self storage actually went up during the crisis, not down, and by following the algorithms, they destroyed 10s of millions of dollars of value of their assets, because they didn't incorporate human judgment. So I think human judgment, ain't going anywhere, in particular during times of flux like we're in today. You always, data is an incredibly important input. We should get as much as we can. We should analyze it as deeply as we can. But, then we need to think about what is the real world have implications.
Alex Colvin 17:31
Now an industry that is inherently very human, is the travel and hotel industry, and here at Cornell, we have the world's leading hotel school just next door to ILR. My friends over, they're certainly telling me about how that industry has been really devastated by by the pandemic, you know, the, the economic consequences there have been enormous. When, when do you see that industry coming back? Are they going to bounce back quickly slowly, where do you think they're going?
Spencer Levy 18:02
To my friends at the Hotel School I first say I come there and I teach at the Hotel School, every couple of years and stay at the Statler Hotel, and you've always been good to me. And so, I have been studying the hotel industry in depth for a long time but in particular in the last year and this is what's going to happen. So we break hotels into three categories, Alex. One is the most challenged, which are international focused hotels in markets like Honolulu that really only serve an international audience or primarily do that. And those hotels are not going to come back to pre-COVID levels till 2024. And then we have the second category which are business hotels where they are not going to come back in full in cities like Chicago, New York till 2023. And some of those hotels won't come back at all, because we project at least 20,000 rooms and hotels rooms in New York City will not reopen. But then there's the green shoots, the light at the end of the tunnel, and what does that green shoot? The drive to staycation hotel. Those are doing quite well. I had on my personal podcast this week Jordy Johnson, who is the CEO of Johnson development, large owner of hotels. He says his drive to hotels are doing incredibly well. 80% plus occupancy. Can't get a room there on the weekend, and anytime during spring break or summer holiday, you better get your rooms now because they are booking up rapidly. And so some of the demand that's lost from business or international will be picked up by the drive to staycation traveler, part a. Part b, the average American today has more savings in their pocket than they did pre-COVID. Now this is not to diminish the fact that there are many hurting Americans. I am not ignoring that fact at all, but the average American has more savings. So they have savings and they have the key fact. Pent up demand. It goes back to the psychology of being cooped up wanting to spend. And this is not guessing. This is a very common economic concept, but also we're seeing it in action in places that have opened up like Australia, like Asia where my good friend Henry Chin who runs our Asian Research business calls it, revenge retail. People are going out to spend on luxury goods and other things, because they haven't. And hotels are going to be perhaps the biggest beneficiary of it, but until we have freedom of movement, particularly international air travel, it's going to take some time for international and business hotels to come back.
Alex Colvin 19:22
And business travel has really been a central part of a lot of people's work lives and I understand that you yourself were hitting something like 200,000 miles in 2019 which is
Spencer Levy 20:43
2019 was my record year yes.
Alex Colvin 20:44
Yeah that is a staggering amount of travel, travel. It's a little like what George Clooney's character in Up In The Air was like traveling constantly and, l
Spencer Levy 20:56
Clooney was also a motivational speaker on the side, and sometimes I wonder whether people hire me for these shows to be the economist or the motivational guy. But the, and I also teach a lot too. But yeah, the amount of travel I did in 2019 would have been exceeded last year. I did 57,000 miles in January and February alone last year, because I had two European trips, multiple cross country trips. And the question you have to ask yourself is, is it worth it? Is it always, are we going to come back to that. And I don't know that that will ever get back to a 100% of those levels, because I realized I can do so much from here. But I think we're gonna come back closer to those levels than people think. And the reason is is that I already have had my first live gig last week, I did wear a mask for that gig, but I have my next live gig, gig next week in Houston, and it's going to be very different. And then I have another gig live in Denver a few weeks after that. And then I expect come September, it's going to be close to business as usual, with the exception of international travel, which I don't see coming back till mid year 22.
Alex Colvin 22:07
Yeah, yeah I think that's a really interesting point we were thinking about that same trend from the university standpoint. I discovered how much of my budget was actually going to travel, which I don't think we've ever really taken a hard look at until COVID and it's it's really kind of kept us economically fairly stable because we've saved so much money on that. You know, myself included, you know, we go to conferences and then as Dean I'm doing doing Alumni Relations kind of work traveling traveling around. And it's interesting now we think about some of the things that, you know, we're really missing going to those conferences and really kibitzing with our with our colleagues and coming up with new ideas over beers in the evenings. You know that we are missing out. But there was a lot of other stuff we were traveling for that we didn't really need to travel in and we can frankly get connections with people that we wouldn't have been able to make it we do them virtually, so you know so yeah I think we're gonna follow what you say it was a lot of stuffs gonna come back but, but not everything.
Spencer Levy 23:06
Well, sometimes I have these really strange thoughts about whether I live in an alternative reality, and whether a higher power decided to have this crisis so I could spend time with my family. I'm a father, I have three kids, they are 16, 15 and 11. And, you know, for everybody that's listening to this podcast and they're asking about work life balance. Once you get further up the chain, it's very difficult to both have that and go to my kids ballgames or my daughter's dance recital. Guess what I've been doing this year? Going to my kids ballgames, going to my daughter's dance recital. I just drove my kids to school this morning. And you know what? It was great. And you know what, I now see the value in that far more than when I was so focused on the business travel side. So, no, COVID has 100 bad terrible things that happen because of it. One of the positive things that happened, it made you really treasure your family even more.
Alex Colvin 24:03
I'm gonna second that entirely. I have a 13 and 17 year old daughters and I've been hitting soccer games and I haven't, I haven't forgiven I think father than a one hour radius from Ithaca for a year, but I've been to a lot of soccer games locally and I'm quite happy about that. So especially I understand that you, as well coming on podcasts like this you also host CBRE's podcast The Weekly Take. Can you tell me about that and what you're trying to do with that.
Sure, so first of all we're much like you, you should be duly proud of this podcast Alex on the future of work, we're very proud of our podcast, which is about the future of real estate. And so we try to get the premier real estate leaders in the world on our podcast weekly to talk about the different asset classes. So you mentioned hotels. We've already had two hotel podcasts, including we had the CEO of Host Hotels, Jim Risoler, who was one of our guests. And we have the CEOs of every major read coming to our show. We have the global heads of real estate from major corporations including, Bank of America, including Microsoft, to talk about what's going to happen to real estate in the future. And we're very proud we've been recognized by Forbes as one of the top, go to industry resources. And that's because we're very, I say disciplined about making sure we have the highest quality guests, and we have great conversations. We don't make it an academic exercise. We make it a conversation with some of the top leaders and they feel very comfortable to come on our show, because they have their peers there as well.
Right. Well it was a real pleasure having you on our podcast but, but I do hope with travel picking up we'll be able to see you on campus before too long.
Spencer Levy 25:45
As I said, I teach up there, you know, every couple years and would like to do it more. And I would note that my friend my buddy's daughter is about to graduate from Cornell this year and we're probably going to spend a week in a house on Cayuga Lake starting probably at the end of May or early June.
Alex Colvin 26:04
Well, congratulations to her and it's been great having the conversation. So, thank you.
Spencer Levy 26:09
Thank you very much for the opportunity.
Julie Greco 26:11
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Transcribed by https://otter.ai