I am a firm believer we will go back to the office but we will go back to the office under different terms than before. It will be based on choice and trust and repurposing of offices to really make the experience richer.
Susan Freeman
Hi, I’m Susan Freeman, welcome back to our first, 2021, PropertyShe podcast brought to you by Mishcon de Reya in association with the London Real Estate Forum where I get to interview the key influencers in the world of real estate and the built environment. We are still recording the podcast digitally so bear with us if the sound quality isn’t up to studio standard.
Today I am really delighted to welcome Ronen Journo. Ronen has very recently joined Hines, the international real estate firm, as European Head of Operations and Senior Managing Director. An expert on global workplace trends, technology and corporate real estate operations, he’ll work closely with Hines’ tenants across Europe to meet the evolving real estate needs of global occupiers. Whilst his remit will focus on the European office portfolio, he will also be responsible for maximising and enhancing the user experience of Hines’ occupiers across all sectors in their multi-asset portfolio.
Ronen joined Hines from WeWork where, until recently, he was the Senior Vice President for Enterprise and Workplace, heading property management operations and relationships with their key corporate tenants across Europe. At WeWork, Ronen led the delivery of the We Campus concept for the one million square foot Devonshire Square Estate in the City of London and launched the Powered By We concept in Europe.
Prior to WeWork, Ronen was Managing Director for Workplace Resources and EMEA Operations at Cisco, the global technology firm, where he was responsible for corporate real estate in the EMEA region. In addition to his role at Hines, Ronen sits on the board of several Proptech business including SpaceOS, Basking Automation and Juce as well as UK affordable housing provider, Network Homes. He is also a member of the Challenge Panel of Practitioners set up by the Government Property Agency.
So, now we are going to hear from Ronen Journo with his thoughts on what corporates and their employees will be looking for from their workplaces in the post-Covid era.
Ronen, good morning and welcome and thank you for joining us from Paris today. It’s actually about a year since we last met at the Land Institute Conference in Amsterdam. I mean, it’s incredible. So, it’s great to talk to you today and should we just start off talking a little bit about your background because, as I said, you are in Paris, you live in Paris, you studied in the UK and what led you to specialise in the corporate workplace?
Ronen Journo
Ah, that’s a good question. So maybe just a little bit about my journey. I started my education in surveying and construction management, I entered the industry about 27 years ago and, you know, when I entered the industry after education, you know, worked in the facilities management world and then moved from there to the workplace consulting world, you know, with DGW and then spent just over twenty years at Cisco, you know, performing different roles within the corporate real estate organisation there. Eventually, I led the organisation for the EMEA region and really focussed on how do we enable the business to grow, to change and attract and retain the best talent? So, my interest in the world of work has began, I guess back in ‘94/95 when I first met the DGW team and understood that some great thinkers were looking at the convergence between people, place and technology and we were really working with some, you know, incredible masterplans across the world in trying to create place and create communities. So, that’s when my interest in the world of work I think has really picked up, picked off, and then in Cisco had the opportunity to do many different things in the world of work. When I left Cisco and joined WeWork, you know, the attraction was to join the organisation that was really disrupting the core of my industry but also innovating in the whole world of work and the whole notion of why do people work? How do people work? How do communities come together? And then, you know, having spent three years at WeWork and taking the decision to step down and do something else, I couldn’t have been more pleased to have joined Hines which, you know, is one of the world leaders in investment and development and management of properties across all asset classes, you know, across the world, incredible tradition, a very strong brand that stands for quality and really wants to lead from the front, you know, in the world of work. So, that’s kind of my interest and then outside of the day job I, as you know, I have other interests in the world of work and contributing to different, you know, books and publications. I find that you always learn, never conversation.
Susan Freeman
I have to say, it’s a great time to be joining Hines and very exciting opportunity, I mean, there’s never been such a time for disruption, innovation and, you know, understanding how the workplace is going to change. You mentioned WeWork and I think at WeWork you led the delivery of the Campus at Devonshire Square in the City of London which is a million square foot. Was that a difficult concept to sell at the time or were the City quite welcoming of it?
Ronen Journo
So, that was actually the first, you know, kind of business project that I was focussing on and really what were we trying to do? So, it’s a very well established neighbourhood within the City of London and, you know, WeWork acquired it as part of a JV but, why did they do it? Adam had a strong belief that you can take the concept of community from an individual building, from the vertical to the horizontal and that you can actually connect between very distinct asset classes, between retail and food, traditional tenancies and co-working members and create a business community and a social community, and produce, you know, produce value add, produce alpha for the investment. You know, I would increase the foot fall, you know, increase the occupancy and then really connect that neighbourhood into the fabric of London. So, my role there was to represent the operating company and to engage, you know, people like big architect to develop the masterplan, a multi-year plan of how do we achieve that. Unfortunately, after a year of a huge amount of work that has been put back on the shelf. We did open two WeWork buildings but it didn’t go, you know, much further than that. But it was a fascinating project, a lot to learn, you know, a lot of kind of thinking out of the box and getting very bright people to really stretch the imagination of what you can do in case making.
Susan Freeman
Yes, and last time I was there, was obviously over a year ago but there was a real buzz about it and it was something sort of very new for the City. So, in your new role at Hines, you are going to be obviously focussing on workplace interaction with the tenants across the European portfolio and, you know, with a real focus on user experience. Now, I think you more than anybody else have a real understanding of what corporate occupiers are going to be wanting from their workplaces going forward and I think that you have had the opportunity to interview the CEOs of some of the world’s major corporates. I mean, is there anything that you can tell us what actually came out of those discussions? Is there, you know, consistency? And, you know, do you think that the big corporates are ready to make decisions yet on how they are going to want their workplace to operate going forward?
Ronen Journo
That’s a great series of questions. So, to be as concise as possible, we have engaged, you know, over a hundred, you know, original and global heads of real estates during the first lockdown of the crisis and it was really all about, it was a learning exercise, right? It was connecting with people and listening. What are they thinking? How are they dealing with the crisis? What do they think will be the implications for corporate real estate occupiers, you know, once we get through this crisis? And, what was fascinating for me is to learn that there were distinct schools of thoughts about how aggressive companies believed they were going to optimise their footprint because they felt that the genie, you know, has gone out of the bottle, people now will look at offices very differently, organisations will look at offices and portfolios very differently and therefore there was an opportunity to optimise the footprint and reduce costs. So, there was extreme schools of thought. There was one school of thought that said, you know, we are going to pursue that aggressive cost reduction effort. There was another school of thought that said no, no, no, we need data. We need data to better understand how people are experiencing this virtual working at the moment and we need data to understand what people’s expectations are once we return to the new norm and the consensus that started to build during this dialogue is that almost without fail, you know, all the large corporations that we spoke to, and they represented over six million people who use offices, so fairly substantial cross-section, you know, of companies, is that when we get through this crisis, the purpose of the office will evolve. Every large corporation declared, we are going to retain offices in our portfolio. They will be strategic. They will be core but the purpose of that office, that destination, will evolve. People are going to be given a great deal more choice and people are going to be trusted more. How they perform work and where they perform work but with the same breath what the corporations shared is, we will repurpose our offices. We will make sure that the offices are attractive. We will make sure that they are of high quality. We will make sure that our offices are enabling collaboration, learning and serendipity. We will make sure that our buildings are technology enabled. We will make sure that our buildings are as healthy as possible, that are as connected to the local community as possible therefore aligning with the ESG initiatives for every organisation and those were the declarations of many, many heads of real estates across the world that I have spoken to because what happened is that their boards seized the opportunity of this reset and said let’s talk about business and work people now that we are not tied to the offices. So, this is kind of, you know, the kind of the key headlines. Now, we are seeing a lot of headlines of what companies have already been the clarity of we are going and doing. Some are declaring that they are going to reduce the footprints aggressively. Some are declaring that they will give people ultimate choice to work anytime, anywhere, any place. Some people say we will become totally virtual and the interesting thing is that the headlines come from some very traditional occupiers, you know, Siemens in Germany, “We will trust our people to work wherever they are happy and productive”; Fujitsu in Japan, “We will enable hybrid flexible working”; Barclays Bank, Lloyds Bank, you know some very traditional EP, some very traditional corporations are declaring from the front, “We are going to enable our people to make choices and we will trust them and we will enable them to perform work in a much more flexible way." But I am also reading a lot, and I am sure you do, that there will be a race for quality. People need a place to congregate. People need a place to come together. It has been the case for the last 400 years when the coffee houses began and the private members clubs began in London and Amsterdam and Rotterdam, and it’s not really changing for us as humans, we need a place to congregate and align to and, you know, feel that we can engage and do business.
Susan Freeman
Yes, and in fact the boss of Unilever came out a couple of days ago also saying that his office workers wouldn’t return to working five days a week in the office and they will be looking at a hybrid model and, I mean, it’s interesting because Boris Johnson and also our Chancellor, Rishi Sunak, you know having saying workers will return to the office because, you know, they are all social animals and need interaction and obviously, you know, they’re hoping that the work from home experiment won’t continue on a permanent basis but it just seems unlikely from, you know, everything you’ve said and everything we’re reading that people actually will come back to working five days a week in an office that, you know, they had the opportunity to not have to commute an hour each way and it would, I think be surprising if we go back to the old normal.
Ronen Journo
Yes Susan, I think you are right and I think what I’d love for the audience who are listening to this to just reflect on, is this: back in the early 2000, we introduced hotdesking, we introduced flexible working, agile working. What did the world of work do at that time? The world of work liberated the human from the cubicle. Liberated the human from the desk and said we’re going to design the office in a much more flexible manner. We’re going to give you a much richer, you know, menu of settings that you can choose where to perform different tasks, whether it’s a telephone call, focussed work, cup of coffee or meetings, so we liberated you from spending ten hours a day at a cubicle. All of a sudden you had flexibility to move within the office. That was a step one. Then we introduce, you know, 15.41 wireless and we gave people laptops that flexibility became even more real. The next step that began really in the tech industry and then very rapidly moved to professional services, was liberating the human from having to spend ten or twelve hours a day in the single building and we actually said, listen, we recognise that you are going to spend time with customers, you are going to spend time, you know, training or travelling so in essence during a typical month, you are not 100% in your office. So, that notion, that social contract between the employer and employee became much more real and HR policies came to life and people, managers were coached and trained on how to manage a more mobile workforce. Now, the tech industry back twenty years ago led the way in enabling people to work from any time, any place, anywhere so over any device. The rest of the world caught up very rapidly. What has happened to us and what did we seen then? We saw that the world became too virtualised. When you looked at the data points, the average office occupancy across Europe was between 45 to 55% so you had huge portfolios that were being underutilised and that cost a lot of money so companies started to optimise and said oh I need to get a better alignment between my second biggest cost – real estate and my workforce plan – how my people actually behave and how my business has performed. So that realignment took place. Then what happened is the world became overly virtualised and then, you know, the co-working kind of, you know, wave came about saying hey we’re going to create communities, we’re going to create work environments that actually feel like home, a bit more casual, give good coffee and actually bring people physically back together. So to drive the matrix up, the efficiency matrix up, the effectiveness matrix and the experience matrix. So, I think that this trend has really begun way before Covid. Covid accelerated all of this. Why? Because everyone had been confined to the same conditions. Entire boards of companies, the most senior execs to the most junior graduates. We have all been confined to the same conditions and we had no choice to learn how to collaborate and do works with technology. Now, I am a firm believe we will go back to the office but we will go back to the office under different terms than before. It will be based on choice and trust and repurposing of offices to really make the experience richer.
Susan Freeman
And does that ultimately mean that the corporates will need more office space or less office space because clearly if you’ve got more areas per collaboration and when brainstorming and you’ve got this – cubicles – as you say, that could actually result in needing more space.
Ronen Journo
That’s a great question. I think from my learning of the industry and, you know, especially in engaging a lot of these leaders, we can’t look at the entire economies of the world too simplistically but if you are managing Nestle or you managing investment bank, your office portfolio is made up of very different assets. If you are managing DHL, it’s not all offices, right? It’s industrial. It’s logistics. It’s very heavy technical laboratories. So, your workforce if you take, you know, Nestle for that example with hundreds of thousands of people, portfolio of over four thousand, you know, assets, it’s a very complex portfolio made up of very different assets. So, if we just focus on the office space for a moment, pre-Covid there was an inherent problem for the vast majority of corporations of misalignment between what the business was doing and needing, the workforce plan that the business was following, you know, what scales do I need, what capabilities do I need and where do I need it, to how real estate was providing its space. So, the business direction, the workforce plan and the real estate portfolio. There was a total misalignment. Now I am excluding from that the hyper growth companies such as Amazon, Facebook, Apple but for the vast, vast majority of other occupiers, there was a misalignment. That misalignment translated into underutilised spaces, often legacy spaces that required a lot of reinvestment, in the wrong locations. The business was moving faster than real estate leaders were able to adapt. Now, I think post-Covid we are going to see multiple things. We are going to see companies reducing their footprint because it is an opportunity… they are seizing the opportunity to reduce costs, reduce their footprint, reinvest in what they retain to make it much more collaborate, much more attractive and they will be looking at real estate as a service to the employees. It’s not a must have, it’s a service to my employees because people have a choice, they can stay at home, so I need to provide an attractive, amenities rich, quality service to my employees. So we will repurpose. Whenever they grow, they will also look at what a supplier of the market has to offer. So, do they go to a flex operator or do they come to Hines and say, listen, I actually want the best quality building in the city centre, full of, you know, rich amenities and services and I am willing to pay premium for that because I actually am not going to have thousands of those locations, I am going to have a handful of strategic locations but I really want that for my people. So, that’s what we are going to see that. The companies that are going through hypergrowth are having an interesting through process at the moment and it’s all in the press, we can read what the technology companies are doing. They’re rethinking their workforce plan. They are rethinking the basics. How do I align to the growth of my business and then forward to the changing workforce plan and therefore develop the real estate plan and adjusting to it? What do I mean by that? All of a sudden, loads of companies are saying the talent pool is global so if I am sitting in Silicon Valley, I don’t have to hire all my talent in Silicon Valley where the cost of housing is huge, where transportation and congestion is a real problem, where pollution became a problem. All of a sudden, I could shift some of my growth into Austin, Texas, into North Carolina and actually can create a much more manageable portfolio that’s supposed to go to my business. We are going to see the same thing in Europe. We are already seeing the same thing in South Africa with some of the big South African companies saying I can now tap into talent that speaks multiple languages in the west coast of Africa and east coast of Africa. So, I think it’s going to be fairly fundamental changes, a lot of them positive but it’s going to take several years, this is not going to happen overnight, this is probably the next three years of reiteration. Depending where the company is in the growth cycle and depending who is leading it. Is it real estate leading it? Is it HR leading? Is the CFO leading? Who is leading the charge of change?
Susan Freeman
That’s interesting because I was going to ask you when companies are going to start making decisions because I know, you know, as we’ve discussed this during the last year, you’ve said that, you know, come January-February this year, they are going to start making decisions but obviously the pandemic has gone on, I think, for longer than we expected it to and does that effect, you know, decision-making?
Ronen Journo
So, the last rounds of dialogue that I had with many of those leaders was September, okay? I joined Hines on November 2nd and September was the last round of, you know, fairly extensive dialogues, a number of roundtables, a number of webinars we did and there was a lot of exchange and the hope for many corporations was this, that they knew that they had to go into the kitchen and bake their strategies in a cross-functional manner. You know, I was Head of Real Estate with the Head of HR, with the Head of Technology, with the CFO and the Board, bake their strategy of post-Covid and many of them shared with me that nothing will come out to the market in a tangible way before the end of the winter because they said, look, it’s going to take us till Christmas to bake it, then we have to take to the board, have to price it, have to kind of figure out what would it take to implement which means that nothing will really start to transpiring to the market before the kind of April timeframe. I think now with the prolongation, it’s probably going to push it to the summer. However, let’s not forget the most fundamental reset that we are all going through at the moment and that is the human reset. We are using technology today in a more intensive manner than ever before in probably the history of mankind. All of us. Right? We are using it and businesses are still operating, the stock markets are still operating and you know, there’s a lot of, there’s still a lot of very positive momentum in industry so, people have been confined to this for a year, let’s assume till the summer, eighteen months, so I think the bigger question is, how radical is the change going to be from an occupier’s perspective once we get through? Let’s assume we get out of this by the summer and we start executing on the plans by then. How radical are they going to go along the spectrum of optimisation, cost-cutting, repurposing? And I don’t think any of us know, we can only observe, read the headlines and listen to what many are doing.
Susan Freeman
The other thing I wanted to ask you about and I know it’s something that we have discussed before but there’s a lot of talk about the hub and spoke model and people not necessarily wanting to work from home because it’s not so great for a lot of people but perhaps working near home. What are your thoughts on that?
Ronen Journo
So, it’s a good question. So, first of all, you know, anyone who studied, you know, real estate and I am sure many, many of our listeners here have come from real estate and understand the one on one. Hub and spoke as a tool in portfolio planning is not new. Going back to the eighties, the nineties, you know, all of the great institutions teaching real estate taught us about portfolio planning, right? You know, CBD, core, hubs, spokes, suburbia, you know, distributed, those were concepts that have existed in our teaching for decades. Some corporations have actually implemented those strategies over the years in the way they built their real estate portfolios to support their workforce plans, to support their businesses. If we look at the tech industries, that they typically it would have been a very large campus by an airport, right? The campus has to be large and it has to be by the airport because we need to travel to California and we need to have that accessibility but I need a sales office in the heart of the city to invite customers and demonstrate my technology. The pharmaceuticals, a similar approach. Sales and marketing offices versus, you know, where the big campus is and you know for R&D are. The banks, the same thing. You know, I need my trading floor to be right in the hub and I need to have, you know, different offices for private banking, investment banking. So, those concepts are not new. The big question is this: if indeed we are going to enter an era of human centricity where the human is put at the forefront of all decisions, the person will be totally enabled. An entire industry, both from the investment management, you know, developers’ perspective as well as the occupier, will shift its focus to that. How do you enable these people to work from a rich ecosystem of destinations? So, I am a firm believer there will continue to be core, strategic locations in the heart of every city. We love the energy of a city. We all do. Just look at the history of London, New York, and Paris. In the last hundred years also post-tourism. Those cities bounced back. Right? Every one of those cities. Madrid, you know, Brussels, Paris, London, New York. All bounced back and all thrived so, I think strategic locations and CBDs will continue to thrive. We may not need as much of it. We may demand much more rich set of services and be willing to pay that premium but those locations won’t go away. Now the next question is, if people come to the CBD for two days a week or three days a week, where do they spend the rest of the time? Do they spend it at home or do they spend it near home? And me as an employer, how do I enable that? And so I think what we may see – and this is just speculation – we may see companies who have suburban locations optimising them and repurposing them. We may see some employers offering their employees a monthly allowance and say, you know what, I’m willing to give you X amount of money for you to buy access to a local space, could be a local flex operator, a local whatever but I am willing to give you a certain amount of money to work from hear home, not from home, and therefore I think it will be about enablement as opposed to, you know, is it just a hub and spoke and I think there’s excessive amount of noise in the press about hub and spoke and what are you going to do. I do know for a fact though that some companies that have very, very high concentration in financial districts are asking themselves the tough question: do I need to continue to have all my trading floors in Manhattan or in Canary Wharf or could I actually distribute them? Without naming them but I am aware that those conversations and thought process is taking place.
Susan Freeman
And that also begs the question as to who is going to make the decision about where employees work? Is it going to be the employees or is it going to be the employer?
Ronen Journo
Given that this crisis has lasted so long and subjected all of us to this, you know, horrendous kind of, you know compromise on our life, what I am observing is that the leadership of companies is becoming very, very people and humancentric, right? It is focussing on people. How well are you doing at home? Who is suffering hardship? They are harvesting data. They are serving their people. We at Hines are doing it all the time, even though we don’t have the scale of, you know, some of the big tech companies, the banks, but you know I spoke to our Head of HR yesterday and she said, “I am surveying our team across Europe constantly. I want to hear how people are experiencing this kind of experiment which is just so new to all of us” and so I think people are… the companies are shifting their focus, it is about people, wellbeing, mental and physical wellbeing. Let’s get data and let’s figure out what kind of social contract do we want to have as an employer with an employee once we get through this and I honestly believe that there will be a shift, it will not go back to the old, old world for many reasons but I don’t think we are going to go back to the old and so I think we are going back or going into an era of much more authentic dialogue, much more data driven decisions. Trust, choice at the forefront.
Susan Freeman
And when you say that we won’t go back to the old and, you know, you touched on redesigning offices. One of the things that you said that really resonated is that the old work symbols may go so how do you see that? Will we no longer have CEOs sitting in sort of big corner offices?
Ronen Journo
Ah! I love this question, okay. I am going to share just something I have learnt, you know, in the first six months of the Covid. A Professor in London Business School held a really interesting webinar and by the way I would encourage the listeners to dig into the LBS website, there was a lot of very, very high quality webinars offered, you know, and anybody could just sign up and he challenged the audience to think differently. He said, “We have been in this now for five months. Let’s not lose the opportunity to recognise that technology has democratised and humanised work." And what he meant by that is that all of us – CEOs of companies, executives running the companies, and the most junior employees – are all have become a voice and a screen, in a square on a screen, and not only that but what has happened is that people began to dress more casually. People, you know, we were beamed into each other’s bedrooms, into each other’s kitchen so all of a sudden you could see the pets, the cats, you know, the children and it became much more personal so, this was five months into the crisis. Now, we are year into the crisis and what has technology enabled us is that actually to be much more intentional about, you know, the communication, the connection with people, but it took away a lot of the old world symbols of hierarchy from the exchange. You think about it, you take the CEO of any company, I take the CEO of, you know, my company, take Jeff Hines and take the Executives who run Hines. From the day I joined, I have met them across Zoom. I have participated in global leadership calls over Zoom, you know, weekly calls, you know, for our region here over Zoom and many, many other large corporations are the same but the old world symbols, if I was a CEO of let’s say, I don’t know a big bank, I would have sat in an executive floor, I would have had multiple assistants outside, maybe my furniture would have been different, maybe I would dress different. Not now. Now, you have to be a voice and a face and a human on the screen. So, a lot of those old world symbols that conveyed power and hierarchy are gone. My question to the audience: how many of those do we want to bring to the future? How many of those are relevant to the future when our workforce is made up of four generations? People like my daughters, the teenagers who were born with a smartphone in their hand to people like me in their early fifties and people, you know, in their sixties, all very active in the workforce. Four generations. How many of us want to take those old world symbols to the future and how many of us are willing to let some of those go and actually say the future is humancentric? It’s about learning together, it’s about creating together, it’s about quality.
Susan Freeman
It’s a good question. And, it looks as if like going forward, we are going to see a lot of businesses working with a hybrid model so there will be, you know, some people actually, you know, in the office, there will be some people working from home or near home at any time. There must be different skills to actually managing a hybrid workforce and I can see that one would run into problems if there are some people, including the CEO, who are always in the office and some people who are more often out of the office. How does one make that work?
Ronen Journo
My own experience and recommendation to our audience is to, not to try and reinvent the wheel, you know, work, first of all work in partnership, this is not something that just real estate leaders or HR leaders need to solve alone. This is going back to the convergence between people and culture with technology and place. Okay? This is a joint effort to enable a business to perform and a workforce to perform and what I would also recommend is to look at the tech industry of the last thirty years where the tech industry, and the oil industry to some degree, and look at what they did, you know, when they started to introduce flexible working and a much more dynamic workforce. They were focussing on ground rules. They were focussing on coaching and training managers how to lead teams across geographies, how to lead teams in different time zones, how to lead teams that are not always physically in the same space. So, it’s very much about leadership, it’s very much about management, you know, thought process and it is about communication. You know, in my Cisco years I was trained how to lead a team across eighty plus countries. My team itself was actually based in twelve different countries and how do we bridge between this region and the US? So, you’ve actually been trained and coached on how to try and become as effective as possible. I think the last thing I think, I think it is about communication and leadership. I think people will be much more intentional and will have to say “This day of the week, we are going to be hosting customers, clients, therefore I want everyone in the office. By the way, we are going to have lunch together, we are going to have breakfast together. Or this day, we are just going to have an internal session and I do want you to commute and come in and here is the agenda, here is why we need to be together." People will place value on being physically together. The same way that we are today placing value on not having to commute.
Susan Freeman
And I think we’ll appreciate it, we are going to appreciate it that much more when we can all get together again. And just, you know, slightly different question, there’s a lot of focus at the moment on flexible office operators and, you know, again question about what percentage of the, you know, global office space will end up being, you know, flex. Now, I know some of the larger landowners, including Hines, are adopting their own flexible working models and I think it would be really useful to our listeners if you talked about the Hines model and also how you selected Industrious and Convene as your partners to work with in that space.
Ronen Journo
Okay. Maybe just, if I may, just take one step back. Why has flex grown in popularity with occupiers and why, I am a firm believer, it will continue to grow? The speed of change for businesses is horrendous. The speed of digitisation is huge. Many, many newcomers are disrupting traditional businesses, whether it’s retailing, whether it’s banking, even professional services, you know, pharmaceutical. There are a lot of start-up scale-ups that are disrupting very traditional businesses so the very large occupiers, the large businesses are having to adjust very rapidly and reinvent themselves. Okay? Because of the intensity of disruption and change, they need to also adjust the workforce plan and they need to contract in some locations and grow in others, they need to acquire companies and they need to spin off companies. Therefore, the real estate team within those occupiers is having to adjust at a speed that the industry is not ready to adjust. Traditionally, you entered a five year lease or ten year lease or a fifteen year lease and you invested a lot of CAPEX. You were tied in. Well, five years is a very, very long term in the life of any business today. So, because of that a speed of change and disruption, you know, real estate was always doing catch up and therefore the flex came to being more prevalent because companies realised that the ability to consume space on very short-term is necessary to a proportion of their portfolio. For some it might be 5%, for some it might have been 10% or 20% but whether you are growing or shrinking, as your business changes, the ability to sign a six months agreement or a twelve month agreement, twenty four month agreement, became very important and attractive and therefore we saw the growth of flex. I am a firm believer, reading all the data out there, is that the flex will continue to be an important offering of our industry and if you see I am being very careful not to talk about co-working, I am talking about flex. Flex is a wide spectrum of how we offer space to occupiers, so it’s everything from, you may take a five year lease with flexibility to contract or grow, you may take a ten year lease with those flexibilities, or you may take shorter tenure, you may take twenty four months commitment and it may go all the way down to access to meeting lounges, access to hotdesking on a daily or weekly basis, so the spectrum of flexibility is wide. Now, coming to Hines, a couple of things around that. We have incubated the concept of flex recently with, as you just mentioned with Hines Square and we launched a number of locations in the US with Industrious and it’s successful and it’s super important for us to have done that as a starting point in order to learn the true value to our clients and to truly understand, you know, how do we enable our clients to retain their culture, retain their identity, create the communities they want to create but at the same time consume space in the more flexible term. So we did that. I am now, you know, the platform that I am gradually building for Europe, flex is one of the products on my platform and I am part of the global team that is now focussing on how we take that to market so I am right in the centre of it with Houston, you know, contributing, learning what’s been done, what are we doing and how do we take it globally. What would make sense? What do the clients need? What the investors’ expectations are and what actually would make sense? Not just doing it for the sake of doing it. Doing it because it really makes long-term business sense.
Susan Freeman
And, do you have any sort of feel for what percentage of global workspace, office workspace, will end up as flex because I have heard anything from like 30% up to 70% but it seems to me it’s probably a little bit early to say?
Ronen Journo
I think, you know Susan, I am sure you would agree, I think it’s all crystal balling speculation. I do believe the proportion of every occupier’s portfolio, you know the proportion of flex with every one of those portfolios, will increase but I don’t think it will replace the entire portfolio because I think corporations recognise that they need strategic locations that convey their brand, that convey their culture, that convey, you know the technology that they are using perhaps of selling the product they are selling but also the type of experience that they want to offer their employees. So I think, you know, we are going to see that remaining in the portfolio but because of the intensity of business change, every occupier will have to also consume flex but I believe that occupiers will, again, if they apply the lens of human centricity and business, the type of flex they buy will have to be aligned to what they are achieving in their co-offices. They will not want to lose their identity. They will not want their people to have a substandard experience. If they stand for quality and they attract the best talent in the industry, they would want their employees to have that experience in the flex offering that they use. I don’t think they would want to create the haves and have nots and I think that’s where we may see a correction in this demand and supply of that.
Susan Freeman
I just wanted to ask you about the concept of more mixed use in city centres because you are sitting in Paris and the concept of the fifty minute city is something which, you know, is being embraced in Paris and, you know, in various other cities. Do you think we are going to see more mixed use in city centres because I know Professor Moreno who created the concept, is very much of the view that we are no longer going to see these office campuses, that it is going to be more a mix of homes and offices and hospitality?
Ronen Journo
Yeah, I read Professor Moreno’s paper and also have seen him, you know, speak live numerous times as well as, you know, Hidalgo, the Mayor of Paris. What I am learning now that I have been in the firm for almost three months, is that we as a firm, just to give you an example, are very heavily involved in some very substantial mixed use projects across the region where the focus is on really creating communities that are mixed use, that are vibrant, that help the housing crisis, that help businesses, you know, not over-commit to more space than they need, that bring back, you know, the smaller retailers and it’s fascinating to be within Hines and to observe that and, you know, we have really powerful examples in Germany, in Dublin, in Milan where we are heavily engaged in reshaping neighbourhoods and cities and then I have been fortunate enough in the last month to be pulled into a lot of those conversations and for me, the fifty minute city is going to become a reality, you know, through these such projects that Hines and others are really working on and creating and I think we should not ignore where we have been before. So, I am huge advocate for the concept of the fifty minute city, I think we need to be realistic that some cities like London are geographically so much bigger than Paris and you may not achieve that but what you can achieve is vibrancy and, you know, much more affordable housing and hopefully reduce people commute because if you think about where we were before, commute was horrendous, house prices was, you know, created such a situation people had to travel too far in order to be able to afford it and, you know, office, parks and city centres became ghost towns, after five o’clock they were dead, on the weekend they were dead and I think we are striving for more as a society. So, from what I am observing, what I have learned recently in Hines, we are right in the middle of that both in the United Stated and here in Europe and I think over the next several years it will translate into reality.
Susan Freeman
Yes, I hope so. I notice from your CV that you are a member of the UK Government Property Agency Challenge Panel of Practitioners which I understand is a mix of public and private sector and I just wondered what’s the remit of the panel and what challenges are you having to deal with and what sort of recommendations are beginning to come through?
Ronen Journo
Okay. So, first of all, I’d just like to say that when the invitation came through to join this panel, it was probably the most humbling moment in my journey over the last 27 years, you know, as a British citizen and someone who has adopted the UK as home, you know, for the last almost forty years, this was a very humbling moment to be invited to express a view and engage with, you know, a number of other leaders and help, you know, the Government Property Agency. So, a couple of things, the Government Property Agency houses over 400,000 civil servants in the UK and their remit is to look at the ten year strategy of how we provide the best working experience to our civil servants. We cannot pay the civil servants the same salaries that they would have earned if they worked for an investment bank or big tech company so how do we ensure that we provide them with the best experience that balances, you know, wellness with choice and they have a ten year strategy has been now revisited for the next decade and the panel was assembled in order to review the strategy and review the business plan and review the old structure and review the initiatives and express views about how other organisations in the public sector and how other organisations in the commercial sector may be doing things differently. So this began last April, we met at a regular frequency, it’s very much Chatham House, we know everything we review and everything we discuss is treated as highly confidential and we have made a set of recommendations to the GPA as to, and the 51.10 as to, you know how to help the organisation evolve moving forward. As a panel we are going to stay in touch, I think we are probably going, you know, stay in touch with the GPA and the Cabinet Office during the next twelve months because we have a keen interest to help and contribute but some of the recommendations are very much in line with what we discussed in the last kind of, you know, thirty to forty five minutes, human centricity. You know, the Government has launched the hubs across the UK and wants to bring a lot of different departments into, you know, a number of key hubs. Well, if you do that, that’s fantastic because you drive efficiency, you create communities, let’s not forget the civil servant in the mill, the human centricity, let’s not forget technology, let’s not forget experience, the wellness. So everything we discussed applies to the Government and what I think I would say about our Government is that I think it’s incredibly courageous to establish such a panel and truly be engaging the panel and listening and wanting input from the outside. I think it’s phenomenal. I think it’s, you know, the Government in the UK over twenty years ago I think led from the front when they wrote a book called, you know, Working Beyond Walls, which was based on The Treasury moving to flexible working. So this is just another sign that our Government is really very cognisant of trends in industry and doesn’t want to be reactive but it’s a very, I have not talked about it publicly, it is the first time I am sharing it so thank you for asking, I shared it with friends like you but it’s something that I really feel very privileged to have been invited to participate and contribute to.
Susan Freeman
Before we wrap up, I notice you describe yourself as an internationalist by heritage and nature, and you’re happiest in a global context so, the last year or so must have been quite difficult because I imagine travel has been a little bit limited?
Ronen Journo
Travel has been very limited but Zoom and Team and technology has enabled me to do what I really feel is fundamentally important and that is connect with people and just a short example, you know, in the last kind of seventy days that I have been in the firm, I have been on a very intensive speed dating onboarding programme and I have met almost 180 or our team members, our executives, across the world, across Europe. Just this morning, I spoke to our Senior Managing Director who runs Asia Pacific and, you know, we spent an hour together connecting. Now, it’s not the same as walking the building, having lunch, shaking hands but that will follow and I had to adapt and, you know, as long as you are connecting and authentic and the purpose is clear, it’s a beginning and we will complement that with face-to-face over time.
Susan Freeman
I am not sure that we are going to get back to shaking hands in a hurry and I am not sure, you know, you’re a Parisian, you know there’s a lot of kissing, multiple kissing that goes on, I mean, you know, will that return do you think?
Ronen Journo
Well, social norms have changed and yes, I don’t know, I’m not smart enough to know but, you know, has the kissing in Italy, in France and Spain gone away forever? I don’t know. Maybe it’s good, maybe it’s good for society. I think we will all witness that together, it’s a very special time, you know, to be in our industry. It’s a very special time to be in society and I think we need to seize that opportunity to learn. I really fundamentally encourage everyone to be humble enough and say I need to take a deep breath and really learn about me as an individual, about my family, about my business and really kind of understand that this is a reset to society, a reset to capitalism and really just take that to heart and, you know, I think we will all come through that, hopefully healthy and thriving.
Susan Freeman
I think that’s very good advice and a good place to stop, Ronen. So, thank you, thank you very, very much, I really enjoyed that.
Ronen Journo
Thank you. Thank you, it’s a pleasure and Susan, next time, I would love to have lunch together. Thank you so much for the opportunity to have this conversation, I really appreciate it.
Susan Freeman
Thank you so much Ronen for joining us today to share your invaluable insights on where and how we are all going to be working in the future.
So that’s it for now. I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very soon.
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