Voice of the Occupier: Ken Manke, Otis Elevator Co

 Hosted by Adam Hoy, President of the CoreNet UK Chapter, our debut episode features a riveting conversation with Ken Manke, now with Otis Elevator Co. Tune in to hear their thoughts on the pressing challenges facing occupiers in today's CRE landscape, from shifting reporting structures to the pursuit of quality and optimising resources. 

Listen now to gain valuable insights and to stay ahead of the curve. 

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Transcript

Welcome to the voice of the occupier, the podcasts from the UK chapter of CoreNet that dives deep into the world of commercial real estate from the perspective of those who truly inhabited. I'm your host, Adam Hoy, and I'll bring you insightful conversations with industry leaders, innovators, and visionaries shedding light on the challenges and opportunities facing occupiers today. Let's get started. 

Hi everyone. Welcome again to the voice of the occupier, from the CoreNet UK chapter. Really happy to be here today with Ken Manke. Ken joins us. He's an industry expert, been in the industry a long time, and worked with companies  such as Unilever, CBRE, Colliers. Ken and I've worked together a couple of different times in our career.

Really happy to have him on the, on the show today. Welcome Ken. Thank you, Adam. Great to be here. Appreciate the invite. Yeah, really happy to have you.  Talking about the show, really, the intent here is to have a conversation. The the intended audience is occupiers, people in the industry, people that are going through challenges, things that they're working on.

And I know in the experience that you've had, you've had a lot of experience going through a lot of these challenges. Clearly, I think we're at a different end, part of kind of the industry cycle. Now, post COVID, a lot of companies are kind of working through what that means for them, people still trying to figure out where turn up rates going to be, what type of design they want to have battling with things like mandates that their, their companies might be putting on them.

But maybe if we start there, you know, kind of your lens and where you've sat, can you tell us what you think right now is the biggest challenge facing the industry? Yeah, Adam. Great, great point. And in the build up to the question, you certainly touched upon a lot of the challenges that that all of our occupiers and service providers are facing.

And, you know, me having having played a role at both at an occupier level and a service provider providing support to occupiers. And actually, now I'm Just exiting and leaving, leaving another service provider and going back to an occupier role, I'm in the process of doing that next couple of days.

For me, I'd kind of bundle it up in the word change. And that is as you layer a lot of the challenges that you've mentioned to, I think at, at the heart of a lot of these challenges. Is change, change, meaning most occupiers are going through a fairly radical and significant change in leadership, not, just reporting lines of who do they report into what function, but actual leaders that that are changing inside of their, their enterprise that coupled with and layering it with.

The market volatility that we've got it at a macroeconomic level, inflation, rising costs of goods sold and supply chain challenges and lead time lags and the interest rates impacting funding and borrowing,  you know, wrapped up in the war of talent and. Companies trying to find the right balance of attracting, but retaining talent, and then you throw how that trickles down into the cost pressures that that companies have, where they want to invest, where they need to save cost, where costs are increasing, but where there are opportunities to look at reductions, the changing technology landscape, not just ERP systems and data, though.

But the emergence of AI and the potential that that brings, but the investment that's needed to realize that.  And then all of that really culminating into what does that mean for my portfolio, whether I'm in an office environment.  And like you'd mentioned, you've got return to office, you've got the new realities of hybrid today, the flight to quality, which is a significant driver that, that all occupiers are facing,  and then from the industrial side, looking at just how do I get involved in understanding and playing a role in shaping the strategy of my company, where we're based, where we're manufacturing product, where we're shipping, storing the use of 3PLs, how we're distributing to the, the customer base and the end user.

How I'm optimizing networks think all of these challenges have been out there, but I think the layering of all of this and the culminating of just the change that all occupiers across all sectors and geographies are going through it. It feels even more. monumental than it has in decades past. Yeah. So yeah, lots of, lots of good stuff in there, Ken.

I think, you know, maybe if we start, at the beginning of what you said, you look at the people that our organizations are reporting into now, I think over the last 15 years, we've seen, I don't want to say a shift, but we've seen a variety, if you will, in terms of. where people are reporting, you know, into procurement, into finance, into supply chain.

I was at a conference this week where I saw a couple of groups that are now reporting into the IT organization, which is interesting. Where are you seeing that go? Are you seeing kind of a, you know, is it still a variety in your viewpoint or are you seeing it kind of plugging into different, into different areas and, and could you get more value going into, into a certain group over another in your opinion? 

Yeah. You know, I used to in my earlier occupier days, I used to really believe that where you reported impacted the value that you can derive or that you can provide. Now I think it's reporting lines or just it's. It's a reaction to where the company is at in terms of their own transformation.

You know, meaning I think probably the most common is still reporting into the CFO or into the finance organization, which is, which is an obvious place to go to given decision making and the role that, that CFOs play in an organization, particularly for your more traditional kind of non market facing parts of the business or your, functions.

But I think you can have just the same positive impact if you report into a procurement organization. An HR organization, a supply chain organization, or even like a global business services type construct where you're looking at the aggregated value and contribution across a number of functions.

I think the reality is regardless of where a reporting relationship is or where it's changing, it's still just understanding what does the enterprise need me to do? Right? Is it more of a cost focus? Is it more of a talent focus? Is it more of a transformation focus? Is it more of a technology focus?  what's the burning platform of the day?

And how do I impact all of these areas regardless of my individual or direct reporting relationship?  Fully agree. I think one of the things, you know, we've talked about at CoreNet through the years and in different forums is the skillset that, that People coming into the industry need to develop over time.

And obviously relationship building, stakeholdering, understanding different organizations within the company. It's never been more important. And I think from a reporting line structure, fully agree that it, regardless of where you report in, you have to have the right relationships across the business.

You have to understand what the business needs are and you need to be able to plug into,  creating ways to, help those business units and reporting into procurement global business services. I think, it is almost an agnostic group in the sense that we could, we can go into a number of different places.

So fully, fully agree. The other interesting things you were saying there are change. I, totally agree. Change,  the, the speed of change now is, you know, even, even faster than it was pre COVID. I think, Part of what I'm seeing, if you look at the workplace of the future, and you said it kind of in your answer there, the flight to quality is definitely something that, that we're seeing more of, you know, not necessarily. You have companies that are mandating certain days of the week when people come in, you have other, others that aren't, but across the board, we're still seeing that companies want to be in better space now. So where maybe you're not spending, maybe you are spending a little bit more per square foot, but your costs per head might go down because the way that you configure people in those spaces might be different.

So I think the value proposition back to, Back to the business where, you know, it might've been a straight financial case a few years back, it's a little bit different now, but maybe you could talk a little bit more about flight to quality. So what does that mean in your mind? Does that fit out type?

Is it amenities? What are you seeing from a quality perspective? Yeah, great question. And there, there's, there's a lot of very robust research out there around this kind of flight to quality. And also because of that, a lot of not misinformation, but misinterpreted information on what does a flight to quality mean?

And a lot of You know, not only when I've been occupier side, but a lot of the occupiers that I support now, a lot of their management picks up on headlines like, you know, office markets are, are tanking and there clearly are elements of, of truth to that, right? Flight to quality, it's a cycle and it's just how tenants react to depressed markets.

But if you start kind of peeling that back a little bit and start understanding it, you've got trophy assets. You know, you've got a lot of fantastic buildings with amazing amenities since really 2015 that, that have been in construct and now the supplies on the market. And then you've got a lot of, a lot of class a and class B inventory.

That is certainly a lower level of quality. And yeah, I think one of the, one of the numbers that, that I was just reading is 90 percent of all of the us office vacancies are in the bottom 30 percent of the buildings, you know, in terms of usually 2000,  , and before. Building construct. And so it's, you've got a lot of old buildings out there that are driving the vacancy numbers up that are the ones that are driving the cost down that have saturated the sublet markets, and they're not getting the investment because of high interest rates and not a lot of lending that has been opened up to, to the developers and landlords of these buildings. And so everybody, to your point that you'd mentioned is everybody wants to go to these trophy assets and they want to take less square foot.

But they're willing to pay more per person because it's a higher quality asset. So that's happening. And that's why in a lot of big markets, I mean, whether you look at a New York or San Francisco or Dallas, and I think this kind of carries with different numbers, different percentages globally. That's why it's not unexpected to maybe pay 30, 35 percent more per square foot because you have a higher quality building and.

You start seeing that separation, that polarizing effect and that's happening and they're going to those trophy assets because to your point, that's, those are the ones that have the better spaces. They're more modern. They're, factoring in the, the important elements of ESG and lean and wellness.

They've got the amenities that people want. They're in locations that people want to go to. Not for that traditional kind of head down type focus work, but it's where they can go and they can collaborate. They can collaborate with a 360 degree ecosystem that they wouldn't necessarily get in a lower quality building or in a lesser environment.

Yeah, yeah, fully agree. From a design perspective, we're definitely seeing a change in the quality of design. So you start with the trophy building and then, you know, you look at kind of a higher quality design. I think we're seeing both of those things come together. Even from an amenity perspective, are you seeing anything new, you know, are you seeing across clients that you've people trying different things?

You know, I think we look at the old list of amenities, whether that be, you know, food offering, and we always come back to food offering. And then you look at, at, at gyms and fitness areas. I think we're seeing a lot more in the wellness space too, like different rooms for different types of well, amenities, but anything you're seeing in the amenity space that you hadn't seen before.

Yeah. You know, the reality, 95 percent of it, it's the same of what you'd mentioned. You've got diversity of space. You've got great meeting or event spaces. You've got the hospitality and the concierge type services. You've got maybe the gyms or you've got the, the, the cafes or the canteens or the cafeterias for the different assortments of food you've just got good.

Audiovisual technology capabilities as well, that makes it as ubiquitous when you're in the office as you are like we are when you're, you know, in your, your home office working.  So, so there's not, you know, it's not like there's disrupting amenities. I think it's more, it's, you've got high quality and you can offer all the amenities,  , not just one, one or two.

And, I think that's, you know, if, there's any element, it's, you're doing it though in a location that offers a lot of other collaboration opportunities in the office and outside where it's just drawing kind of the weeds, it's drawing the groups to want to be together, that they can't operate like that when they're in their home office or they're in their co working space by themselves.

Yeah, yeah, fully agree. I think, you know, the term earn the commute came up over the last couple of years. And it's interesting, I think, you know, pre COVID. And obviously, when we started in our careers, you didn't have to earn the commute, you went to work every day, and there wasn't really a debate. But now we're definitely getting to a point where, even when companies are mandating certain days in the office, you know, groups like ours are trying to provide space that really, you know, endeavor to earn a colleague's commute.

And I think that's something that we'll continue to work on.  One of the questions I'd like to ask, and the reason I want to ask this is because I think what I've seen more recently,  I've seen this my entire career, but, we're definitely getting to a spot now based upon everything that we in the corporate real estate industry are being asked to do.

We're seeing a lot of demands on time, resources, money, a lot of areas where our teams are really, really stretched.  And we, we want to be as a service organization. We want to be all things to our enterprise. And we really want to make sure that we're, we're, you know, servicing them wherever we can.

And.  One of the things I'm interested in is, in your opinion, is there anything corporate real estate groups can stop doing, right? Can really, can de prioritize given what I would see as a new agenda in a post COVID world. Any, any thoughts on what, what, what teams like ours can, can start getting away from?

It's a, it's a great point. I, can't recall a situation either when I was an occupier.  In dealing with occupiers where that resource constraint in time and capital hasn't come up too much is going on, you know, I'm busier now than I ever have been and that's a consistent theme, probably similar theme in any business function, but  it's certainly prevalent all through corporate real estate and the two items, both as I reflect on,  30 occupiers that I've worked with in the last eight years as a service provider.

But then even as I was an occupier and now going back to an occupier side, the two things that I'll take with me, have done a lot of workshops around just  simple, what would you continue? What would you start? What would you stop? And to your question, nobody ever puts anything in stop. It's always continue to do all this and then start all of this.

And it just, it almost makes it worse. But my two observations, one is, we have a tremendous amount of redundancy built into what we do in corporate real estate. And I'll say that in a, in a broader sense, not just, you know, real estate and transactions and advisory and strategy, but in facility management and project management to where, how is my business set up?

Now I need to mirror or man mark my business. And now I need all my providers to man mark me. And I've got multiple providers. And there's, there's a smarter way about how do we get the collective amount of work done by empowering the right. Teams and individuals without all of the mirrors that are set up within within that structure, and it's it's really more a regurgitation of I get this from my service provider.

Now I put it into my context or my format, and then I go up through my ranks, and then I go to my business constituent who then sends it to the ultimate decision makers. So I think there's a way to get smarter about how we Set up and the org effectiveness and the organizational design that goes into our retain teams and the teams of, of my providers,  , which is a bit of HR one on one, but not often how, how we do things, and then the second item, and I'm saying this, recognizing even when I was an occupier, you know, so if I, if I spent, you know, my, if I look at my 10 years as an occupier, and then I look at my, my last eight years as a provider  with my knowledge Of how have I, how did, when I was a provider, how did I work with all the different occupiers?

There's probably a lot of things when I was back in even my Unilever days as an occupier that I would've done differently. One of which is I would've listened a little bit better to my business on what they need and what they want versus I, what I thought they wanted or what I thought they needed. You know, two, two examples and, and I see this.

So one is, occupiers wanting to deploy FM solutions when they've got a very decentralized business. And they spend a tremendous amount of time in orchestrating and developing very robust facility management programs that their business didn't want. And they didn't ask for, and they're not signing up for it only to deploy it, incur a lot of costs, go through a lot of effort and then have it ultimately employed because the business who ultimately holds, holds the cost and the P& L won't accept it. And so not saying it's not the right thing to do to deploy it, but I think instead of spending all the energy to do that, despite what they're asking for, spend a little bit more time on the front end of aligning, how would something like that work and then look at deploying it.

Second, and not the other way around, and the other item, and I've seen this a lot, particularly in the COVID years,  all companies, like you'd mentioned, are going through, what's my site by site strategy? What's my portfolio strategy? What's my scenario planning on the if and if and whens? When do I, when do I move?

Where do I base myself? When do I consolidate? Where should I be in the amount of times where I see those scenario plannings and that strategy development being done in a vacuum with the real estate team without including the business in it makes it very difficult when you actually go back to the business to articulate.

Here's what we think we should do and why. When the business wasn't involved, probably doing something in parallel, parallel or in the shadows, or you're operating off of the information that you knew two years ago and not where they're at today or where they're going to be in the next three to five years.

And so those are just kind of two things, not necessarily stop, but it's, let's not be redundant. Let's make sure that we're really engaging. With the business on the front end before trying to deploy strategies that can impact them that they haven't agreed to or bought off on. Yeah, fantastic answers.

So maybe if maybe just to go back on a bit of that. I mean, obviously, the first example that you gave. you know, we use the term shadow organizations, in, in when we're setting up facilities management contracts as an example, and you're so right. You know, we, we build that redundancy into org structures and we think that we need it, right?

We think that we can't get by without having those. I think the one thing I might layer into that is, You know, you look at things like vested contracts and contracts that are tried to set up or using a trust as the kind of the key and then kind of spinning everything around that. I think from a, from a governance perspective, really finding a way to let your partner do what they do, right, while still ensuring they're doing that but not getting into the weeds of, of how they're doing those things.

And I think that's definitely a challenge, you know, as we both have experienced on the occupier side, you get into a situation where something doesn't go right. And you can't go in front of your business and say, you know, our partner, whoever that is, didn't, didn't perform. It's going to be on you, the internal CRE group.

And then when that happens, you're more likely to layer more oversight over the third party. And then you get into this, into this loop of now you've got redundant  , people, shadow organizations, and I liked your example of even that shadow org, even being there at a business level too, right? So where you're going into a, to a, to a shadow point of contact.

So you've, you've kind of got three layers in there that, you know, maybe that could go down to two or even one. I think that's phenomenal. And, and definitely agree with the listen to the business more. I think there's, there's the balance between, the corporate real estate team being the experts in corporate real estate, and kind of forcing, I don't want to say change, but, you know, I give the example all the time, one of my earlier days of designing a building in Spain and, and the, the GM in Spain wanted the whole top floor as kind of a, a suite, you know, for himself.

That's something that we push back on because as the experts and as the, you know, the group that's trying to contain costs, we didn't think that was the right thing to do. But if you look at. You know, your perfect example of you have a corporate real estate mentality of, let's push a global or regional program forward because we think that's, we'll get scale and we'll be able to deliver consistently across the sites.

If you're working in a company that isn't organized that way, then you're going to be pushing rocks uphill the entire time. And not only are you setting up for failure for your company, but you're bringing in a partner that probably doesn't have a chance to succeed. So understanding how your company works, ensuring that you're lining up your solution with that in mind, I think is, is fantastic. I mean, how much time would we save, have saved? I could think of examples we won't go through today, but we would have probably saved a lot of time and effort if we would have realized that beforehand. So I think,  listening to the business, I think is a phenomenal, And hopefully something that we're doing every day anyway, but really good.

Cool. Listen, last question for you. And I reflected on this one a little bit in terms of my career. You know, I know a bit about your career and kind of the path that you've been been through. And I'm wondering, and I know you've mentored and provided guidance to, to, to younger folks coming into the industry, but if you were mentoring a group of young people or Somebody asked you to come in and give advice as somebody that's been in,  , industry for a long time.

Can you talk a little bit about what you would say to them to kind of point them in the direction of a corporate real estate career? Yeah, it is, it is a, a great, a great question. You know, I think it's an area that, that CoreNett, I mean, a testament to CoreNett, CoreNett's been spending a lot more time , and not just the last couple of years, but in the last decade,  around how do we attract newer talent and how do we attract more talent into, into our, our, our world of, of corporate state?

And yes, my last kind of my 25 years, but my last 15 years as much been kind of centric around corporate. Corporate real estate, around global business services. But I've had an opportunity to spend time in several other functions and whether it's real estate or another function of the business, I think most folks, and certainly when I was coming out, you know, they, they, they are, they're looking at where do I want to, to, to go into from a profession perspective, you know, they want to be challenged.

They want to learn and they want to be developed and they want to make an impact. I mean, at, at the core, and if we even reflect on our dialogue here and we look at what we're doing in real estate, it's a very fast moving function. It's one that has an opportunity to be a part of driving a significant amount of change in industries, in markets, in sectors.

It's at the center of this very exciting world of workplace and technology of really work. How to, how to companies and enterprise. How do they function regardless of where they might be operating or what they might be providing good services, et cetera. you want the opportunity to really get to understand how a business works, right?

You want to, you want to touch functions. You want to work with your different business units or business sectors, and you want to, you want to work in a very globally dispersed environment across all of your different regions. And ultimately you want to, you want to impact areas like. Culture and, you know, the cost and the growth of a, of a business with talent, with ESG every day, all day, we, we do that in, in real estate and, and, you know, thinking of, of where one wants to make an impact and build a career, a diverse career that gives them a lot of opportunities.

I mean, we're both byproducts of that working with a lot of blue chip, highly regarded, highly reputable companies, globally in global environments being relocated and centralized in different parts of the globe. You know, real estate is, it's got to be one of those kind of top three functions that I could think of where you really can make a sustainable impact like that and drive change while continuing to learn and be developed.

Yeah, I totally agree. The opportunity to learn about business and the opportunity to learn how companies work, these functions, procurement is one real estate. There's others where you kind of get that bird's eye view of how the entire company works and the ability to do interesting work across different asset types, different parts of the world.

I fully agree. I think corporate real estate is, is one that can give you that and agree. I think CoreNette's stepped into that. And I think one of the. You know, one of the pillars is to really help our community develop, which I think the group has has done a nice job of over the years. So one quick follow up on that.

I think from a from a talent pool perspective, obviously, we both came from other areas,  , of, of the business and came into corporate real estate. How are you seeing that trend? You know, looking across the groups that you've worked with over the last 15 years, are you seeing more of that people come from different parts of the business, different functions, how have you, how are you seeing that?

And what are your thoughts on kind of how that will, will go into the future? Yeah, you know, fortunately, there's a lot of of universities that have very strong and increasingly more robust real estate curriculum that that I think is opening doors for those that perhaps didn't know real estate was a profession that they could consider in the corporate environment that that are but but to your point, and you know, we're byproducts of that.

A lot of the organizations that we've worked with, worked for, are doing a lot more mobility across an organization. So bringing people in that have transferable capabilities that we.  , within those capabilities would be successful in the world of real estate and then introducing them to, to this, this real estate workplace, kind of facility management, project management organization.

And, and it's fantastic bringing in other parts of the business that know how other parts of an enterprise operate increasingly than understand the value levers that we can provide in real estate and then just marrying those worlds together, whether, you know, it's a change in their long term focus or it's a short stop.

  Think it's all about. Diversity, right? And diversity of function and experiences as well. And, and I think we'll continue to see that,  , it's been more prevalent last 10 years and, and I'm sure it'll continue to multiply in the next 10. Yep. Yep. Fully agree. Good. Well, Ken, listen, really appreciate your time today.

Very insightful stuff.  I think our occupier community is going to really be interested in some of,  , what you had to say today. So really just want to thank you for, for joining us on the podcast. Thank you. Thank you for having me. ​