Voice of the Occupier: Andrew Hallissey

Hosted by Adam Hoy, President of the CoreNet UK Chapter, this episode features a fascinating conversation with Andrew Hallissey of Colliers. Tune in to hear their thoughts on the pressing challenges facing occupiers in today's CRE landscape. 

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

#VoiceoftheOccupier #CREInsights #CoreNetGlobalUK

Thanks for listening. Follow us on LinkedIn and Instagram.

Transcript

Welcome to the voice of the occupier, the podcasts from the UK chapter of cornet 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.

Here today with a gentleman I've known for a long time, an industry veteran has been around for a long time, Andrew Hallisey, the Global CEO of Occupier Services at Colliers. Andrew, thank you so much for being here today with us. Yeah, thanks for inviting me, Adam. A pleasure. Absolutely. You know, we do this podcast for occupiers.

We hope other people listen to it. We think it's entertaining, but we do it for occupiers and we really want to give them an impression and some, some information around what's going on in the marketplace today. Clearly you're well placed, you know, you work with a lot of different occupiers across the globe now in terms of what, what they're doing.

I'm wondering just to start off the conversation. Can you give me a little bit about what you're seeing in the market today? Where do you think some of the biggest challenges are for occupiers in, in today's market? So really interesting times, Adam, and I think you can probably break, break down what's happening across the industry into,  into different lenses.

So, you know, real estate markets globally from an investment perspective have been in a recession essentially for the last, for the last 20 months, you know, we've seen capital values of. Commercial real estate assets, you know, fall by 20 to 30 percent in some markets, depending on the, depending on the asset type, year on year investment volumes are down over 50%, you know, across most of Europe and North America, Asia Pacific isn't, isn't as big.

As as badly impacted, but look, there's kind of light at the end of the tunnel as interest rates start to start to come down on the outlook is, is, is positive that hopefully will add a new lease of life into investment markets when you correlate that though to how that is impacted occupiers, it's, it's quite a different story. So, you know, coming out of, of COVID, you know, we've seen across most major developed real estate markets in the world, there hasn't been sizable reductions in, in, in rent. So whilst occupiers have been  downsizing from, from an office occupancy perspective, there's been a remarkable resiliency in, in demand.

And, you know, that kind of goes contrary to what you might expect with all of these occupiers, occupiers downsizing their, you know, their office portfolios. Very different perspective, though, relative to industrial logistics markets. They've been impacted a lot, a lot less. And, you know, in many instances have been one of the, you know, the best performing, most resilient asset types out there.

You know, those occupiers that have a retail footprint, kind of, you know, a real mixed bag, you know, in some retail markets around the world, you have retail rents that are rising and you have other retail markets, you know, predominantly secondary and tertiary markets where, you know, they're, they're really, really struggling.

So hard to categorize just, you know, what's happening for occupiers in, in one wide, you know, Brush totally depends on the industry sector totally depends on the mix and composition of asset types within that portfolio and obviously the geographic dispersion of of those assets. Yeah, yeah, that makes sense.

I think from a, you know, from a core net perspective, we've talked a lot post COVID around employee experience, workplace experience. I think we started with return to office and there was a lot of pressure on corporate real estate teams to kind of help bring people back, right? It was the carrot around getting people back into the, what I say office, but it could be any type of workplace.

I think what I've seen over the last year plus is that the conversation That conversation has died down a little bit, right? I think companies are, are coming up in terms of their utilization and their turn up rate. We're, we're starting to, to, to build back up. I don't know if I would say return to pre COVID, I don't know if we'll get to pre COVID, but I think the numbers are going up.

You know, mid forties is where I'm seeing a lot. You know, we, we just saw last week, Amazon came out with a five day a week mandates, which has gotten a lot of discussion across different, different different groups as you're working with different occupiers and maybe we look at the, the office space in general, you know, the, the flight to quality is one of the things we talk about the, the, the real focus on workplace experience.

Is that, is that what you're seeing as well? Are you seeing more companies look at quality of space kind of. putting in that, you know, maybe I don't want to say more expensive, but, but value creating ideas into space. What, what are you seeing in the office space in terms of how people are, you know, evolving the type of space they're creating?

Yeah. Spot on in terms of your kind of assessment of what you, what you've been seeing across the, the industry. So, you know, some people were, were saying that there was going to be a reversion to mean. mean being the, you know, the, the, the pre COVID kind of occupancy models that, that office occupiers were using.

I think at this point, that's, that's not going to be the case because there is a reversion, but it's not to the mean at this point, it's absolutely evident hybrid is here to stay. So, you know, post COVID. Cool, but there has been absolutely and it's taken a number of years to get there a structural shift around how most office occupiers are  using space and the type of HR policies that they're now deploying across their, their companies and it's three to four days a week in the office.

Very, very few, you know, Amazon might be, might be an exception to the rule, but very few are mandating five days a week. So that flexibility that has now been offered to people, that, that's a much higher degree of flexibility that existed in most company HR policies pre COVID. You know, most employment contracts, depending on the country, of course were advocating and enforcing five days a week in the office.

That, that was the historical norm relative to expectations for employers, but that's, that's fundamentally changed.  Now the interesting dynamic is when you correlate that into how organizations are then translating that into their, into their corporate real estate strategies. You know, there's all different types of models in terms of the number of days people are in and which days of the week, but if you still have the same number of employees and they're coming to the office.

Three to four days a week, and it's at their discretion, which days they come in, it creates a real conundrum in terms of, yes, we want to downsize our space to have the most efficient possible portfolio we,  we can, and we're, you know, looking for opportunities to kind of surgically do that, but the extent to which you can take larger amounts of space out is, is really, you know, Challenging and really difficult because you still need to provide space, those, you know, Tuesday, Wednesday, Thursdays, when you are at peak occupancy, whatever peak occupancy is for, for your organization.

So, look, I think it's, they're the type of dynamics that are, that have been playing out and, you know, it's why most of the downsizing decisions. That we've seen over the last three years haven't been large scale downsizing decisions, they've been  quite specific where folks are looking at taking 10, 20, maybe 30 percent out, but it's it's rare cases that you're seeing large, larger reductions in overall footprint.

Yeah, I think it's interesting, you know,  kind of talking with different occupiers. I think we're all in the same boat where we've got competing demands coming at us. Right? So the CFOs are always looking to make sure that the price point is at the right level. Business leaders want to make sure that, that teams have access to the right type of space to do what they need to do while they're in the office.

And I think.  One of the defaults pre COVID in a lot of organizations was you did design for the peak, right? So if your peak day was Wednesday, then your business leaders wanted to make sure that, that, that people on a Wednesday had what they need in the office. And I think what I've seen, and I've seen this from different occupiers is that the conversation has shifted a little bit to where you're not going to necessarily design for that.

peak turn up, right? So there might be some days that are crowded in the office, but, but the, the balance to that is, you know, on a Friday when, when there's still a lot of companies that, that, that would be the day where people might decide to work from home, then you're not going to be, you know, kind of having an empty, an empty space on a Friday.

So it's an interesting, It's an interesting challenge. I think from a, from an overall occupier point of view, one of the things, and we talk about this quite a bit at CoreNet is the type of space that people are going into and how they're building up that space. You know, what is, what is the space being used for?

What type of seating choices are there? Are people going into different types of seating areas during the day? If they're having individual meetings, you know, what we're hearing is that People come to the office to collaborate, so you need to make sure that you have the right amount of collaboration space versus heads down desks.

So it's an interesting challenge I think we're seeing, and I definitely think it's shifted after COVID, right, where I think there were a lot more people coming in for heads down work.  Pre COVID. And now I think that the driver in a lot of areas where there might not be specific mandates is where people come back to collaborate, which I think is an interesting one.

Now, just maybe picking up on, you know, I mentioned Amazon. It's an example. You're clearly working with all types of different industries. Are you seeing a mix in terms of, you know, we hear financial services companies, they want their people in more often. Do you have a feel for, you know, how industry specific it is in terms of the way that, that companies are working post COVID?

Yeah, there's definitely variations and, and look, you, you could kind of summarize it, you know, those organizations, particularly those in a professional services context, and you can include financial services in that those folks that are involved in front and middle office functions.  Those organizations where creativity is core to what they're, to what they're doing, they want their people together.

And there's a very firm view that organizational culture is built and enhanced by the physical in person connections between people. It's also very fair to say there are certain business functions and activities, some of them being more, Infrastructure support functions that can very, very successfully be delivered by, by people working from home.

So, look, there's, there's, there's a mix, but, you know, you take, you know, Adam, we're here in, in, in central London, you know, London has never been busier and there's just a, you know, such a, you know, center of gravity around creative industries here, you know, the city is just on fire again and, and, and it should be.

Because, you know, the, the doldrum of the post COVID days, you know, we're, we're quite miserable for, for, for everybody. There's also a mix, by the way, if you talk to some of the flex operators, a lot of the flex locations, again, depending on the city are absolutely jam packed so small to medium sized.

Businesses again, those particularly with from a  professional, professional services, consulting, advisory, et cetera, you know, they take a very firm view that they want their people together.  It's really some of the more kind of legacy, larger enterprises that maybe are a bit more traditional that have been slower.

To, you know, putting mandates on, on folks to, to get back. But look, I w I would agree with your earlier comment, like this kind of return to work thing, it, it feels like we've kind of been talking about it for years. And the, the agenda within, within corporate real estate seems to have moved on from this because, you know, the answer is hybrid is here.

The application of hybrid can vary by, by company, by, by industry, by employee type, and that's kind of how it's going to be. Yeah, fully, fully agree. I think the interesting thing is, I think our industry has taken advantage of the, you know, the, the, the aftermath of, of COVID working to improve the space.

And I, I think that stayed right where there's focus on quality and, and focus on real workplace experience. So COVID opened the door for us to do that because executives wanted to find ways to. to get people in. One of the levers was, you know, you know, put a little bit more money into your workplace and build a great experience.

And what I've seen is that that's that while we might not be using the words return to work as much as we were a year ago, we're still, we still have the open door to create fantastic offices that people want to come into every day, which, you know, if we, if we look back in 10 years, What are the, you know, what came out of COVID?

And I think, I think heightened employee experience, workplace experience is one of the things that will stay. And I think that's great for all of us. We've always wanted to build really, really good offices. And now I think in a lot of cases, we have an open door for that. You know, what's interesting is, and you know, Being in the industry for a while, I think, and talking to different people, different occupiers and, and, and folks that, that work with occupiers, the remit of the corporate real estate group function within, within a corporate has definitely evolved over time.

You talk to different companies, you know, you might have one company that's pure play real estate, some FM real estate, some FM real estate projects, and then you start expanding beyond that. You have titles like a head of corporate services that look at more than that, right? They're looking at real estate.

They're looking at a lot of. Corporate functions as part of a broader corporate services group. And I think one of the things that we've talked about in, in, in a variety of cornet, you know, gatherings is, is building up our brand. And I think COVID allowed us to do that a bit, right. Getting the, getting our brand value heightened and not, not. 

With the idea of bringing more, you know, just to have more, but it's, where can our group really create value for the enterprise? And, and I think what some corporates have seen is that we can put more of these maybe services that don't really have a great home into a corporate real estate team. So what, you know, one of the things I like to, to, to talk to people about is cool.

We've got ambition. We want to do more. We think we could add more value. Is there anything in your mind that. That, that, you know, we should stop focusing on, right? Is it, can we stop, you know, if we want to do more because we think we can create more value for the enterprise, are there things that, that, that we can stop doing so that we can, we can move our, you know, can heighten that value proposition, if you will.

Yeah, yeah, it's an interesting question, Adam, and it's a,  it's a big question and if we, you know, if we were to take a step back and look at the evolution of corporate real estate and workplace as a profession over the last, over the last 20 years, it's kind of evolved from groups that were generally quite conservative.

Thank you. Tactical in managing activities associated with the provision of space whether they're brokerage services, you know, project services, facility services, and the, the capability sets within a lot of those corporate real estate functions you know, tended to be delivery orientated.  And focused on making sure that, you know, the  services that were being contracted for were being effectively and appropriately delivered.

And look, that is obviously a critically important skill set to have within within within any real estate function. But over the last 20 years, it's there's been, you know, I would describe it as a fantastic maturing within within the industry, where, as, End user teams have become more focused and have, there's been more outsourcing.

A lot of the management of that kind of tactical delivery of services has been pushed into service provider partners. And that's been, I think, a very healthy evolution and end user teams have focused more on higher value strategic issues. Portfolio planning, portfolio strategy, asset optimization ensuring the right ESG models are being deployed to deliver you know, a more, a more sustainable real estate program and to ensure that the demand requirements of the core business are effectively being understood.

Because, you know, you think of the, the, the levers for value creation, you know, the more effective demand requirements can be established, the closer the relationship with the core businesses where corporate estate leaders are, you know, truly part of the business and are seen as, you know, a trusted, respected business partner and a trusted advisor.

You know, it's, it's when those relationships are essentially the same and they're so integral and they're so tight that real value can be created because look, the execution of the services that go with delivering great workplace experience as you, as you mentioned, you know, managing brokers to get good outcomes on, on, on deals, ensuring projects are delivered on time and within budget, and that you're getting the services you've contracted, you've contracted for in your, in your FM contract.

It's not that. They're not critically important, but I don't think they're highest and best use for, you know, for a corporate real estate leader that is really focused on a value creation agenda for their, for, you know, for their core business.  Yeah, yeah, fully agree. I think some of the other areas that, that in speaking with leaders that, that we talk a little bit more about, obviously ESG has been around for some time.

It's continuing to be important. I think all of us have targets when it comes to environmental that we're, that we're all managing. One of the things I'm seeing more of is the social aspect of ESG and, and how corporate real estate teams can play in that space. So if, if you think about, You know, a global portfolio, you're interacting with, with communities, all different types of communities all over the world, where can a corporate real estate team kind of lead in and help being in all of these markets, right?

We have people, whether it's a person that sits on a, an occupier side or through a service provider, we're there in these markets. And how can we help evolve the social agenda for our, our, our communities? Companies being on the ground in every one of these markets. So I think if you look at impact, right, and that's kind of what, what I talked to teams about is what impact can we have on the enterprise that we're representing?

And I think there's a, there's a phenomenal opportunity for our industry to really be the tip of the spear in terms of impact. And, and I think that's, that's where. We continue to evolve the conversation in that sense. I think maybe just on ESG. And I, I, we talk a lot about this when we, when we have different events and when I'm talking with occupiers and I'm sure, you know, within the companies that you're working with, obviously environmental is one of the things that we continue to work on.

In your opinion, right, working with different providers, where do you think we're at with that agenda? Are we doing enough in that space? Can we lean in more as an industry in terms of, you know, you look at the built environment, I think it's 40 percent of, of, of carbon comes from the built environment. Is there more we can be doing in our industry with regard to really being the face of, of, of, you know, that moving in the right direction?

Yeah, it's,  it's moving the right direction. I, I, I don't, but just at, at a pace that's just way too slow. So. You know, it's, it's what's focusing on the positive. It's absolutely fantastic that over the last 5 to 10 years, you know, with the encouragement of, you know, progressive governments around the world that the impact of what the Built environment is doing to, to the environments that, you know, we're occupying to cities around the world is, is, is now front and center for every business  in the world.

There's statutory requirements to  measure and report on emissions, et cetera. So we, we have made a lot of progress in recognizing.  The problem, the challenge that everyone is now faced with is, you know, at least, you know, you take, you know, fortune 1000 companies who, you know, the vast majority of them have made commitments to become, you know, carbon neutral by, you know, with, with, with some date, you know, most of them are, you know, You know, still kind of struggling to figure out exactly how they're going to deliver on, on those commitments.

The, the challenge we have within, within the built environment is the, the vast majority of the legacy real estate stock that would exist in, in any market around the world is not efficient relative to the environmental impact of, of, of those buildings. And if you factor in embodied carbon, you know, maybe we've actually been Making quite poor decisions over the last 20 years.

So the assumption that the most environmentally sustainable solution for let's just take an office occupier is to move into a brand new, you know, carbon net zero building, you know, with all of the preamble lead ratings. And that's that's the that's the best solution. You know, as you know, that is, you know, that that that that.

Solution fails to take into  account the cost of embedded and embodied carbon. So, as an industry, we haven't necessarily been, been making the right decisions, either as advisors or as end users, because the measurement methodology has been somewhat flawed.  But again, in recent years, there is an increased acknowledgement and understanding of embedded embodied carbon.

And, you know, increasingly, that is now being incorporated into the measurements that are facilitating, you know, building selection criteria decisions for, you know, what space to occupy. So, look, it's, it's kind of an evolution of how we, you know, we're recognizing the problem. We've been looking at at solutions with the measurement methodology hasn't been right.

But it's  now coming to the fore. But again, these are for progressive organizations, Adam. Think of the number of small to medium sized enterprises out there that don't have dedicated real estate teams or sustainability leaders. And, you know, these organizations, I think, are struggling to embed this type of decision making when they're thinking about real estate decisions. 

Yeah, fully agree. Fully agree. And I think, you know, it comes back to the word I was using before impact. And if you look at where we're placed, the corporate real estate team is placed within a company. I think we're in a great spot to, to provide guidance and expertise to really impact not only the, the enterprise agenda, but when you get into these bigger Societal type challenges, these bigger societal things.

So I think again, coming back to Cornet and thinking about how we build up an organization like Cornet to make sure that we're helping advance the industry as a whole. I've said this before. I think the young leader group in the UK is probably the best young leader group in the world. I think it's a phenomenal organization that, that, that really focuses on helping to develop people and develop within our industry.

And I think. The, these new exciting areas that we're getting into that we're, we're providing leadership in, I think continues to be a draw for people coming into to our industry. One of the questions I like to ask during, during this podcast is given your time in industry and given your time in coordinate, you're very active in the group.

Can you tell me what you would say to a young leader, right? Maybe on the fence coming into corporate real estate, maybe going into something else. What would you say to somebody to give them encouragement to come into this industry? Yeah, well, it's a really interesting question again, Adam, because,  you know, I've been a member of Cornett for over, over 20 years.

And, you know, Cornett has been just a fabulous organization to support my professional development over that, that 20 years, you know, a couple of observations. Just about, you know, commercial real estate as a career path in general. Look,  I feel incredibly privileged, Adam, to have had the opportunity to kind of stumble into Commercial real estate as a, as a career, you know, most, most students out there, you know, whether they're, you know, going through the, you know, high school or undergrad or post grad don't necessarily understand the depth and spectrum of opportunity with within this space. 

And it is just a, you know, as you know, Adam, it is just a fabulous industry. That is intriguing in every way, filled with so many different career paths, avenues and options based on your, your core skills and, you know, aspirationally, you know, what, you know, what excites him and the type of things that you, you want to do.

Cornette plays a fantastic role in helping educate and provide options and a network for people that are. Early in their career and people at all stages and, you know, one of the really interesting things about commercial real estate is, you know, this is still a relationship based business  and a relationship based industry and so much of how people drive performance outcomes, no matter where we are.

Within the industry, they, they, they sit and they, they play is through collaborating and partnering and leveraging the, the complimentary skills of other stakeholders within, within the industry. And, and that happens through through relationships. And one of the, one of the, I think, most fantastic things that CoreNet does is allows people to build, you know, long term sustainable relationships outside of the core company that you're employed with  on a day to day basis.

And so many of those relationships become enduring friendships with people that you love seeing when you, you catch up with them at a, at a CoreNet event or, or, or a summit. So. You know, the, I guess the summary of, of that in terms of advice would be lean in, have fun, be authentic, be yourself, and, you know, good things will happen.

Yeah, brilliant advice. I think, you know, people may not see this at the beginning of their careers, but if you're an industry like ours, you have. winding paths and, and you, you, you run into people at different points on, on each path, but if you're around long enough, you know, you keep seeing the same folks.

So I, I fully agree. Listen, Andrew fantastic insights shared with, with us today. Really appreciate your time. We really enjoy having, you know, industry veterans like yourself on, on this podcast, because it brings a lot of value to the members and the people that listen. So really want to thank you for your time and appreciate you being on the show today.

It's my pleasure. Be careful calling me a veteran. People might think I'm old and that's, that's not true as you know.  But no, Adam, thanks so much. Great, great job pulling these together. There's so much insight and knowledge that should be shared across the industry. And UK chapter is doing awesome, awesome work and it's.

It's voluntary and it's a big investment of time and effort for those that are part of it. So look, it's, it's appreciated by the members and, you know, thank you for everything that you're doing to progress the industry. Thank you, Andrew. And thanks to everybody that listened today. Looking forward to coming back with another Voice of the Occupier podcast really soon.