And the really the elephant in the room is not you know people working from home. It's AI that's going to disrupt far more than anything else. You know what I can tell you very clearly is an AI robot doesn't need an office. They need a data center. So that is the elephant in the room in terms of coming back to office. Mark welcome to the future work podcast. I really appreciate it my friend. Say you're the largest operator in the flexible workspace industry and have been for years. What got you into this crazy industry to begin with?
Frustration with the real estate industry, Frank. So, I this was my 10th business. Um, I was on number nine and I wanted to get some office space and it was painful to the extreme to sign up for it, whatever. It just didn't seem right. So I thought there was a better way in conjunction with that. I saw other people had the same problem. You know, they were sent around in cafes. This was in Brussels, Belgium, um having meetings when they really should have been doing those meetings in properly supported meeting rooms in, you know, in great buildings in Brussels at that time. So it's a combination of both those things. It's just a gap in the market really. um saying look this the real estate business should be a whole lot better.
Well I think you were part of a movement that started in the late '70s early 80s. I think you started 87 86 87 if I remember right um with Reggie Gustafen uh um in Brussels. I remember the two centers uh that you started with. So that's a great history and a great ride forward. But now that the industry is maturing, there's tens of thousands of flexible workplace facilities all over the world. We're becoming a high density in some markets like London as an example. Um and yet large business uh great supporter for a while of the industry using our flexibility is saying everybody needs to return to the office to the core office. What's your take on that right now? How do you think companies they're not saying that? So reporters reporters are saying that are interpreting that. But of course that's totally ridiculous. Doesn't make any sense. So if you're a large company with a 100,000 or 50,000 workers, there's no you're not saying you're not trying to get people all to come. That's you're not even thinking about it. But when a reporter asks you a question, what they're really asking is do you believe in the future of the office? And what they're saying in reply is, 'Yeah, offices are great places to get focused work done.' But this sort of RTO thing is a sort of it's a journalist hobby horse question um which is answered with a yes or a no answer, which is not the right answer. And by the way, many of these companies will say, 'Yeah, get next question.' You say, 'How many you want everyone back in office? How many days a week?' They get them back for two days a week. I mean, that's crazy. It's even more crazy than getting them back in for 5 days. So, you know, it's sort of it's this is something that's in flux. The good news is great future for the office, but it has moved. You know, people it makes no sense in the digital world to have people commuting hours a day to go and use a laptop somewhere else.
Well, no, I completely agree. I don't think people have ever minded being in an office with their colleagues. What they do hate though is that commute and the cost of that commute as well uh both to the company as well as to themselves. And also this idea, sorry to interrupt, Frank, being with your colleagues. I mean, look, I mean large office floors, you're not really with you're with four people that sit next to you around you, right? You're not with everyone. You walk in, you meet the four people, you maybe meet someone else, you walk around, but not you're not sort of not everyone chatting with each other and it's not, you know, this idea that somehow put people in the same area and they all communicate is a fallacy. Much better spend the money on technology than make sure the people communicate and you create that. You would then uh strongly disagree with uh Jamie Diamond's comments, etc. and others um uh Elon Musk that says we need to get everybody back to the office so we can preserve or maintain our corporate culture. No, I disagree with the statement because it's too simple a statement. So what they're actually saying is it's important for people to do focused work. right now what they are saying as well I think Elon Musk is saying and rightly so if you just say to people you can work from home and you don't supervise that then you in fact lost your workforce you know it's how good are you as a company or as an individual on managing your resource you certainly don't need them all in the same office that is not a measure of management and many companies operate all over the country they have people all over every state in America, they can still manage them. Well, your company does, our company does. We've been we're in 122 countries and yeah, we have to put a lot of effort into managing remote locations, remote people, and but it's they're not saying they've all got to be back to one central office. They're not saying that. They're saying offices are important, and that I agree with. no distractions, no um you know basically an ability to ensure that people have the right work surroundings as opposed to you know the wrong surroundings which can be a homework environment. Yeah.
No, it's interesting. A good friend of mine who lives in the East Coast, Northeast, just took a job with a company out here in the Midwest in Texas, and they have to move their family. They have to move their household. They've got to sell a house, buy a house. They're spending all their time focused on the activity of physically getting to a place so they can be in one spot rather than being the most productive they could be. And I think that is the beginning. That's just the very beginning of where the problem starts.
It's highly nuanced and this is it is not a yes no answer. And that is the problem when someone asks Jamie Diamond who's running a huge company. Um, you know, okay, do you believe in getting people in an office to do focus work? He rightly says yes. But having said that, they will have a lot of people that work from home and do it very well. It's not all 100,000 people. There will be back office people that can easily do what they have to do from home. We are in the office business, Frank. We have nearly 3,000 people that work from home. 3,000 all of our back office because for those guys it, you know, the commute is painful for them. It takes a lot of their day. Many of them are working mothers, things like this. They want to be near their kids. They don't want to be two hours away, an hour away. Oh, agreed. No sense. And they are doing customer service work over the internet, over Teams, or over the phone. It's they're not in an office sort of they don't need to be there because they're talking to customers all day.
Well, you know, it's interesting. We don't have that many employees, but probably our ratios are about the same. About a third of our people work remotely. About another third work on a hybrid basis. Yeah. The other third work on a full-time dedicated office. Yeah. What's right for the person. So, as I said, I think you're saying as well, Frank, it's not a yes no answer. And you know clearly there's a huge job for offices in helping individuals be more productive for their company. Equally there will be people that are really good at working from home and it's not no problem so long as you can manage it.
Okay, let me throw a couple of quick numbers out. The real estate related real estate because that's where you started. One day a week out of the office equals a 20% office vacancy factor for a company. And that means 20% less beneficial utilization for the commercial real estate. Not really, but anyway, go on. You go with the example. There's a material reduction in the benefit of utilizing that space the more the less you're in that space. So where do you think the economies of the world are growing and let's say at 2 to 3%. Let's assume that pushes office space at 2 to 3%. Where do you think that balance if 40% or 30% of the people are working outside of the office? Where do you think the balance comes back to just commercial real estate? Forget our industry for a second.
So if you sort of take a look at the future of real estate for um it will be less and better quality. So when people sort of want to bring folks in it better be good because those are not going to come in right. So it becomes much more of an experience-based product. So number one. Number two also as you said. Yeah. Number two, the future of real estate is that there will be a lot less and really this sort of nonsense talk about, you know, sort of working from home or art. It's not a thing really. People have been working from home for the last 10 years. I know I have and I know I'm very unproductive doing it, but I work remotely in a hybrid way all the time. Well, you're home now, I think, or thereabouts. No, I'm not actually. But I'm at my home. Yeah. So it depends on the individual. But look, the future of real estate is very clearly there'll be less requirement. And the really the elephant in the room is not um you know people working from home. It's AI that's going to disrupt far more than anything else. You know what I can tell you very clearly is an AI robot doesn't need an office. They need a data center. So that is the elephant in the room in terms of coming back to office. Um it's not about inflation. It's not about economies growing anything. It's about population. And the real question is how many office workers, knowledge workers will there be in five or 10 years time. Now the key thing there apart from AI is the populations generally knowledge workers are dropping. Yep. Okay. Because of birth rates. So less real estate plus companies want to be efficient. It's got, you know, if work can be done effectively from another location and I can tell you that the biggest change isn't with front office people, it's all back office people. If you go around suburban America, rural America, those massive call centers, 50% of them are gone and the other 50% are going. That's a big challenge in your operations and in ours. Um, we all have AI receptionists now. Yeah. That we utilize. And we had I doubt whether you did either. We didn't let people go. Just as we grew, we stopped hiring people. Yeah. But then you're becoming more efficient. Therefore, you need less people. Well, and better service, too. Better service. Of course. A computer never takes absence there. And a computer never turns off. Look, it's a new world we're going into and you know this sort of very basic discussion which you opened your question with RTO that black and white it's nothing to that's one small thing on the spectrum one small thing but work is changing what's the big thing then if that's one big thing is technology technology okay and then the second big thing is technology and the third thing is management techniques. It's about how you manage your teams, you know, how you use technology to do that. And you know, this idea that you can only get the best out of people when they're all sitting outside your office is really, you know, you must be a bad manager.
Well, we've always believed that the best people are where they are. You leave them where they are so you don't disrupt their family. Yeah. And you figure how to use technology remotely. So I guess we're either ahead of our time get people together Frank all then you get the questions they say well what about community and don't people learn at the coffee machine and yes but you can reproduce all of that with an offsite every month just do an offsite then you force people to get together don't take a chance and but modern technology software programs work on cultivating the culture building the culture in a company getting people communicating so they know what's going on. By the way, very few offices you walk around and you ask people what's going on in the no idea. They're sitting in the but they don't know because no one talks to them. Yeah. Companies are hierarchical. You only talk to the people you know all the people around you. Anyway, it will become it's all about productivity. It's all about either your biggest cost or your second largest cost. That is your people. Nothing do forget real estate, it's people. So if you can make your people five or 10% more productive by supporting them better in what they do, that is a huge return on that small investment. Yeah. When you look at the economics, real estate has generally been the fourth or fifth cost. People are first always. Absolutely. Thereafter it becomes either technology or interestingly travel. Yeah. travel historically and that's diminishing. It's reducing now. Historically has been the third highest cost of any corporation. Yes. Um so it is going to be interesting as we see but as the technology develops as we all use advanced technologies.
