1 00:00:02,600 --> 00:00:06,960 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,000 --> 00:00:09,799 Speaker 2: Here to take us through the world of commercial real 3 00:00:09,920 --> 00:00:12,960 Speaker 2: estate is a true expert. She's Michelle McKay, CEO of 4 00:00:13,000 --> 00:00:15,200 Speaker 2: Cushman Wakefield. So welcome. Good to have you here, Michelle, 5 00:00:15,240 --> 00:00:17,040 Speaker 2: Thanks for having me. So we've heard an awful lot 6 00:00:17,079 --> 00:00:19,520 Speaker 2: about commercial real estate in recent months, not all of 7 00:00:19,560 --> 00:00:22,400 Speaker 2: it good. Give us your perspective from Cushman Wayfield because 8 00:00:22,440 --> 00:00:24,000 Speaker 2: you have a particular way of looking at it. 9 00:00:24,120 --> 00:00:26,079 Speaker 3: Yeah, I do, and I think that there's been a 10 00:00:26,120 --> 00:00:29,320 Speaker 3: lot of dialogue around the idea that there's a bifurcation 11 00:00:29,640 --> 00:00:33,519 Speaker 3: of assets out there, higher quality and lower quality. I 12 00:00:33,640 --> 00:00:36,000 Speaker 3: like to think of it as a trifurcation of the assets. 13 00:00:36,120 --> 00:00:38,479 Speaker 3: So we have some super high quality assets out there 14 00:00:38,479 --> 00:00:41,440 Speaker 3: in the office, industrial and retail sector in particular, who 15 00:00:41,440 --> 00:00:44,279 Speaker 3: are untouchable, right. You saw them get through COVID, They 16 00:00:44,320 --> 00:00:47,279 Speaker 3: demand higher rents. Everything is great. Then on the other 17 00:00:47,320 --> 00:00:49,400 Speaker 3: book end of this, you have assets that were struggling 18 00:00:49,400 --> 00:00:52,800 Speaker 3: before COVID even started, and those assets continue to struggle 19 00:00:52,840 --> 00:00:54,880 Speaker 3: and may never make it back. The meatia of the 20 00:00:54,920 --> 00:00:58,040 Speaker 3: conversation is around the middle of those markets and the 21 00:00:58,080 --> 00:01:00,320 Speaker 3: assets that reside in the middle of those markets. And 22 00:01:00,360 --> 00:01:01,280 Speaker 3: how they're performing. 23 00:01:01,680 --> 00:01:02,360 Speaker 1: And I think that the. 24 00:01:02,360 --> 00:01:04,600 Speaker 3: Struggle for all of us is that it's a gray 25 00:01:04,680 --> 00:01:07,680 Speaker 3: zone out there. We want to say it's good, it's bad, 26 00:01:07,760 --> 00:01:10,440 Speaker 3: it's bottomed, is recovered. We want to make a big 27 00:01:10,480 --> 00:01:13,520 Speaker 3: statement about it, but it's nuance. We think about some 28 00:01:13,600 --> 00:01:16,479 Speaker 3: of them having financing that's coming due next year at 29 00:01:16,480 --> 00:01:18,800 Speaker 3: substantially higher rates. We think about some of them that 30 00:01:18,840 --> 00:01:21,880 Speaker 3: are owned purely in cash. Some markets could be compelling, 31 00:01:21,959 --> 00:01:24,080 Speaker 3: like Baltimore that you and I don't sit around and 32 00:01:24,160 --> 00:01:28,160 Speaker 3: think about, or San Francisco in contrasts to New York. 33 00:01:28,520 --> 00:01:30,360 Speaker 3: So I think that what's going on out there is 34 00:01:30,360 --> 00:01:33,720 Speaker 3: a discovery process whereby people are trying to figure out 35 00:01:34,000 --> 00:01:36,640 Speaker 3: which assets they want to get involved in, what has value, 36 00:01:36,880 --> 00:01:38,880 Speaker 3: And at the end of the day, I do believe 37 00:01:38,880 --> 00:01:42,360 Speaker 3: in twenty twenty four we'll have some distress playing through 38 00:01:42,400 --> 00:01:44,920 Speaker 3: the system, but that will just be helpful to getting 39 00:01:44,959 --> 00:01:46,040 Speaker 3: us to the point of resolution. 40 00:01:46,280 --> 00:01:49,080 Speaker 2: So it's a large and complicated asset class, but we 41 00:01:49,120 --> 00:01:51,680 Speaker 2: in the media like to make things really simple. And 42 00:01:51,720 --> 00:01:53,880 Speaker 2: the question people are asking an addresser right now is 43 00:01:54,040 --> 00:01:56,360 Speaker 2: have we bottomed and we're coming back up here? We 44 00:01:56,360 --> 00:01:58,800 Speaker 2: had John Gray for Blackstone just this week say he 45 00:01:58,840 --> 00:02:01,840 Speaker 2: thinks we have bond daily from San Francisco FED saying 46 00:02:01,880 --> 00:02:03,200 Speaker 2: she thinks there's money about to come in. 47 00:02:03,320 --> 00:02:06,040 Speaker 3: What's your perspective, Yeah, I think that if you want 48 00:02:06,080 --> 00:02:09,600 Speaker 3: to say bottomed or not bottomed, you lean to we've bottomed, 49 00:02:09,960 --> 00:02:12,040 Speaker 3: because if you're going to make a macro statement about it, 50 00:02:12,040 --> 00:02:14,560 Speaker 3: I would say somewhere around eighty percent of the assets 51 00:02:14,600 --> 00:02:17,280 Speaker 3: are in really good shape and twenty percent still have 52 00:02:17,320 --> 00:02:20,120 Speaker 3: some issues to work through. We know that the FED 53 00:02:20,280 --> 00:02:22,160 Speaker 3: is most likely going to come out with some kind 54 00:02:22,160 --> 00:02:26,079 Speaker 3: of rate cut. Powell's comments last week were dubvish regardless 55 00:02:26,120 --> 00:02:28,000 Speaker 3: of what's going on with inflation and kind of how 56 00:02:28,000 --> 00:02:30,919 Speaker 3: sticky it's been. That gives everybody a point of view 57 00:02:30,960 --> 00:02:34,240 Speaker 3: to think that there's recovery coming. When there's recovery coming 58 00:02:34,240 --> 00:02:36,600 Speaker 3: and optimism in the real estate sector, people will start 59 00:02:36,639 --> 00:02:37,480 Speaker 3: to make decisions. 60 00:02:37,840 --> 00:02:40,440 Speaker 1: That's what takes you out of the bottom. 61 00:02:40,240 --> 00:02:43,079 Speaker 2: An investment banking. We've seen a period here where there 62 00:02:43,080 --> 00:02:45,160 Speaker 2: haven't been as many deals, but people say there's a 63 00:02:45,160 --> 00:02:47,560 Speaker 2: pipeline coming down coming out of the road, We're going 64 00:02:47,600 --> 00:02:49,560 Speaker 2: to have more deals. You're you seeing that in commercial 65 00:02:49,560 --> 00:02:50,000 Speaker 2: real estate? 66 00:02:50,040 --> 00:02:51,119 Speaker 1: Is there a pipeline yeah. 67 00:02:51,160 --> 00:02:53,919 Speaker 3: I mean, pipeline has been huge in building for probably 68 00:02:53,960 --> 00:02:56,640 Speaker 3: the last year. A lot of money sitting on the side. 69 00:02:56,680 --> 00:02:58,799 Speaker 3: I was talking to our chief economists about this the 70 00:02:58,880 --> 00:03:02,720 Speaker 3: other day and really contempting that at some point money 71 00:03:02,720 --> 00:03:05,080 Speaker 3: managers have to put money out otherwise they've got to 72 00:03:05,080 --> 00:03:08,240 Speaker 3: return it to their investors. So there's almost like forced 73 00:03:08,240 --> 00:03:11,120 Speaker 3: decision making that's going to ensue over the course of 74 00:03:11,160 --> 00:03:15,000 Speaker 3: the next couple months. I also think that transaction volume 75 00:03:15,040 --> 00:03:17,040 Speaker 3: is going to pick up with the knowledge that rates 76 00:03:17,040 --> 00:03:19,280 Speaker 3: are going to move, because remember, you could borrow a 77 00:03:19,320 --> 00:03:22,760 Speaker 3: short term You could take one year or two year, 78 00:03:22,800 --> 00:03:25,799 Speaker 3: three year money and refi your mortgage into a more 79 00:03:25,840 --> 00:03:27,160 Speaker 3: stabilized rate environment. 80 00:03:27,600 --> 00:03:29,520 Speaker 2: When it comes to offices, talk about the geography. You 81 00:03:29,520 --> 00:03:31,960 Speaker 2: mentioned some of the geographical areas, but we here, for example, 82 00:03:32,000 --> 00:03:34,639 Speaker 2: San Francisco is very different from Chicago, very different New York. 83 00:03:34,760 --> 00:03:37,880 Speaker 2: And don't get me started about things like Dallas or Austin, 84 00:03:38,360 --> 00:03:40,880 Speaker 2: or of Florida, Miami. What are you seeing. 85 00:03:41,560 --> 00:03:43,960 Speaker 3: I mean, we're seeing certain markets that are doing really well. 86 00:03:44,000 --> 00:03:46,480 Speaker 3: I think that that kind of top line headline is accurate, 87 00:03:46,560 --> 00:03:49,680 Speaker 3: and you're seeing other markets that are really struggling. I 88 00:03:49,720 --> 00:03:51,600 Speaker 3: think that when you take a step out of the 89 00:03:51,720 --> 00:03:55,040 Speaker 3: United States. It's really compelling. I was just in India 90 00:03:55,360 --> 00:03:59,040 Speaker 3: in New Delhi. Those markets are doing really well. In Asia, 91 00:03:59,120 --> 00:04:01,280 Speaker 3: a lot of occupancy in the office market, a lot 92 00:04:01,280 --> 00:04:03,400 Speaker 3: of occupancy here in New York City. 93 00:04:03,560 --> 00:04:04,920 Speaker 1: We're doing pretty well here too. 94 00:04:05,280 --> 00:04:07,600 Speaker 2: So Chrishwann Wakefield is active not just the United States, 95 00:04:07,640 --> 00:04:09,680 Speaker 2: but al so Europe as well as Asia. Yes, so 96 00:04:09,720 --> 00:04:11,480 Speaker 2: give us a little bit of comparison there. But what 97 00:04:11,520 --> 00:04:13,720 Speaker 2: you're seeing in Europe, what you're seeing where you're active 98 00:04:13,720 --> 00:04:14,400 Speaker 2: in Asia as well. 99 00:04:14,520 --> 00:04:20,920 Speaker 3: Sure, in Asia, our top markets are India, Australia, Singapore. 100 00:04:21,160 --> 00:04:23,640 Speaker 1: I love those markets. We do a lot of services business. 101 00:04:23,720 --> 00:04:26,240 Speaker 3: Actually in those markets, people aren't as aware of that, 102 00:04:26,320 --> 00:04:29,000 Speaker 3: I think as they probably should be in the UK 103 00:04:29,400 --> 00:04:32,320 Speaker 3: and in France and Germany, in Netherlands, those are our 104 00:04:32,360 --> 00:04:33,720 Speaker 3: stronger markets in Europe. 105 00:04:34,520 --> 00:04:36,880 Speaker 2: You mentioned services. That's important because from Wakefield, I think 106 00:04:36,880 --> 00:04:39,400 Speaker 2: it is fifty five percent of your businesses services. I 107 00:04:39,480 --> 00:04:41,880 Speaker 2: tend to think about the transaction side, not the services side. 108 00:04:42,240 --> 00:04:43,960 Speaker 2: But that gives you visibility and how some of these 109 00:04:44,000 --> 00:04:47,440 Speaker 2: buildings are being used. When you seeing post pandemic. 110 00:04:47,240 --> 00:04:48,400 Speaker 1: We're seeing post pandemic. 111 00:04:48,400 --> 00:04:51,039 Speaker 3: That actually a lot of buildings, including we manage a 112 00:04:51,120 --> 00:04:54,800 Speaker 3: huge residential portfolio here in the US, very high occupancy. 113 00:04:54,920 --> 00:04:57,960 Speaker 3: We tend to manage buildings of higher quality. So the 114 00:04:57,960 --> 00:05:00,240 Speaker 3: information that we're receiving is really based on that. 115 00:05:01,440 --> 00:05:05,039 Speaker 2: How has real estate overall changed in the last ten 116 00:05:05,120 --> 00:05:05,880 Speaker 2: fifteen years. 117 00:05:05,960 --> 00:05:07,160 Speaker 1: Yeah, I love this question. 118 00:05:08,200 --> 00:05:10,719 Speaker 3: We talk about the flow of dollars into the commercial 119 00:05:10,760 --> 00:05:12,880 Speaker 3: real estate sector over the last twenty years. I've been 120 00:05:12,880 --> 00:05:14,680 Speaker 3: in real estate a little over thirty years, and when 121 00:05:14,760 --> 00:05:18,560 Speaker 3: I started, it was one of the only alternatives. You 122 00:05:18,640 --> 00:05:22,520 Speaker 3: are never considered in the vein of equities or you know, 123 00:05:22,600 --> 00:05:25,640 Speaker 3: bonds and debt. I think today it's a core part 124 00:05:25,800 --> 00:05:28,720 Speaker 3: of every money manager out there, which means there's just 125 00:05:28,800 --> 00:05:30,000 Speaker 3: more capital behind it. 126 00:05:30,480 --> 00:05:32,279 Speaker 1: And so in that way it's changed. 127 00:05:32,320 --> 00:05:35,400 Speaker 3: But let's talk about the human equation also post COVID, 128 00:05:35,760 --> 00:05:37,480 Speaker 3: the way that we talk about real estate. 129 00:05:38,080 --> 00:05:39,719 Speaker 1: Yes, the office. 130 00:05:39,320 --> 00:05:43,239 Speaker 3: Conversation has dominated, the work from home, the return to office, 131 00:05:43,320 --> 00:05:46,000 Speaker 3: But when you think about the ecosystem of real estate 132 00:05:46,080 --> 00:05:49,760 Speaker 3: and certainly what we manage. We're involved in hospitals, We're 133 00:05:49,800 --> 00:05:53,359 Speaker 3: involved in R and D, We're involved in protecting national 134 00:05:53,480 --> 00:05:57,440 Speaker 3: art collections. We clean universities. You know, I mentioned Harvard 135 00:05:57,440 --> 00:06:00,880 Speaker 3: to you in our conversation this morning. State is really 136 00:06:00,920 --> 00:06:03,240 Speaker 3: about what is built and what is out there in 137 00:06:03,240 --> 00:06:04,160 Speaker 3: the built environment. 138 00:06:04,680 --> 00:06:07,520 Speaker 2: It's also about how it's used. Are you seeing changes 139 00:06:07,560 --> 00:06:10,400 Speaker 2: in the way real estate's being configured in the wake 140 00:06:10,400 --> 00:06:12,880 Speaker 2: of the pandemic and all the difficulty we've had. 141 00:06:13,200 --> 00:06:17,200 Speaker 3: Yeah, people are really reconsidering what has value. And it 142 00:06:17,279 --> 00:06:19,640 Speaker 3: used to be that you could walk on to maybe 143 00:06:19,880 --> 00:06:22,960 Speaker 3: any traditional office space in it would almost look like 144 00:06:22,960 --> 00:06:25,560 Speaker 3: a trading floor, right, A pod, a pod, a pod, 145 00:06:25,600 --> 00:06:28,040 Speaker 3: a pod, and people are lined up almost like soldiers 146 00:06:28,040 --> 00:06:30,239 Speaker 3: in that space. Now what you're seeing is more common 147 00:06:30,279 --> 00:06:32,880 Speaker 3: area and what you're seeing in terms of services. Companies 148 00:06:32,920 --> 00:06:37,360 Speaker 3: like ourselves are groups that specialize in workplace solutioning how 149 00:06:37,440 --> 00:06:39,279 Speaker 3: you enter your space, How do you feel when you 150 00:06:39,320 --> 00:06:41,640 Speaker 3: come into the space, How are you the most productive 151 00:06:41,640 --> 00:06:43,760 Speaker 3: when you come into it? These are the questions our 152 00:06:43,800 --> 00:06:46,479 Speaker 3: clients are starting to ask us, not just can you 153 00:06:46,520 --> 00:06:48,440 Speaker 3: find me one hundred thousand square feet? 154 00:06:48,640 --> 00:06:50,600 Speaker 1: So we have to have the specialists for that. 155 00:06:51,000 --> 00:06:53,719 Speaker 3: The other way that it's changed is that data is 156 00:06:53,800 --> 00:06:56,960 Speaker 3: really important in decision making today. So if you and 157 00:06:57,040 --> 00:06:58,680 Speaker 3: I were to walk down the street and you said, well, 158 00:06:58,720 --> 00:07:00,760 Speaker 3: I'd like to be in this building. People don't make 159 00:07:00,800 --> 00:07:03,280 Speaker 3: decisions like that anymore. They want to know, how does 160 00:07:03,279 --> 00:07:05,680 Speaker 3: the employee get here? How long is the commune? Does 161 00:07:05,680 --> 00:07:07,599 Speaker 3: that employee have the skills that I want? Where do 162 00:07:07,640 --> 00:07:10,600 Speaker 3: they live right? How can I make them come to 163 00:07:10,640 --> 00:07:12,720 Speaker 3: the office or incentivize to get them here. 164 00:07:13,480 --> 00:07:15,840 Speaker 2: It's been a difficult period for commercial real estate. I 165 00:07:15,840 --> 00:07:18,200 Speaker 2: think everyone would agree to that. Yeah, Cushman Wakefield's is 166 00:07:18,200 --> 00:07:21,240 Speaker 2: not immune to that. As you look forward now coming 167 00:07:21,280 --> 00:07:24,240 Speaker 2: out of this, what's your growth plan for Chrishman Wakefield. 168 00:07:24,600 --> 00:07:26,960 Speaker 3: So we went through a full pack strategy plan a 169 00:07:27,000 --> 00:07:29,440 Speaker 3: couple months ago. I came in in July, as you know, 170 00:07:30,080 --> 00:07:32,640 Speaker 3: and seeding growth was a really important component of that. 171 00:07:33,280 --> 00:07:36,640 Speaker 3: We love our services businesses. We're going to seed it organically. 172 00:07:36,720 --> 00:07:39,200 Speaker 3: We had been a company that really grew mostly through 173 00:07:39,760 --> 00:07:41,280 Speaker 3: small tuck in m and A. 174 00:07:41,280 --> 00:07:42,440 Speaker 1: After we went public. 175 00:07:42,920 --> 00:07:45,560 Speaker 3: I really liked the idea of feeding into our services 176 00:07:45,600 --> 00:07:47,080 Speaker 3: businesses to grow them directly. 177 00:07:47,120 --> 00:07:48,840 Speaker 1: We have very talented people in there. 178 00:07:49,040 --> 00:07:51,520 Speaker 3: We're also going to blow up our capital markets group 179 00:07:51,560 --> 00:07:54,520 Speaker 3: and really expand that area in terms of growth and 180 00:07:54,560 --> 00:07:57,120 Speaker 3: talent there as well. I also like some of these 181 00:07:57,160 --> 00:07:59,520 Speaker 3: mega trends that are playing through the system. We talk 182 00:07:59,600 --> 00:08:03,400 Speaker 3: about population growth, we talk about data centers, we talk 183 00:08:03,440 --> 00:08:06,440 Speaker 3: about geopolitical risk, we talk about climate. 184 00:08:06,920 --> 00:08:07,920 Speaker 1: How do these play through? 185 00:08:07,960 --> 00:08:11,280 Speaker 3: Well, we've done a whole pack of analysis for ourselves, proprietary, 186 00:08:12,480 --> 00:08:14,320 Speaker 3: so that we understand where we want to see growth. 187 00:08:14,400 --> 00:08:16,560 Speaker 2: Take us forward, pick up on one of those climate 188 00:08:17,040 --> 00:08:19,280 Speaker 2: because there are real issues as we go green, try 189 00:08:19,280 --> 00:08:22,040 Speaker 2: to go green, try to reduce emissions. It affects certainly 190 00:08:22,080 --> 00:08:25,960 Speaker 2: real estate, commercial and also residential around the country of 191 00:08:26,000 --> 00:08:27,240 Speaker 2: the world. How are you addressing that? 192 00:08:27,360 --> 00:08:31,160 Speaker 3: Yeah, absolutely, and real estate constitutes a very large amount 193 00:08:31,240 --> 00:08:34,600 Speaker 3: of emissions across the world today. One of the things 194 00:08:34,600 --> 00:08:36,760 Speaker 3: that I think about when I think about these trends, though, 195 00:08:36,880 --> 00:08:39,280 Speaker 3: is the trend of cooling. It's something that really resonates 196 00:08:39,320 --> 00:08:43,640 Speaker 3: with me when we see temperatures swinging back and forth 197 00:08:43,640 --> 00:08:47,079 Speaker 3: across the world, and you think that normally this season 198 00:08:47,120 --> 00:08:50,960 Speaker 3: would produce this temperature, but now it's something different. When 199 00:08:51,160 --> 00:08:54,200 Speaker 3: I intersect all of these mega trends, I think about 200 00:08:54,320 --> 00:08:58,120 Speaker 3: data's intersection with heating and cooling, and I think about 201 00:08:58,160 --> 00:09:00,720 Speaker 3: how many interesting options we can have there in terms 202 00:09:00,760 --> 00:09:03,679 Speaker 3: of producing results for our clients, but also in terms 203 00:09:03,720 --> 00:09:06,320 Speaker 3: of what might be interesting areas for us to expand 204 00:09:06,360 --> 00:09:08,600 Speaker 3: into aside from giving guidance about it. 205 00:09:09,559 --> 00:09:14,280 Speaker 2: What about power specifically, Yeah, that's certainly important to cooling 206 00:09:14,280 --> 00:09:17,320 Speaker 2: as well as eating absolutely renewables. How do you tap 207 00:09:17,360 --> 00:09:18,240 Speaker 2: into renewables? 208 00:09:18,320 --> 00:09:21,400 Speaker 3: Yeah, I think that tapping into renewables is something that 209 00:09:21,480 --> 00:09:24,400 Speaker 3: a lot of our clients are looking into specifically, So 210 00:09:24,679 --> 00:09:27,679 Speaker 3: when they are thinking about wind, when they are thinking 211 00:09:27,720 --> 00:09:31,840 Speaker 3: about water, when they're thinking about alternate sources, we have 212 00:09:31,880 --> 00:09:34,680 Speaker 3: to be able to produce a result for them. Quite often, 213 00:09:34,720 --> 00:09:37,679 Speaker 3: what we're doing is analysis around where can they locate 214 00:09:38,000 --> 00:09:39,719 Speaker 3: if they want to be greener in the way that 215 00:09:39,760 --> 00:09:43,400 Speaker 3: they're accessing energy in this case, and we have to 216 00:09:43,440 --> 00:09:45,800 Speaker 3: have the people in our house and that kind of talent. 217 00:09:46,200 --> 00:09:48,880 Speaker 3: But what that reflects on, and even these questions that 218 00:09:48,920 --> 00:09:51,720 Speaker 3: you're asking reflect on, is this idea that real estate 219 00:09:51,720 --> 00:09:52,520 Speaker 3: has really changed. 220 00:09:52,640 --> 00:09:53,840 Speaker 1: The whole game has changed. 221 00:09:54,240 --> 00:09:57,440 Speaker 3: These questions weren't being asked of people like me ten 222 00:09:57,520 --> 00:10:00,360 Speaker 3: years ago, but the client is asking exactly what you're 223 00:10:00,400 --> 00:10:01,920 Speaker 3: asking of us today. 224 00:10:02,400 --> 00:10:03,920 Speaker 2: Michelle. It's really a treat to have you on. I 225 00:10:03,920 --> 00:10:07,200 Speaker 2: hope you come back. That's Michelle Mackay of Cushman Wakefield