Dallas C-Suite Perspectives on Commercial Real Estate Trends

Debra von Storch, Steve Mansfield, Lucy Billingsley, and Russ McFadden.
Debra von Storch, Steve Mansfield, Lucy Billingsley, and Russ McFadden.

It’s always interesting to get user perspectives on commercial real estate, and a recent panel discussion hosted by CoreNet Global’s Southwest Chapter provided just that. CoreNet, of course, is the leading association for corporate real estate and workplace professionals. The event was held at the Winspear Opera House and moderated by yours truly.

The questions were built around CoreNet Global’s Corporate Real Estate 2020 report. If you haven’t seen it, check it out online. It’s a transformational initiative that envisions the future of business and the changing nature of work. The yearlong project tapped into the perspectives of corporate real estate executives at hundreds of companies, including AT&T. The results show a dramatically changing workplace.

Serving on the panel were:

• Debra von Storch, partner and southwest region leader over strategic growth markets for EY, formerly known as Ernst & Young. She’s not only an influential leader in her own firm, but a driving force in the region’s entrepreneur community. She knows a great deal about innovation and what it takes to help high-growth companies thrive. You may recognize her from the many events she attends all over Dallas as a power networker, or from her feature in the September issue of D CEO.

• Stephen Mansfield, president and CEO of Methodist Health System. Since Steve took the helm in 2006, Methodist has doubled in size and experienced the most profitable years in its history—quite an accomplishment when you consider all of the challenges he’s dealing with in the healthcare arena right now. Steve is a humble guy, but has received widespread recognition for his achievements, including a 2012 Entrepreneur of the Year award from EY, a program that Debra oversees. Steve also is on the advisory board for D Healthcare Daily, an affiliate of D CEO and D Real Estate Daily.

• Lucy Billingsley, partner at Billingsley Companies. The daughter of legendary Trammell Crow has made quite a name for herself in her own right, with projects that span across North Texas and include all product types. Just like her father, Lucy is known as a pioneer and an innovator who has had a profound impact on our market. Her tenants include some of the most progressive companies in North Texas. You can read more about the two Lucy’s in the September issue of D CEO.

• Russ McFadden, vice president of corporate real estate for AT&T, where he’s responsible for portfolio management for the company’s real estate operations—no small job. Russ not only oversees transactions and strategic planning, he also leads AT&T’s client relationship management and workplace transformation efforts.

If you were unable to attend the panel presentation, you’re in luck. Because crack D CEO intern William Johnson transcribed the whole thing. Here it is:

Q. At a recent CoreNet Global luncheon, the director of Workplace 2020 for The Coca Cola Company discussed the major overhaul of the company’s Atlanta headquarters facility. The goal was to drive brand and culture internally as much as it does externally. Let’s start by getting some insights on the importance on your company’s brand, and how it’s reflected in your workplace. Debra, EY is currently going through a major rebranding effort. Let’s start with you.

DEBRA VON STORCH: As of July 1, we are now EY. No longer, as my mother used to say, Ernest Young. We were Ernst & Young for rough 150+ years. EY chose to transform our brand because of the changing demographics we see. By 2020, 85 percent of our 300,000 employees will be millenials. And they are about building a better working world. And not only have we transformed our brand but we have transformed our purpose. We are about adding stability to the financial markets, serving out clients, serving our community, serving our people.

Aas your transform to build a better working world, your work setting needs to transform as well. So we are also launching the workplace of the future, which will be a more collaborative environment. Starbucks cafe type of environments, conference rooms and very clean, tiny, small offices. We’re excited about our brand and we’re excited to be EY.

RUSS MCFADDEN: AT& T is one of the most respected brands in the world, and we take that very seriously. As a matter of fact, when we talked about our workplace transformation program, the thing that resonated the most with our chairman, Randall Stephenson, was that he wanted our workplace to reflect our branding. It’s all about mobility and innovation, and he wanted our workplace to reflect that. We wanted to allow people to work whenever, wherever they are at.

So along those same things Debra talked about in terms of changing the work environment so it supports that mobile workforce, it’s infusing the workplace with the appropriate technology to make sure that we’re always connected … that we’re leveraging the products and services we sell to our customers and taking advantage of those internally.

LUCY BILLINGSLEY: It’s interesting that these answers come out so smoothly, because they are quite radically different than what we would have heard in the past. When we leased buildings to people in the past, it was a commodity. It was all about price and efficiency. Now, human resources personnel are also involved, and everything is different.

I think it happens first when you draw it up; why not let the building speak for the company? If you’re cutting-edge, if you’re mobile and you’re about tomorrow, let the building say it. Let the building be an appropriate reflection of that. When you come through the door, you want every employee there to have their life enriched because they’re a part of you. And so, get away from the old boring, yesterday interiors.

How great do we feel about being here at the Winspear, instead some conference center in a hotel where the ceiling is too low and the lighting is bad and its a mutually bad experience? Space makes an incredible difference. I’m thrilled to have conversations begin with clients saying “This really is about tomorrow.”

Q. We’re at a unique time in workplace history, with four vastly different generations sharing the same space—Generation Y, Generation X, Baby Boomers, and Traditionalists. The workplace also is becoming much more diverse. The life experiences of these groups and their world views have little in common. What are some of the challenges in creating a company culture that accommodates these varying needs? And has your company’s workplace evolved to accommodate the changes? Steve, let’s start with you. What kind of culture do you strive to create at Methodist?

STEPHEN MANSFIELD: Methodist is a regional system, unlike E&Y and AT&T, both of which are global. Our touch points are all fairly concentrated. We run a diagonal from Mansfield to McKinney. So, we don’t have some of the challenges that others have around culture, when you’re local, for a lot of reasons. Culture is always a challenge, no matter the size of the organization. And our culture is synced up from our mission statement: saving lives with quality care. That informs a lot of what we do, making sure everyone can articulate how they live out that mission statement.

In all of our construction planning meetings, the question is frequently asked, “How does that fit and how does it advance our mission statement?” The interesting conversation that I hear more about is occupant well-being. For example, how does this space work for collaborative meeting? Because what makes a collaborative team work well from a space standpoint is different from what may make me work well with an individual. That’s a kind of a totally different setup, dynamic, and discussion but I think it underlines the fact that we all have scarce human resources and scarce economics to deal with today.

BILLINGSLEY: Space is changing. With all of this discussion, intent, and purpose around collaboration, we also have to create with places to think and have clarity and focus without interruption. I think we’re right at the cusp. Because testing all of these new ideas and spaces will reveal much. When it comes to that, the furniture companies are brilliant. So let’s go test it and see what the right answers really are.

VON STORCH: I’ve been at Ernst & Young for 31 years. One thing about the Baby Boomer generation, they have a lot of stuff. I’ve got mementos and pictures and files and stuff. The biggest challenge that we’re seeing with our boomers is that they want to keep their stuff. So how do we work with that? We’re currently on five floors. What I anticipate happening is that we’ll convert one floor at a time to the workplace of the future.

We won’t convert all of them, because we’ll still want to have those people engaged at the firm who have stuff. But by 2020, again when 85 percent of our employees are millenials, they won’t want stuff. So we’re going to continue to see an evolution in space. Our biggest challenge is security, because we’re in the business of having professional confidentiality in everything we do. Technology is big focus for us now.

Q. The impact of a work environment on employee health is another topic of interest. At D Magazine, for example, we punched a hole in the ceiling between the two floors of our office, so employees could take the stairs instead of riding an elevator. Some employees use stand-up desks or sit on exercise balls, and we’ve cleared out some space for on-site yoga classes. What trends are you seeing with regard to providing a work environment that promotes the health of employees?

MANSFIELD: It does force you to think about the ergonomic aspects of design and flow: What you do from the standpoint of a creative work environment that’s not just physically accommodating, but psychologically accommodating as well? Those variables play such an important role in employee health. And just a simple thing, like in the new hospitals we are building, locating our stairs near our elevators, can make a difference. Putting a stairway adjacent to an elevator improves employee satisfaction, because nine times out of 10, taking the stairs is probably faster. It’s also a benefit to our health, and adding a bit of natural light to that stairwell contributes to the experience as well.

BILLINGSLEY: There should be light at the end of every hallway. For the architects in the room, please give us better hallways. We need them. The other aspect to the equation is location, being near your amenities—near restaurants, get outside near trees.

MCFADDEN: One of the things we’re trying to strive for in our design is connecting people throughout the building. We’re trying to support those instantaneous connections. A lot of times you can do that with a focus on health. For instance, most of the furniture today has sit-stand options, so more people are likely to walk around. It makes them less sedentary in the office. Also, as mentioned, creating stairways that bridge floors together opens up the whole space and creates a sense of connection between two floors.

Q. Bank of America is among those companies pursuing an alternative workplace strategy, wherein employees give up their physical space in an office and work from home and shared work centers in the office building. This has helped shave B of A’s real estate needs by 25 percent and save billions of dollars. Office hoteling is another trend, where workers share office space. Are you seeing this trend in your company, or do you foresee exploring an alternative workplace strategy in the future?

MCFADDEN: We started the journey a couple of years ago, looking at the utilization of our workspace. What we saw was that about half of our office space went unused any given day. And that’s for a lot of reasons. It’s people traveling, on vacation, and people working from home. But when you look at a company the size of AT&T, that represents a huge opportunity. We have invested in many tools to better understand how people are using their space.

Our desire is to not drive people to work from home, but we do want to help people work from wherever they’re at. We’re using a variety of strategies. We have a third workplace program, using Regus and some other space providers. We have some hoteling that is going on. We have a very active telecommuting program; about 25 percent of our managers work from home part-time or full-time.

We have created innovation centers that we call the AT&T Foundry. We’ve got four of them around the country. They are places where people from the outside can come in—application developers, and they can create new innovations, new applications, and on a very fast basis they can leverage on our network.

We’re also trying to drive people to unassigned seats. Recently, we brought in about 400 marketing people from across the country to Dallas. These are primarily director-level and above, professionals who have always had  private offices—with a door. We said, “When you move to Dallas, you don’t need an office anymore. You don’t even get an assigned seat. You’re going to go into an open office with unassigned seating.”

It has been a significant shift—a big paradigm change—and a lot of learning has gone into it. But it has worked well. We’re about four months into it, and it has gone much better than we expected. We’re seeing a lot of benefits from it in terms of those instantaneous meetings. We see a lot fewer formal meetings. We see a lot more people walking over to a co-worker’s workspace. It has gone well. We think we’ll eventually see about 50 percent of our managers in unassigned seating.

VON STORCH: We’re doing something similar, with a focus on technology. In any of our offices around the globe, I have a security badge that will buzz me into the office, and then I’ll go into a kiosk where I have already reserved in advance a space, without my stuff. It’s my space that will have full wireless accessibility when I badge into that space. I may have four or five different spaces throughout the day in whatever office I am in. We are trying to provide that collaborative environment, that private environment, that video conference environment, and it’s all driven, in part, by technology. By 2020, every office at Ernst & Young will be this way.

Q. Alternately, earlier this year, Yahoo’s CEO ordered all home-based and teleworkers back to the office in order to drive innovation. She said, “Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.” What is your company’s stance on the issue and what have you done—or plan to do—to increase the productivity or achieve a better work-life balance for your employees?

BILLINGSLEY: Being a smaller company, we haven’t needed to make the accommodations others have had to make. But I really resonate with Yahoo’s philosophy; I very much want to see and be with people. Aanother thought is that we work all the time. My kids are grown enough that I do work all the time—but when do I get my psychological space? And how does that work on vacations? On vacation, I work at midnight, because I’m in a different time zone. It’s another fascinating thing that employees have done with mobility. We all get addicted to all of the devices—kids today don’t even know they’re addicted. Some sort of disengagement is needed.

VON STORCH: We believe that we need to be where our clients need us. When we’re not at the office, we’re at client sites the majority of the time, or at our various collaboration spaces. But flexibility is a critical part of us retaining client. And attracting and paying for our talent is what we’re going to need to grow and reach that 300,000. We expect you to engage and initiate and support sustainable relationships, and you can’t do that by not coming to the office. You have to have that face-to-face contact, whether that be on the client side or in the office. Fridays, though, in our traditional office buildings, you don’t see a soul. Generally Fridays are when people fly back into town, work from the home, do things at their kids’ schools, or whatever they need to be doing.

Q. To close, what other issues and trends are influencing your corporate space decisions/planning, and how?

MANSFIELD: All of our construction projects have taken into account a lot of variables, including doctor well-being. We’re seeing much larger operating rooms—a Da Vinci robot takes up a lot of space. The average operating room that’s 20 years old takes up about 150 to 250 square feet, and now they’re 850 or so. Patient rooms, because you’re trying to get the universal rooms that can be used for a variety of patient types and services, have also grown by about 250 square feet. These rooms and other various spaces use a lot of natural light. We want to get as much natural light as we can everywhere we can. This includes our break rooms because, again, the psychological impact that has on a worker’s day.

We have a lot of construction is going on, and it’s fascinating, really, across the span of a career to see the impact and change—even though the interaction between patients and a physician or nurse are still largely as they were many years ago. Technology has changed so many other aspects of that, though. We try to give the nurses time to get away from the desk and into the patients room, and that has led us to a lot of design changes, such as remote nurses stations, as opposed to centralized.

MCFADDEN: The reason we’ve been so successful in this transition of moving people to unassigned work spaces is that we really do provide the right work environment—a work cafe that is very comfortable and gives access to light. It’s giving them a lot of flexibility within the workplace. It’s providing meeting space they can huddle in. It’s providing focus space they can go take a call in. A lot of it kicks back to technology, and we keep on hearing this throughout this discussion, that we are really infusing these work spaces with technology, so you can have virtual communication with other remote locations.

It’s not just big formal rooms, it’s small rooms that have that tele-presence. It’s pervasive WiFi and cellular coverage throughout the floor, so you can pick up your laptop and move around throughout the day.

It’s also simple things, like printing in the cloud. Historically, at AT&T, if you wanted to print through a printer you had to go through this really long print screen, plug into your laptop and print only to that printer. Then you had to run there and pick up your paper. Now you can print to cloud, swipe your ID and it pulls it off of the cloud and prints it off in a secure manner. So it’s trying to figure out how we can take advantage of the technology in a good way that enhances the employee experience and couple that with the services we already provide.

BILLINGLSEY: One thing we’re seeing is that people want every kind of space. They want to have living room furniture outdoors and picnic tables indoors. Everything is being tossed upside down. I think it comes down to what’s casual and what’s enriching. We’re not a formal society anymore. How and where do people do their best thinking? What enriches the experience of each person? This flexibility of space is also really bringing the outdoors in. In addition to natural light, for some reason, energetically, we need trees. I think all of that integration is really important.