WHEN: Today, Wednesday, October 13th
WHERE: CNBC’s @Work Summit: Adapting for Today, Transforming for Tomorrow
Following is the unofficial transcript of a CNBC interview with WeWork Executive Chairman & SoftBank Group International CEO Marcelo Claure and Hudson Pacific Properties Chairman & CEO Victor Coleman at CNBC’s @Work Summit, which took place today, Wednesday, October 13th. Video from the interview will be available at
All references must be sourced to CNBC’s @Work Summit.
ANDREW ROSS SORKIN: Tyler thank you and we are going to have that conversation. We’re actually going to do it as a two-parter this morning. We have two very special guests who are experts on this very subject. They are living it as we speak, Marcelo Claure of WeWork, the chairman of WeWork, also of course the COO of SoftBank, CEO of SoftBank International and then later we’re going to be speaking to Victor Coleman of Pacific in just a moment. But before we do that, let’s go straight, I see you there Marcelo. It’s great to see you.
MARCELO CLAURE: Hi Andrew.
SORKIN: We’re all trying to figure out what the future of work actually looks like and you have a, you know, as best a spot as anybody to see what’s happening in real time. This is a business that I think people were very concerned about during the pandemic but has oddly enough, almost from a contrarian perspective, had great success during this period. If we have this conversation, I don’t know, 12 months from now, what do you think work actually looks like? Are people back in the office or not?
CLAURE: I think the world has changed forever and flexibility is the name of the game. And companies are going to take many different stances, some are going to take work from home and because they’ve learned that they can run their business as efficient working from home. Some are going to push your employees to go back to the office and some are going to take, most companies are going to have a hybrid approach which is give employees the flexibility to work a few days from home and come to the office when they need to go to the office because we’ve seen that the office is a place of innovation, is a place of productivity. So, there’s going to be many different flavors and I think one size fits all is dead. The corporate headquarters as we knew it, 9-5, five days a week, corporate HQ, I don’t think we’re ever going back to that and employees are going to have to, you know, be very flexible in order to satisfy the needs of employees, in order to be able to retain their employees as the world has changed forever because we’ve all learned that we’re capable of doing a lot of work from home. However, at the same time, we’ve all learned that we got to go back to the office to perform some tasks.
SORKIN: I was talking to a COO last week who said that they’re going to have to find a way to earn the employees commute every day. This idea that that actually being at the office there has to be value at the office. If that’s true, what do you think business leaders have to do?
CLAURE: So I’ve talked to a lot of CEOs and it’s interesting to see if there’s a relationship of what a customer wants to our employees today, you know, employees demanding because they care about their health, they care about their safety and employees are demanding a different way of working. And when we talk to CEOs, we talk to employees, for sure, there’s going to be a lot of companies that are going to allow to work two days from home, they are going to give employees the ability, ability to be able to work close from home in, in different in, in a disburse real estate companies are going to have. And there are some that are just going to try to push their way through and force employees back and I don’t think that’s going to work. I think those leaders that believe that, hey once the pandemic is over, you know, the world goes back to normal. I think that’s a big failure. I think we’re in a world of flexibility. I think we’re in a world of a hybrid workspace.
SORKIN: But how much, how important do you think human to human interaction is? This is the argument that David Solomon, the CEO of Goldman Sachs, has made, both in terms of getting his own people back to the office but also arguing that look, in a Zoom world, you know, life is relative. Nobody was having meetings with each other but at a time when people can meet and they can get on an airplane, the, the salesperson or the banker who actually makes the flight to go see the client is going to win relative to the one who tries to do it over Zoom. Do you think that’s true?
CLAURE: I mean 100%. So, first is you need to be able to collaborate with people face to face and this is why a lot of companies are basically renovating their space and are creating these collaboration workspaces where people come in, they collaborate, they innovate, they talk. As it relates to sales and all that, sure, you know, they want the face to face meetings, an important part to build the relationship. But what we’ve learned is that we were overdoing it. I mean I remember myself getting to plane to China for a one hour meeting to try to sell something. I think that has changed. I think we’ve all learned that you can perform certain tasks sitting in your office or perform certain tasks sitting at home so I think it’s, again, I go back into hybrid. People are gonna be more careful about doing long travels for one meeting. People will be more efficient with their time and I think what we’ve learned is there are tasks you can do from home, there are tasks you need to go do in an office and be able to see your coworkers, your bosses, see your employees face to face so it’s totally flexible, totally hybrid. And let’s put some data behind that, right, and this is what to me is very exciting. I think we’re really going into the biggest disruption of commercial real estate and why do I say that. If you look at the traditional what we call this flexible spaces like WeWork provides, that used to be 1% to 2% of the market. The expectation are that that’s going to be 30% of the market so every building, you’re going to see about 30% of those buildings, they’re going to have those flexible collaboration workspaces. So, I, you know, sometimes we tried to put things in perspective for people to understand. If we go back to the Amazon days 1994, ecommerce was 1% to 2% of the business and now it’s 21%. Flexible workspaces are going to be 20% to 30% from what 2% is today. So, the world is massively, massively going to change. I’m just going to give you one more data point. WeWork has 1% of a commercial real estate in London. On the second quarter, we amounted to 37% of all leases. We have 1% in Manhattan, we were 25% of all leases. We have 1% in Miami, we were 25% of all leases meaning companies are coming to WeWork to basically hire a flexible workspace so they can offer that to their employees which is fascinating and these are all the Fortune 100 companies.
SORKIN: I don’t know if you saw but right before this segment, Tyler did a poll with everybody who’s watching us and about 30% of them said that they were going to effectively shed real estate over time and so the question I’d ask you is, do you think that that benefits WeWork? Do you think that that effectively offices, people get actually rid of their offices and say, you know, once a week we’re all going to just meet at a WeWork or is it we’re going to keep our headquarters and if you need a space to work, you can go to a WeWork almost as a perk of the job.
CLAURE: I mean, all of the above. We have to look at certain companies for example, Slack, which is a remote first company, what they did is they provide older employees, something that WeWork offers which is called all access. You can go to any WeWork anytime, anywhere in the world. So that allowed their employees to make the choice, hey, what I can do from home but sometimes I got to be able to get out of my house. I got to be able to get a, you know, have a quiet space to think, quiet a space to write, quiet a space to do conference calls. So that’s one way of doing it. Dropbox, you know, they were radical. Dropbox wouldn’t announce a work from home policy but what they did is they created collaboration hubs, where they’re called Dropbox Studios, inside WeWorks all over the world and so on. So, there are so many different variations and, you know, what WeWork has done is, yes, you know, we’re, we’re the most flexible real estate technology provider in the world. What do I mean by that? You can rent a space by the hour, by the week, by the month, by the year. You can rent one desk, you can rent the whole building. You don’t want to commit to a building, you get a card. You can go into 800 different types of WeWork and I’ll tell you something that that’s fascinating the trend that we’re having. We just launched something that basic called Workplace Management and what is that is we have every single enterprise company in the world calling and says WeWork, we want to move to flexible workspace within our own buildings but we have no idea how to book a room, how to double book a conference room, how to assign flexible workspace for employees so suddenly we find ourselves providing our software, as becoming a a software service company to many different enterprise customers and landlord, something that we would have never thought about a couple of years back and that is every single employee, the employer is figure out different ways how to satisfy the needs of their employees to get them to come back or to get them to go to a distributed workspace. So definitely a lot of changes, a lot of opportunities and this is only the beginning of what I think is going to be the transformation of the way we work and the transformation of the commercial real estate industry.
SORKIN: Do you imagine that individuals would go to a WeWork five days a week because one of the other things that I think’s been fascinating during this pandemic is we’ve heard even from these CEOs who say, you know what, when I actually need to do work like actual work like writing notes, emails, memos, what making putting together a presentation, I actually like to do that at home. I can actually get real work done at home. Whereas when I’m actually at the office, I see people, not to say that’s not work, meetings are a lot of work but there’s a difference.
CLAURE: The key here is to know that we’ve learned to do certain things at home that we didn’t do before. So if you’re not going to be interacting with anybody else and you’re lucky enough to have your, your office in at home and not surrounded by kids, dogs, etc., you can do that work from home, but I haven’t, we have, we see a lot of be adverse which means I actually have to find a quiet place where I can think, where I can write, where I can take a conference room, where I can take a conference call and we have many of those people sitting at WeWork’s conference room where they’re just booking a conference room for an hour and that’s fascinating. I mean or they come and they book, you know, Monday, Wednesday and Fridays, three or four hours a day and we see a lot of that so I think, you know, there’s, there’s one thing for sure, and Andy said it very clearly at Amazon, there’s not one size fits all even within the same company, right? I mean if you work in a warehouse, you have to be there, you’re necessary to be working there, but if you’re an executive or salesperson, you don’t necessarily need to be in an office so there’s for sure, not one size fits all and every company is going to take a different approach and every company may use their, their work rules in order to be able to attract and make it a company advantage in a world where employees are becoming very demanding.
SORKIN: And that was a reference I should mention Andy was Andy Jassy of Amazon who has really opened up the opportunity within their company for the leaders inside the company to decide how their departments and their people work. You have a unique perspective in that it’s international and I think a lot of the conversation we’re having today to some degree is, is domestic. And I’m curious how you think this is playing out elsewhere in the world. When people talk to, talk about this idea of return to the office. Is this conversation happening in Asia, for example, what’s it look like in Europe and are there lessons in it?
CLAURE: So WeWork is pressing close to 40 countries, 150 cities all over the world. So we’ve been able, it would be fascinating to watch, for example, our occupancy levels in Germany are in the high 90s meaning people have decided to return to work and places are, are in, you know, they’re booming. You look up and because those are places that basically were ahead in the whole goal, in the whole COVID treatment of their citizens. You have other places like Latin America that were pretty much shut down for a very long time and now things are starting to get back to work, but the conversation is the same. It doesn’t matter if you’re talking to the head of a local Brazilian bank, you know, the world, the work flexibility is related to basically the way people are coming back to work so the same thing is happening in Europe, in Latin America, in China, in India, and every employer today is struggling with the same, you know, what is the amount of flexibility that you’re providing to your employees in order to come back to work. So, I mean some places have gone back to work faster. I think Europe at one point in time was fully back to work, in a country like Germany, and some places took a little longer because they had a higher degree of infections so it’s been very correlated to the level of amount of people that have COVID in a specific country.
SORKIN: But, but you think the idea of hybrid is, is true across the globe, it’s not, it’s not a specific issue to the US because I do hear in places like Asia that there really is a return to the office mentality.
CLAURE: No, I mean I tell yourselves, I mean I saw back in Japan where traditionally has been a pretty employer driven culture, the flexibilities is everywhere. And, you know, you can never play with your employees’ health and safety. Doesn’t matter if you’re in China, in Japan, in, in Germany or in the United States and I think every employer has taken that very serious and is trying to, you know, we’re all basically struggling with the same and that is how many days a week should your employees be back in the office. And should they be back into one office, or should you actually shut down your corporate headquarters and be able to have offices distributed in closer proximity to your employees and that’s that that’s a global trend, and, you know, just remember this flexibility, you know, we believe that about 1/3 of every, 1/3 of all the commercial real estate market in the world or buildings in the world are going to have a flexible workspace where a desk is being used by different people at different times of the day on different days and that’s a global trend.
SORKIN: Marcelo, final question and this is about it, you mentioned the idea of employee power we are in a moment where employees have been empowered part of that I would argue is a function of the labor market at least here in the United States because it’s such a tight labor market the employees do have more power and more say than they ever have before. But to some degree, you might argue that that in certain cases might look like a historical aberration in the future. Do you think that’s a shift in culture around millennials and, and around what employment is going to be going forward or do you think that is a function of the economics of what’s happening right now when it comes to supply and demand for labor?
CLAURE: I think it’s both, right. I mean in a tight labor market, employees have a lot more choice so therefore they’re going to go to a company that not only they identify with the culture of the company, but now there’s this new ingredient and it’s such an important part and what is the work, you know, what is the work rules that that company has today. That has suddenly become an important part when a high demand AI engineer has to make a decision of which company they want to choose and they all ask. I mean I see it in our over 350 software portfolio companies, we’re all fighting to attract the best talent and suddenly employers are asking, what is your work from home or what is your flex consideration. In the past that wasn’t the case, can I work from home, do I need to work, do I need to go to the office, do I need to move close to headquarters. These things before weren’t even part of the conversation. But today because of the pandemic and a tight labor market, that has only become an important part when an employee’s making a decision of where they’re going to be employed because great talent is in high demand, and great talent has choices of where they’re going to work.
SORKIN: Well Marcelo, thank you for the conversation. It’s great to see you. I hope to see you in person again. I saw you a couple weeks ago for the first time maybe in a minute as they as the kids now say but it’s great to see you and look forward to having this conversation very soon again to see where we really are six months, in 12 months, in 24 months from now but Marcelo, thank you.
CLAURE: Thank you, Andrew.
SORKIN: In the meantime, we are going to pivot the conversation now to, to Victor Coleman, who’s going to be joining us right now from Hudson Pacific. A landlord with an array of brand name clients that you all know, Google, Netflix, Amazon, Square, Uber, Riot Games and more. It’s great to see you, Victor. I, I’m fascinated from your perspective having just listened, listened to, to Marcelo who I think is betting on a hybrid world whether you’re betting on a hybrid world too at this point.
VICTOR COLEMAN: Well, I think what Marcelo was saying which is, you know, indirectly at the end of the day is I don’t know if I’m betting on a hybrid world or not. I can tell you that it’s one, one size won’t fit all. And I think that’s what we know, right, these tech companies and media companies all have their own game plans at the end of the day, but uniformly they’re all adapting to change and that’s what we all have to do and we’re finding that with our tenants today.
SORKIN: So Victor, what are they telling you, we were mentioning Andy Jassy at Amazon who is a client, how many of them are saying we’re thinking we’re going to need more real estate in the future and how many are calling up and saying actually we may need less?
COLEMAN: Well, I think, you know, the work from home concept is uniformly such that just because you may be at the office less days a week doesn’t mean you need less office and one of the things we’re finding is Class A office or high quality office that is going to be conducive to safety and protocol and all the other aspects that we’ve converted our space to for our tenants like Amazon, that space is, is in very high demand and the larger tenants are taking up that space going forward and we see that as really a benchmark of what we think the future is going to align itself to. Now the smaller tenants are not making the decisions the way the larger tenants are. I think listen what, what Andrew has sort of come out and said is, you know, each department can make their own decision. I think what we’ve all figured out at the end of the day is that the value of being integrated and human interaction and onboarding training is, is something that you can’t pass up. I mean if you look at a Google or you look at a Netflix or you look at an Amazon, they built their entire enterprise on culture and the culture can’t just be thrown out because we are now transitioning. That culture will adapt and change, and they’re going to adapt and change together, they can’t do it remotely 100%.
SORKIN: And how are you seeing the reconfigurations of space as a result of what you’re talking about?
COLEMAN: Well listen, that’s, that’s the, the question. Until they’re in, in a position of, of some form whether it’s three days, four days, five days a week, whatever it is, that’s going to evolve but what we’re finding is, is a number of things. First of all, the adaptability of flex base is 100% the case. Having safety protocols, having different amenities and services to attract their employees around outdoor, indoor, outdoor space. I mean we, we, we see right now the biggest amenity we have now, we’re granted we’re a little bit more favorable because we’re on the West Coast. We’ve got assets from Vancouver all the way down to here in Los Angeles, and so we have a lot more access to outdoor space but just the ability to have safety protocols in place, have new updated air conditioning units with MERV 13, all the different aspects of which we see our tenants demanding right now, that’s going to evolve. But as more people come back, the adaptation of that space is going to evolve as well. Tenants are fully prepared to put a ton of money as are we as landlords into their space to make it more conducive to whatever the future is going to look like.
SORKIN: You know, but one of the interesting things is over the last decade and you know this better than anybody, many companies have moved towards open floor plans and one of the things that I think came up especially during the pandemic was a lot of people said, you know, I like four walls. I like four walls and a door.
COLEMAN: Yeah, I think, listen, I think one of the things that, that I don’t agree with, with, with some of the people that you’ve talked to and some of the people you’ve talked about is, you know, this sort of co working flex space that that they’re sharing. I don’t think shared space is what people want to come back to right now to say today, I’m going to be in this office and tomorrow you’re going to be in this office. I think people like four walls. I do think they like the privacy. I do believe that, you know, some of the comments that you’ve been talking with some of your prior guests and Marcelo specifically, you know, around people getting work done. It’s just as challenging getting work done at home. I mean I don’t know how many times, everybody has commented on how efficient Zoom is but how many times you get interrupted in a Zoom call that would never happen in a face to face meeting with an executive committee or just a department, it’s just not the case.
SORKIN: One of the big issues that you hear about a lot and I’ll reference David Solomon again from Goldman Sachs but he’s spoken about it the idea of wanting to make sure not only that, that junior people come back to work but that senior people come back to work and there’s a culture issue in terms of trying to get those people to work together so that you can have that type of apprenticeship but as a result from a real estate perspective, what kind of perks you may have to provide in terms of office space, and the like, to almost upgrade to make it worth the time of a senior person who might say, you know what, I can do my job from home, it’s just fine.
COLEMAN: Well listen, legacy is a really important factor in all businesses, right, so you’re bringing people up that are younger people, that are smart, that want to grow in a company that’s maybe a success aspect of whatever that business is. And David’s absolutely right. I mean, it’s all the process of having these young people come up. So who are they going to learn from? They need to learn and they need, they need to share and interact when, you know, when you hang up a conference call or a Zoom meeting or something like that, there’s, there’s no next moment, right. And so, it’s got to be conducive for these for, these senior management people to walk out of a face to face meeting that we used to do a year or 2, 3, 4 forever ago and turn to the person to your left as you’re walking down the hallway and say hey let’s follow up on this, this and this. So it’s much, much more challenging on that basis now to make it conducive for senior people to come to the offices, it’s going to be based upon a lot of aspects. It’s the quality of the space, it’s going to be the quality of in the interaction of the business dealings. I mean there is the art of the deal and the excitement of doing business. I heard you comment about, you know, is somebody going to get on a plane and fly for a business meeting if your competitor is going to fly, the answer is I totally agree, it’s 100% yes. So that’s conducive to the senior people wanting to interact and do business.
SORKIN: And then a, maybe this is a space question as well, in a hybrid world where people are going to have meetings both internally and perhaps even more importantly, externally over Zoom sometimes but then doing other things in person, what does that look like? I work sometimes in an open floor plan and Zoom in an open floor plan is a funny thing because if there are people behind you, if there are people in front of you, if there, there’s talking, it makes it, it makes it very difficult if you’re then in a conference room where some of the people there, but some of the people. It’s, it’s almost harder than doing it one way or the other.
COLEMAN: You’re absolutely right. Listen, it’s, it’s, there’s sound issues, there’s distraction issues, there’s respect issues that that don’t occur when you’re sitting face to face and so I do find it a little bit interesting how there’s not enough pushback to say, listen, this is not as productive. It may be time efficient, but it really at the end of the day, it’s not because if, if, under your example, you know, you’re, you’re putting yourself on mute coming back and forth, I didn’t really get this point. I have to reach out to the person and there is more time on that basis. I mean that’s just part of it, right, and so people need to be honest about what’s convenient and what’s productive and I think that’s the biggest difference.
SORKIN: Okay so I’m going to ask you the question I asked Marcelo at the beginning. If we had this conversation, you can, you can pick when you want to have it, two years from now, five years from now, will the companies that, that I just mentioned, these big companies that are clients of yours, do you think that they’ll ultimately have more real estate, total square footage or less?
COLEMAN: Well, I think, I think it’s a combination of a couple of things. Yes, I think it’s a combination of a couple of things. I do, I do think, for sure, as I mentioned earlier, Class A space is going to be in high demand and so, and it already is. The best quality space right now is those spaces that people are leasing and absorbing because they know it’s up to date. It’s, it’s got all the amenities, it has the ability to expand and grow. So, there’s going to be a differentiator between what we call B’s and A’s. I do think companies are going to expand in other markets to adapt for a work from home process both for all different classifications from, from onboarding younger people all the way through to executives and so as a result, companies are going to take more space on that basis. What we are not seeing right now is companies taking less, coming to us and saying, hey we need less space. There are obviously companies that are, that have that have come to us on that basis, but the majority of companies are keeping their footprint and adapting it or actually expanding their footprint and adding more common area space or collaboration space or amenitized space to adapt for a more, three, four a day work week.
SORKIN: Victor Coleman, Hudson Pacific, it’s great to see you. Hopefully we’ll do this in person as well. Appreciate it very much and look forward to seeing you again very soon. Thank you.
COLEMAN: My pleasure, good seeing you.
SORKIN: You bet. Tyler, back to you.
