Disruption has been the theme of Ronen Journo’s 28-year career, so his perspective on this period of rampant experimentation in corporate real estate is particularly prescient. Ronen is Senior Managing Director and European Head of Management Services & Operations at Hines, a privately owned real estate investment, development, and management firm. In this episode, he and Ryan discuss how the pandemic provided an accelerant for challenges that had been on a slow burn for decades, and the need for corporate real estate professionals to focus on the experiences of the people who use the built environment in order to fully realize its value. For more ways to keep people at the heart of the built environment, check out our POV on the future of work: https://www.linkedin.com/pulse/designing-better-tomorrow-millerknoll/.
This is Looking Forward, conversations about the future of work brought to you by MillerKnoll.
Ryan Anderson (00:19):
Hey, everyone. Today we talk with Ronen Journo, senior managing director and European head of management services and operation at Hines. Ronen is a wonderfully strategic thinker about the role of real estate in our communities and how the future of real estate can positively impact organizations and their employees. Having been part of many key disruptions in corporate real estate, I think you’ll enjoy Ronen’s perspective on the changes that are currently underway across the world. And as a self-described passionate and purpose driven student for life, Ronen wanted me to encourage each of you to connect with him on LinkedIn and share your feedback and thoughts about our topic today. So with that request in mind, enjoy this conversation with Ronen Journo. Hey Ronen, thanks so much for joining the podcast. Maybe to start out, you could tell us a little bit about you and what you do at Hines.
Ronen Journo (01:06):
Sure. No, happy to. So what am I? I’m a workplace and real estate practitioner. I’ve been in the industry for the last 28 years. I spend my entire journey paying rent. I’ve been a tenant, spent 21 years at Cisco running the real estate organization and being a tenant across many countries and many geographies, many different cultures. Then I left and joined WeWork and I worked with Adam Neumann and his team to build the enterprise business of WeWork. Spent three years there, saw the exponential growth and the big impact we’ve had on the industry. And then I joined Hines 18 months ago, and I hope that the listeners are aware of Hines, but it is a fascinating place. It’s a family owned, family run business, 65 years in business, Houston based. And when you look at Hines, what in essence do we do, we invest, we develop, we manage, and we operate prime real estate across the world and across all asset classes.
Ronen Journo (02:16):
Predominantly we have been in offices. Now we cover all asset classes. Huge growth in living sector, in logistics, in retail, and continuing to really shape and regenerate many cities across the world. So I would encourage the listeners to dig a little deeper and get familiar with the firm. When I joined the firm, what I’d been asked to do is to really look at the operational business that we have successfully built over the past 40 years in the United States, over the past 20 plus years in Portland and Russia, in Mexico, and try and figure out together with our country leaders how do we build this operational business here in Europe? How do we bridge between asset management, property management, and engineering excellence, and really offer our investors, our customers, our tenants, and the location, the highest quality of service and engagement and relationship that we could possibly offer?
Ronen Journo (03:18):
So the intent is not to compete with the big service providers out there. We are building this business unit purely for our own use to support the assets that we own in our various vehicles. And really just look to do that at the highest quality possible, look to align the ESG initiatives of the firm together with those of our tenants, our customers, and really just build much deeper relationships with the people who pay rent. So that’s in very simple terms what’s my mandate. There’s a lot more complexity behind it, but in a nutshell, that’s the transformation that I’ve been asked to drive.
Ryan Anderson (03:59):
That’s fantastic. I know you’ve had a highly varied and interesting career. Let me ask you, what about this work is so appealing to you? What motivates you and why have you chosen to dedicate your time to focus on this?
Ronen Journo (04:11):
That’s a tough question. That’s a good question. I guess when I reflect back on the last 25 plus years, I would say 28 years, I’ve been fortunate to be part of disruptions. Okay. If I think about my very first job in London, I was part of the outsourcing disruption back in the mid 90s, when companies were looking at outsourcing, “How can I package services and give them to a third party to perform them at a better price point and a better quality of service?” My Cisco years were a different type of disruption. They were technological disruption. It was all about, “How does technology change society for the better? How does it change the way we work, the way we live, the way we play, the way we communicate?” And with that, it had a huge impact on the workplace. It liberated the human from the desk with extension mobility.
Ronen Journo (05:10):
Shortly afterwards, we saw the safe wireless, which liberated us, not only from the desk, but from the floor, from the building. And we were able to move around the campus. And then we had different types of internet connectivity away from the dialup into VPN, which again, enabled us to work from outside the office. And then telepresence came about, WebEx came about, and all of a sudden collaboration could be done and performed from pretty much anywhere you choose to. And what I learned in that disruption is that we enabled people to work anytime, anywhere, any place. And I was very fortunate to be part of that and to be able to contribute to that and learn from that time. Joining WeWork was a different disruption in its own right. It was about creating workplaces that were cool, sexy, places that people wanted to come and congregate.
Ronen Journo (06:06):
It was about informality. It was about moving away from the old symbols of the workplace, the hierarchy and power into making them much more human-centric. By the same time, it had a different side to that disruption. It was all about driving efficiency and giving the occupiers flexibility. An average flex operator operates at a high level of density, high level of flexibility that most corporate occupiers aspire to and need. So it was a different set of disruptions that we lead through and being part of that machine that set new industry standards was just something I had to do. Now, leaving WeWork and joining Hines, the reason I was so delighted with this opportunity is because Hines is already at the top of the game. It’s one of the top three most important firms in the world when it comes to investment and development and management operation of assets.
Ronen Journo (07:01):
If you dig into the history of the firm, you will see that they have shaped many landscape of cities across the United States, across Paris, London, Berlin, and what I really appreciate about the opportunity is that they asked me to get us closer to the tenants. They asked me to build that intimacy with the people who pay rent and do that by building the operational business, something that I’m so fundamentally passionate about, the day to day tactical stuff that matters because if you get the restaurant right, if you get the toilets right, if you get the air conditioning right, and you get the hospitality mindset right, and the right set of amenities and technology enablement, you create an experience. And to be able to build such business within such a large, reputable, successful vehicle, it’s once in a lifetime. And again, why? I just want to contribute to the transformation of the industry. I want to do my small piece and I couldn’t ask for a better vehicle with which to do it
Ryan Anderson (08:02):
Well, not only have you been part of such an interesting and series of impactful transformations, you’re also quite cognizant of what’s going on at a given time. As you move closer to tenants that you work with, given the significant reevaluation of workplace and urban centers, how do you think about the transformation that we’re currently undergoing and where do you see all of this leading?
Ronen Journo (08:23):
It’s an excellent question. So many different lenses to look at what’s going on at the moment. If I look at it from the lens of a large occupier, nothing new, if we want to be absolutely brutally about it. The need for flexibility, the need for the workplace to be a tool, an enabler for attracting and retaining talent, for the workplace to be the place where people congregate and feel a sense of belonging and a sense of alignment with the brand and the values for which we stand for is not new. That has been in existence and a big challenge for heads of real estates for the last 20 years. The need to drive efficiency and effectiveness in the way that space performs is not new. What has happened from the occupier’s perspective is that COVID has accelerated these trends, COVID has made sure that this convergence between people, place, technology, and culture has become front and center of the agenda of every board, of every corporation on earth.
Ronen Journo (09:30):
It’s no longer nice to have. It doesn’t only belong to Google and Amazon and Facebook. This has become the front and center conversation in the ballroom of every company across every sector, which means that it has accelerated the need to get the formula right. Now, if you look at it from the occupier’s perspective, what does it mean? It means that they are going to right size their portfolios. They’re going to retain only what they need. They’re going to consume more flex. They’re going to focus on the human experience within the space and the purpose of that place they call workplace. What is the purpose of the workplace we provide to our employees? And it’s going to be much more intentional. It’s going to be much more human-centric. The dialogue between the employer and the employees is going to be much more wholesome than ever before. Why?
Ronen Journo (10:21):
Because the people want choice. People want to be trusted of how they perform work and where they perform work. And why? Because technology over the past three years has won. It has proven that work and businesses can continue to function for the vast majority of businesses across the palette, especially if you’re in the knowledge industry. Now put that aside. That’s the employee’s, that’s the occupier’s perspective. If you look at it from an investor’s perspective and a landlord perspective, what does this mean? It means that as occupiers who pay the rent are looking for more flexibility, investors have to build that into their underwriting. They have to build that into their modeling. They have to be cognizant that in the environment of offices, it’s no longer going to be acceptable to commit for 20 year leases or 15 year leases. There will be a core strategic location that people sign up and commit to, and over and above that, they would be looking for much more flexibility.
Ronen Journo (11:18):
The same thing applies to a manager and occupier landlord. They’re going to have to think about place-making. They’re going to have to think about portelification, “How rich are the set of amenities I provide and how do I make sure that everything we do is having a positive impact on the environment, but also on society and the neighborhood around us?” ESG is becoming front and center for the investment side of the industry, for the landlords and developers. As much as it has been, it will become more for the occupiers, so we are establishing a common agenda. So what does it all mean? It means that I’m finally saying what I’ve been advocating for a while, which is the built environment is truly becoming human-centric and technology enabled. And if we can put the human and the human experience at the center of every conversation and work inwards out and work from the center out and focus about the people who are going to use that built environment, whether it’s a customer, whether it’s employees, our partners, then we will provide very sustainable and very successful locations and businesses.
Ryan Anderson (12:31):
Hey friends, we’ll get back to our episode in just a moment, but first I want to take this opportunity to let you know that Looking Forward is part of SURROUND, a podcast network curated by standout design group. SURROUND brings together some of the best architecture and design driven audio content available. So if you like what you hear from us, visit surroundpodcast.com and check out some of the other great shows on the network.
Ryan Anderson (12:54):
That’s a fascinating take and much of what… In fact, most of what you said really resonates with me, particularly that so much of this was our reality before the pandemic, but it’s been so highly accelerated. Whether it’s on the investment side or on the occupier side, it feels like there’s a major game of catching up happening in so many circles. I’m curious with your global perspective and all that you’ve seen, are there things happening in the world of workplace, maybe in Europe or somewhere where you’ve seen the most success for best practices that the rest of us in other parts of the world can learn from?
Ronen Journo (13:28):
From what I’m seeing and from a lot of dialogue with many occupiers, everyone is experimenting. Everyone is still somewhat in the kitchen, trying to cook the right formula and somewhat deploying prototypes, piloting, and experimenting. And if we think about it over a long continuum, that’s okay, that’s fine. This is not bricks and mortar. It’s not something you can set in concrete. The convergence between human beings’ needs, how they perform work, what environment, what services enable them to perform work, be happy, be productive, and feel that it’s actually enhancing the physical and mental wellbeing, it’s a very complex set of inputs and dynamics. The legacy of the industry is that we designed, we built, and we provided very static, very fixed environments. And three years later, five years later, all the matrix were in their wrong direction, underutilized, wrong menu of settings, ineffective, people don’t like it, don’t turn up.
Ronen Journo (14:36):
People’s perception wasn’t very consistent. Once they were proud of it, then they were not. So we as an industry have been providing safe, static, fairly obsolete set of solutions. What many occupiers and many people in the service provision side of industry are doing now is focusing on what is the data showing us, what are people telling us, and where have we been pre-COVID in terms of management practice, in terms of leadership values, in terms of behavior of our workforce, in terms of adoption of technology. Assess where you have been before, look at the data of before, listen attentively to your employees of today, engage them in a meaningful dialogue, and begin to extrapolate solutions that you’re willing to test and fail with. That’s what I’m seeing. And the reason I say that is because what we are seeing is a lot of contradictions.
Ronen Journo (15:38):
On one hand, we see CEOs of major banks and city mayors, “I want you back in the office. I need you back in the office. It’s important for you.” Absolutely. The office has a fundamental role to play in the life of every organization. I fundamentally believe that. We need a place to congregate. As humans, we needed it for the last 600 years of our existence. If you go back to the coffee houses of Amsterdam and London, that’s where business was made or if you go to the guilds where the professions go together. So I fundamentally believe we need that. But the contradiction is that if the CEO tells his employees, “I need you back,” and yet, three years of business have produced excellent results, good profitability, good productivity, people are actually working over time because they’re spending 12 hours a day on Zoom, they’ve burnt out, the way the message is being interpreted by many is, “You don’t trust me. You’re not giving me choice. You want to control me.” And that is causing a lot of disconnects.
Ronen Journo (16:45):
And we’ve heard about the great resignation. We’ve heard about the Exodus from the big cities in the United States, in particular in California, in London. And I think that we’re going through a correction period where employees are saying, “I really just want you to trust me and I want you to give the space to manage my time to produce work. And I want you to manage my output and the way I collaborate. Don’t manage me by presentism.” That is a social transformation we’re going through at the global level.
Ryan Anderson (17:19):
Is your sense that in this piloting and prototyping that organizations are being participative and are actually including the voice of their employees? Or is that something that most organizations still need to do a better job of doing?
Ronen Journo (17:30):
Well, if we look at Leesman, Tim Oldman, I think he has now reached over a million data points. And if you listen to Despina, my good friend, Despina Katsikakis at Cushman, she shared a presentation recently with my team where they have gathered 6 million data points of how people experience working from home versus returning to the office. And those are both documents that are being published in the public domain, so people can follow Leesman and Despina and find those papers. What it indicates and illustrates is that employers are very focused on trying to understand what the employees want and what the employees perceive as fair and what the employees have experienced during this crisis. It has not been easy for everyone. Many people have suffered. In particular, the very young generation who needs the mentorship, the pupillage, the proximity, but at the same time, through this dialogue, many employers are recognizing that today they’re facing four distinct generations in the workforce.
Ronen Journo (18:42):
I think that generally was the cutoff point where we have broken, 52% of all people in the Western world, knowledge workers are under the age of 30. So we are indeed dealing with four generations who all experience the crisis in different ways and all have different needs in order to integrate work and life into one now that we are getting into some new degree of normality. And employee employers are listening, are engaging. And I think the astute ones, from what I’m observing, are also recognizing there is no fixed solution. They’re calling it hybrid. But what does it mean in hybrid? The spectrum of choice and flexibility is huge, but we are also seeing organizations taking extremes of the spectrum. Some are saying, “You can work anywhere in the planet as long as you produce the output.” We’ve seen some who say, “You can work anywhere in the United States, as long as I can localize your salary.” Right?
Ronen Journo (19:43):
So we have seen different approaches. I think across Europe, it’s far more complex. Labor laws are very complex. Tax law is very complex. We have unions, we have works councils. So I think that the degree of fluidity across the European countries is somewhat more tricky, but employers are taking the blinders down. They’re saying, “The most fundamental is the experience of my people, the engagement of my people, and being able to attract new talent and retaining the talent I have.” And for me, that’s super encouraging, back to human centricity. We’re not talking about process. We’re not talking about profits. We’re starting with the most important part of the economy of every country, which is the human being at the center.
Ryan Anderson (20:28):
That’s encouraging. Well, one of the effects of all this that we’ve observed in organizations is that so many people are taking a fresh look at the types of spaces that they’re using. And there’s an interesting dynamic that we’ve seen, a really strong desire for premium buildings, class A, A plus, trophy assets in many parts of the world, but there’s also, I think, a major focus these days on reducing the environmental impacts of creating new buildings and doing more with the buildings we’ve got. So my question is what are your thoughts on how an occupier can make the most of a building that already exists?
Ronen Journo (21:01):
So great question. I would say that the starting point is actually gathering data, not just assuming, and gathering data to establish what is the true environmental impact that that building, fully operational, is having. How much waste are you producing? How much power are you consuming? How much cooling are you consuming? How much retrofitting are you having to do? How much does it cause people to use cars to actually arrive at the locations? So really take a snapshot that is real, away from perception. And then take a hard look at utilization because even if you have a LEED or BREEAM certified building at the highest level, if the building is only being utilized for 30% of the time, that’s not good. It needs to be efficient and effective. It needs to be heavily utilized. Otherwise, you are sitting on a large carbon footprint that can be avoided.
Ronen Journo (22:01):
So I think a starting point is data. I think the second step I would take if I was sitting today in the occupier’s shoes is talk to my landlord, establish a very consistent, regular relationship and dialogue with the organization that owns my building. Who is my investor, who’s my landlord, who’s the operator? Because again, they control probably 20% of the plant and the footprint, you control the rest. If you really want to have a positive impact, do it together. Share your data with the landlord and ask the landlord to share their data with you and establish a structure to make things happen. Align your initiatives with the landlord’s initiative. This is quite difficult for many occupiers to hear. It’s equally difficult for landlords to hear. That’s why I jumped to this side of the industry to try and contribute to change. But I can tell you that the goodwill from the investor and landlord side is huge, is huge.
Ronen Journo (23:00):
The recognition that we need to do it together is absolutely massive. So I would say that’s a starting point. I think the next step is if you have to make changes to a building, start with a question of how can we make it better? How can we regenerate it, retrofit it in a caring, sustainable way? How can we reuse material? And what’s the expected outcome of this exercise? And I think that we’re going to see more and more projects across Europe that are focusing on repurposing, that are going to focus, “Before I demolish, before I relocate, if the location is right, can I repurpose or can I repurpose partial amount of space?” And the same thing applies to even tactical retrofit of an environment of any office building. Before you throw away all the furniture and recycle everything, ask yourself a tough question, “What am I missing? Why is it not performing what I need it to perform? And if so, how can I do it better?”
Ryan Anderson (24:00):
Yeah, that makes a ton of sense to me, particularly given what we were describing earlier as work and workers change so quickly, seeing some of those key metrics, even if they’re strong in the beginning, there may be disconnects later on. So this idea of a space that truly evolves, whether it’s the building itself or more likely just the interior of it, I think it’s a wonderful aspiration. And that partnership you described between landlord and occupier, that sounds like a really great goal. I am curious though, on the data side, and I don’t get a chance to talk with organizations quite as much about this particular topic as I used to, but it felt like for years, organizations had more and more dashboards, lots of different independent datasets related to their building performance, particularly relative to utilization. But sometimes these same organizations struggled with creating an overall cohesive picture of what that data actually means. Do you think that’s still the state of things or have organizations gotten better at using what data they’ve got and integrating it and knowing how to interpret it and make decisions based upon it?
Ronen Journo (25:02):
I think we’ve come a long way. I left Cisco in 2017 and at that time, we had a pretty solid handle of how we use space across the world, what was the performance of the plants in our buildings across the world, what was the efficiency that we planned for those buildings and what worked and what didn’t work. It was a variety of sensors, a variety of surveys, a variety of different methods to observe human behavior in the physical environment. And that is five years ago. I am observing in the industry today huge amount of innovation in PropTech. There are many players who have developed solutions that are a lot less intrusive, are much more compliant with privacy, much more compliant with GDPR and with InfoSec policies of companies that you can literally plug and play. And they enable you to understand, again, how efficient or effective is the space and the services and what is the experience all about.
Ronen Journo (26:17):
And in real time, you can gauge if the combination between the physical space, the way that services are provided, and the human interaction with those two elements is working or not. So you can actually visualize success or failure. Now what’s holding us back from doing it at a global scale and really being very successful with that? I think, a degree of courage from all parties to go there and overcoming the fragmentation that is so inherent in the industry. So if you are an occupier, you can control your demise space, but then you need to get aligned internally. You need to ensure that your HR team and your IT team and your legal and InfoSec, physical security are all aligned with what you are measuring and why and how. Now that’s within your demised. Take it into the entire place, making into the destination, you need that data to be aligned with that of your operator, your landlord, and your neighbors.
Ronen Journo (27:18):
And that takes a leap of faith, that takes courage, that takes dialogue, but there are many examples around the world where this is now being implemented successfully and it’s producing valuable insights, which help people drive better decisions. And I think one of the areas in particular is retail, places where we have seen regeneration of high street retail, where the landlords and the occupiers and the operators partnered to look at foot traffic, to understand the mix of units and the mix of products and the narrative that they create for a particular location produce positive business outcomes, which means more footfall, people are willing to spend time in those locations, and spend and enjoy themselves. So there are examples where this is being put, but as I said, it takes courage, it takes dialogue, and it takes a willingness to break some silos that exist.
Ryan Anderson (28:17):
Yeah, it’s almost like you’re painting a picture of what being a good neighbor and a good citizen looks like.
Ronen Journo (28:22):
Ryan Anderson (28:22):
Essentially, as an occupier working with others, working with your landlord to really seek out far better spaces in a much more holistic way than maybe we’ve thought about in the past. And although I could probably talk to you for another several hours, I do have one last question for you. If you had a friend who jumped into the role of leading a corporate real estate team for a large occupier, and they sat down with you and said, “Ronen, what should my priorities be? How should I start? What kind of a roadmap should I lay out,” how would you counsel them?
Ronen Journo (28:54):
Oh, it’s a fantastic question. I actually had a session with a newly appointed original head of real estate who asked me exactly the same question. I’ll share what I learned the hard way, okay, having spent, as I said, 21 years at Cisco. In the last five plus years, I was invited to sit at eight different boards of the company, country leadership, and what I learned the hard way by growing up in the company and doing many different roles, making a lot of mistakes, but learning from them is that real estate is the second largest expense on the P&L of most organizations after salaries. And the most fundamental part of the role of the leader is to recognize that and to understand how that spend is managed and reassure the stakeholders that it is optimized, it is managed well. But at the same time, recognize that their role is to serve the business. Their role is to serve the revenue generating part of the business.
Ronen Journo (30:05):
Their role is to be the custodian of culture. Their role is to enable the business to go and perform and grow as it needs to. Their role is to support the workforce plan. A business strategy is always supported by a workforce plan. That workforce plan illustrates what skills, what capabilities, what people I need and where. The real estate team and the leader, their role is to serve that, is to align to that as much as they can, and recognize that real estate can be very static, workforce plan and business plans are very fluid. “How do I arbitrate between that static and fluid characteristics?” And never lose track of the fact that despite controlling a very large budget and a very tangible set of services, you cannot achieve the value add to your business if you do it in a silo. You must be exceptional collaborator.
Ronen Journo (31:05):
You must reach out to every cross-functional leader and work as one. That starts with human resources, that goes to legal, technology, finance, IT, procurement, and the list goes on. So those will be just my learnings. You have to be an excellent collaborator. You are there to provide a service. You’re there to enable, and you are carrying a huge responsibility over a very substantial cost base. The last thing, if it’s done well, you can also help to shift the conversation that real estate in any large organization is a fantastic tool to enable people to congregate, have a sense of belonging, have fantastic experience, and really create that community, both social and business, that produces success.
Ryan Anderson (31:56):
Well, what a fantastic way to end our conversation, Ronen. Thank you so much for spending time with me and our listeners today. I really appreciate it.
Ronen Journo (32:03):
Anytime. It’s an absolute honor and pleasure to be here and thank you so much for this opportunity.