Gabe Marans, vice chairman at Savills, leads a global tenant representation team based in New York. He's emerged as a leading voice providing insight on the contemporary office market, leveraging social media, including his “60 Seconds with Gabe” video series on LinkedIn viewed by thousands of followers.
As CoStar’s national director of office analytics, I recently spoke with Marans to get his take on the issues moving the needle for office occupiers. An edited transcript of the conversation follows.
CoStar: Welcome, Gabe. Please provide a quick overview of your practice.
Gabe Marans: Our team is comprised of about 10 people, including support personnel. We are entirely dedicated to tenant representation. About 70% of what we do is in the New York metropolitan area, with the rest mostly international. So we might help a tech company with just one location in Manhattan, but also global occupiers with locations in India, Asia, Africa and South America.
All we do is think about occupier strategies for real estate management. Sometimes that means a two-person coworking space in an expansion city. Other times, it’s a detailed human capital and labor study on specialized talent that informs site selection. We also offer ancillary but important services, including incentive negotiation and project management for construction. We partner with these companies at the C-level, whether they have a dedicated head of real estate or if it’s handled by a Chief People Officer or CFO or even CEO. We help them structure deals to align their real estate, which is an inelastic asset, with their labor needs, which is an elastic driver.
CoStar: How do you advise your clients about the features and amenities that will truly add value to their workplace experience?
Marans: We see our role as drawing contrasts in the market. Many amenities are shiny objects that most tenants will not utilize heavily. The way we draw out from clients what they really need versus what they say they want is to draw contrasts. For example, we might show them a building with a lobby that was renovated 10 years ago as opposed to last year and ask them to consider the differences.
The top amenity that appeals to most tenants is conferencing. The paddleball courts, F1 simulators, and outdoor spaces matter to varying degrees, but there is a limit to how many of these are wants rather than needs.
When it comes to conferencing, I mean facilities capable of handling large gatherings. They represent an amount of space a tenant may have previously warehoused within their suite, but if they are looking now at a building that can house 200-300 people in an auditorium that they might use once a quarter, then they no longer need to do that. They can then invest more intelligently in the design of their space.
CoStar: How important are flex-work options to your clients?
Marans: If a flex operator manages a space that provides conferencing and catering on the scale I was just speaking about, that would be viewed as an extraordinary amenity. Even if it’s just a 20-person space, that means a tenant may not have to build out a boardroom, for example.
Also, if a tenant finds that their growth is occurring ahead of projections, a flexible option means they wouldn’t immediately need to make a long-term commitment to new space.
CoStar: How do you see the final phase of the post-COVID shift playing out?
Marans: We are now out of a post-COVID work world. There was the COVID world and then the post-COVID world. We are now post-post-COVID.
Every company falls roughly into one of three baskets. On one end are big employers like Microsoft and JPMorgan. They have the ability to mandate in-office work because they are destinations for employment and offer higher compensation.
On the other end are companies that started during or post-COVID. This would include AI companies, but also others. Many of them are small, but not all of them. They are now hiring at a rapid pace. They don’t necessarily have mandates, but they have a culture of everyone pulling together, which leads them to be together in the office.
The biggest basket includes those companies that had to readjust during the pandemic and are still readjusting. There’s not a single blueprint for these, but there are some truisms. One is that their executives believe in office-centric work, whether that be three days or five days. You can see this in the number of remote job openings, which has plummeted.
Executives are attritting remote jobs and replacing them with office-centric ones. They recognize that they want people in the office, but have also experienced the pain of reinventing the workplace again and again. Eventually, this bucket will resemble the other two—but it will take time.
CoStar: There’s a tension among the occupier executives I’ve spoken to. On the one hand, they want workers together at the same time. On the other hand, they are reluctant to make long-term space commitments. One potential tool is unassigned seating. Another is taking on sublet space, which has seen availability come down, but is still elevated. How do you see these factoring into the period of transition that remains for these occupiers?
Marans: The answer is different by region. In London, there’s more openness around free-addressing. In the U.S., and especially in New York, there’s a belief in one desk per person. That has changed some. If it was 10% of occupiers free-addressing before the pandemic, maybe it’s 15% today. But it’s not much past that.
How companies manage their space is a tale as old as time. Three years ago, tenants in New York could dictate shorter lease terms. Today, that has changed, with landlords having more leverage. In other markets, tenants can still achieve shorter terms.
There are three legs to a client’s trident of space: Direct, sublease and flex. We will present all three (options) depending on the client. For most clients with scale, the choice is between direct and sublease.
Sublease offers advantages, like lower capital expenses, shorter lease terms and lower rents. But as the market improves, we see a reduction in supply. The supply in New York has decreased rapidly, and the better options, especially, have leased up quickly. Within certain bands, such as tech-oriented space in the Flatiron district that can accommodate about 200 employees, there is almost none left.