BK: Well, I got started in the commercial real estate industry completely by accident. And I’ll take you back to 1981, I’m a freshman at the Wharton School wanted to be a Wall Street guy like every other Wharton kid. And so, spring break my freshman year, I drove around Northern New Jersey, which is where I grew up dropping my resume off at every commercial bank and investment bank I saw. I was in Hackensack, came out of a PaineWebber office across the hall I saw a Coldwell Banker. I thought the place was a bank, dropped my resume off, they called me later that day said, hey, we’d like to interview tomorrow for a summer job. So of course this is 1981, there’s no internet, I go to the library the next morning to look up this bank, saw it was a real estate company, almost didn’t go on the interview, but they were the only ones that were hiring college kids for the summer, took the job, loved it, worked my next two summers there. And then when I got out of school, I started to work for what was then called CB Commercial after Coldwell Banker became CB Commercial and CB Richard Ellis, then CBRE. But I started there full-time when I got out of school. So I got into the business completely by accident, but very thankful for serendipity because I absolutely love the business I’ve been brokering in the city for 38 years now and still love it as much today as I did when I started.

DA: That is a riot. And I can’t tell you if I go back and think about all the episodes I’ve recorded, I think the number one thing people have said is, I didn’t plan on getting into CRE or it was completely by chance that I got into CRE. So I don’t know, is this the industry that people don’t necessarily plan on getting into somehow find their way to it? And then they stay forever.

BK: Yeah, I don’t know, but I do know that commercial real estate is typically a second, third or fourth career for a lot of folks. And I feel very fortunate that I got interested in it very early because I did structure a lot of my curriculum in school around it, with entrepreneurial management classes and real estate finance and marketing and things like that, which fortunately, Wharton offered a lot of those types of classes. But it was great to have gotten interested in the business early, and I applaud people who develop an interest early on because the longer you’re in this business, the more opportunity there seems to be. And so if you start young, you have a big advantage.

DA: I love how you actually thought it was Colwell Bank and you thought, well, I’m applying to banks. That’s a great story. That should be on a Saturday night live skit, I think. So, why do you think, again, you were looking to go down the route of banking and ended up in commercial real estate. So why in the end do you think you were so uniquely suited for this position and have become so successful?

BK: Well, thank you for those comments. I would say I think the things, and maybe I could transition into what we see in people that are successful. And I worked at CB for four years, left with my partner, Paul Massey, and started our own firm Massey Knakal in November of 1988. It started with just the two of us and a secretary. And we sold the business in 2014 to Cushman & Wakefield at the time we had four offices and 250 employees. We had sold for the last 14 years in a row, according to Co-Star, we had sold about three times the number of properties in New York as the number two firm. And a lot of people came and went during those 26 years of running the business. And the traits that we saw in brokers that were very, very successful were people who had achieved some type of excellence in their past, team sports was also another big one, ’cause the competitive nature is so important, there are so many people trying to do what we do in commercial real estate, whether it’s investment sales, brokerage, mortgage brokerage, retail store leasing, office leasing, there are so many different components of brokerage itself, but there are so many people trying to do those things that it is extraordinarily competitive. And so, you have to have that competitive spirit, which I played baseball my whole life and through college and team sports was always a great thing because you have to collaborate in our business to really succeed extraordinarily well. And that looking for excellence in the background, someone who was captain of the debating team or editor of the school paper, or in some way had achieved something that was really excellent in their background. And so I think those are the things that as a, from a personality perspective, help folks succeed in our business. And then, the real estate business is really not that complicated. I tell young people that, you know, you’ll learn 80% of the business in the first year that you’re in the business, and then you spend the rest of your life learning the other 20%, ’cause you’re constantly learning new things. But what really is required I think is the discipline to do the things that you have to do, and that’s where the big disconnect comes in. Knowing what to do is not nearly as important as actually doing it. In fact, my broker coach, Rod Santomassimo wrote a book recently called, “Knowing Isn’t Doing,” and it’s really extraordinary how so few people actually are highly, highly disciplined, and this is a business where you’re not punching a clock, you’re not sitting at a machine making widgets, you can be very, very freewheeling and every day is a little different. And it really requires a lot of discipline to do the same things day after day, week after week, month after month, year after year, and that’s what it really takes, I think to be successful, particularly in the brokerage side of the business.

DA: Right, very interesting. Thank you for sharing that, that’s amazing and great for particularly our young listeners, as they’re thinking about their careers, whatever they might be pursuing and sort of what it takes to be great, what it takes to be successful, that’s really important. There’s a lot of commentary around the return to work and certainly some extreme opinions being expressed sometimes often confrontational and quite polarizing. And I’m not always sure that that’s really helpful as we sort of move out of COVID and forward. The HILO team believes very strongly that we all need to live and work in the world as it is right now. And we think the CRE industry and employers can’t continue projecting into a date into the future as when things will return to that normal because we believe actually maybe a world with COVID is the new normal. And so, we want to get down to business today. So what do you think that means for the CRE industry and particularly from your vantage point with a focus on investment sales in the greater New York region?

BK: Well, I think the whole return to work and working from home experiment has had profound implications on the commercial real estate industry. In New York City, I think we’re still only at about 40% physical occupancy in office buildings that has very profoundly impacted the retail environment in Midtown Manhattan downtown now Post-9/11 is more of a live work environment, a lot of folks living downtown now, but in midtown it’s primarily commercial office buildings. And I don’t know how retailers are surviving with people not coming back to the office. Most people, there was a survey that came out in New York about a month ago. and the number one reason that people gave for not wanting to come back to work was crime. And I know the current administration is focused on crime, I do think that was a little bit of an excuse. I think that folks have found out that they really like not commuting, and I think it’s the convenience of not commuting is what has most people not coming back. But the fact is if you want to build a corporate culture, if you want to learn, you have to be with other people. And I’ll tell you my own personal experience, David, during the pandemic, as a broker, I’m constantly calling property owners for 20 years. My number one goal is to speak to 50 property owners a week and get around to asking them if there was anything in their portfolio they wanted to sell. During the pandemic working from home, I’ve been consistently since March of 2020, consistently over 100 connections a week. And so for myself, I said, wow, this is great, I’m so productive, I’m never going to be a five-day-a-week office person again, maybe I’ll go into the office two or three days a week. And at JLL, which makes a lot of money leasing office space to people, they encouraged us to all be back in the office sooner than later. And so it’s been well over a year that we’ve been back full time and I thought I was going to be a two or three day a week broker in the office and work the rest of the time from home, and I find I’m in the office five days a week. I think part of that is you can teach old dogs new tricks. And part of it is I just like being around people. And I think that particularly not only is corporate culture impacted greatly by being around people, but I think that the learning curve, particularly for young people is nonexistent if you’re working from home. So much of what young people pick up is not necessarily what you hear on a Zoom, but it might be what you hear going on when you go to get a cup of coffee, or when you overhear some folks talking about a transaction they’re working on or just inadvertently you get in the way of information that is going to teach you and educate you and be thought provoking for you and may lead you to ask a question. And the minute the Zoom goes off, you’re not in communication with anyone anymore, but when you’re in the office, you’re constantly in communication. And so, I think it’s detrimental, particularly for younger people who are trying to learn their craft, to not be in the office. And I hope that people do get back to getting into the office because I think it’s more fun number one, it leads to, I think, a happier life and commuting might not be the most fun thing in the world, but there’s plenty of things you can do on your commute to better yourself. Whether if you’re a passive commuter sitting on a train or a bus, you can read, you can watch videos. If you are a driver, you can listen to books on tape, you can listen to a podcast, you can hear things that aren’t distracting that will endanger your drive to work. But there’s ways to use that time to your benefit. But I really think it’s so advantageous to be in the office, be around people and to work with them, both from being more productive and being a better professional and a more knowledgeable professional, but also a happier person.

DA: Yeah, it’s interesting. And I get that we’ve all gotten comfortable being at home in many ways but I actually do miss the commute. Now my commute wasn’t terrible, it was probably a half an hour to 45 minutes. But that commute, that time represents a transition, a transition between places and spaces. And I actually enjoyed observing people and human interaction and seeing the city. So, I’ve actually really missed that, and I know that a lot of people say, it’s a horrible experience, but I actually found there was value in that time, and I guess it’s finding balance at the end of the day.

BK: Yeah, I think David also, I think that there is now kind of the work-life balance has become so homogenous. That in the old days when you were commuting, it was almost like, okay, when you’re at work, you’re working and when you leave, maybe you’ll do a thing or two workwise, but you’re basically not working. And today with having worked from home for a couple of years. Unless you’re asleep, if you’re in commercial real estate, you’re working all the time, you’re picking up the phone all the time, you’re checking your email constantly. The focus on having to proactively create distance between life and work and that work life balance and the whole balance of everything in your life, balancing your health, your career, your family, your friends, your faith, your health, all of those things. It’s even harder now than it ever was because everything is so commingled.

DA:  Yeah, and that’s an ongoing effort. That’s something we always need to be aware of and always thinking about, it didn’t just exist today versus pre pandemic. A follow up question, and we talked about this briefly as we first were introduced to each other. With the flight to quality that we’re seeing in many markets, what does that mean for some of the smaller players in this space? So you talked about Midtown Manhattan, lot of great buildings but smaller buildings, maybe 75,000, 100,000, 150,000 square feet, really interesting opportunities. But what does that mean for them long term?

BK: Well, it’s so interesting what’s happening in the market today. And there are, you almost have to look at every asset class and every type of property differently, ’cause they’re all moving in slightly different directions depending on age, the location, the type of asset. And so what we’re seeing is that in the office sector for instance, there is a huge divide between new construction office and the older stock and the stock of office buildings in New York City is very, very old, I think the average age is somewhere in the 70, 75 year old range. But new construction seemingly anywhere is generating rents of triple digits per square foot. So, it’s really remarkable that flight to quality for new space. And I think we’re also seeing that in the residential sector, many of the new condominium buildings that are being built are doing extraordinarily well much better than the initial projections or performers were based on. And a lot of the folks who are buying those new condos are moving out of old cooperative buildings. And it just seems to be almost an insatiable thirst for new construction, regardless of the type of building it is, and so that’s really fueling the land market. And I do a lot of land sales in New York and that market has been very robust, the multifamily market in New York has been very robust. And then the sectors that are facing more challenges like the office sector and the retail sector, people are reinventing buildings. I think you’re going to see a lot of conversion of obsolete office building. In an older office building, you can do certain things to upgrade it, but you can’t take columns out, you can’t make ceilings higher. So there are only so many things you can do, but the structure of a lot of office buildings make great conversion opportunities to residential. And the city has such a deep need for affordable housing and workforce housing that converting some of these obsolete office buildings provided the floors aren’t too dense. But if the floor plate is appropriate, those buildings make great conversion to residential. After 9/11, the city wanted to stimulate more residential space in downtown Manhattan and created a tax abatement program called the 421 G program, which worked extraordinarily successfully and creating residential apartments downtown. I think there’s a great opportunity for New York City and other cities around the country to create tax abatement programs, to incentivize the private sector, to convert non-residential buildings to residential as both office and hotels. So there is definitely a shift going on and this happens periodically every few decades, you see highest in best use change. There are buildings that were built as residential apartment buildings and then converted to offices, and then 20 years later converted to a hotel, and now they’re being converted back to residential again. And it’s really remarkable to see how buildings tend to be recycled based on what the highest and best use might be at a particular time. And that changes decade to decade, cycle to cycle.

DA: It’s true, it’s true. When I first began working in the commercial estate industry, I had this impression that the, because buildings were so they were concrete, I had this naive impression that buildings were just permanent, and I have learned certainly over the course of my career now that absolutely changes can occur. And it’s actually really amazingly exciting to see because it’s a fairly significant effort to go through that transition, to go through that change, that conversion, but when it’s done, it’s like, wow, that’s just an incredible process to have gone through. So, although not always easy, it’s doable and you’re right, it’s not engraved in stone, yes, it’s concrete, but things do change. Speaking of change, the pandemic has really recalibrated the market and helped what we, in our opinion, buildings begin to recognize that the real asset is not the building, it’s actually the people, buildings are ultimately places for people. And so, we believe now that tenant experience also called workplace experience, workplace engagement is fast becoming the new differentiator and it’s helping to drive real estate decisions. So it used to be that the occupier would look at location and class, but we really believe now that people are looking at what is the experience that that building has to offer. And that maybe that connects directly to this flight to quality, just curious from your perspective and participating in thousands of real estate transactions, can you share any thoughts or observations around how you think buildings will define tenant experience and deliver great customer experience now and in the future?

BK: You know, David, I think that that is something that’s constantly changing, and if you look at new office buildings being constructed today, based on the amenity packages they’re offering, you might think that they’re being built as residential building, outdoor spaces, and green spaces and places to eat and places to mingle and bike rooms and things that traditional office buildings never had are being contemplated as amenities and a selling point why a tenant might move into the building. And just as we’ve seen in residential buildings over the years, the amenity packages have changed so dramatically where now you have in addition to having a gym, some buildings are putting in a pool or a basketball court, or a pet grooming room, saunas, steam rooms, wine storage, all these things that you’re trying to create an experience for someone that they’re comfortable in their own space, but in common spaces to make the living and working experience better. And so I think developers are constantly trying to figure out what the next big amenity is that’s going to be a draw for people, maybe it’s air filtration or maybe it’s being able to open windows to get fresh air from outside, or whatever the case might be. Constantly you’re looking at what the consumer is going to want and that’s in everything, whether you’re making cereal or you’re building buildings, you want to create something that consumers will want and folks, you’re constantly trying to figure out what the right mix is to attract more consumers than the competitors.

DA: That’s great, so are you actually, I’m just curious when you’re representing or involved in a transaction and looking at the acquire, what their interests are, are you seeing more of an articulation around, well, hang on, is this building, could we put a fitness center on the seventh floor or could we expand that rooftop into maybe a rooftop patio? Like are those now those kinds of conversations happening now at the transactional level?

BK: Yeah, I think we anecdotally hear from people as they’re walking through buildings, what they’re thinking about and saying, and clearly a lot of folks keep these ideas as proprietary and don’t want to share them. But we have an office building a 70,000 foot office building on West 55th Street that we’re selling today that very likely is going to be converted to residential. And it was really interesting to hear the different ideas people had of taking the freight elevator and making that a car elevator and putting a garage on vertical floors and popping in more windows and creating amenities space using the basement for different types of amenities. And, you know, people are constantly trying to look at how to make that building relatively more competitive than the other buildings that folks might be looking at.

DA: Yeah, amazing. I’m sure I’ll fly on the wall following you around to all these kinds of discussions and meetings would be very insightful for a lot of operators out there, something to think about. let’s take a short break and we’ll be right back.

Commercial Break

DA: We are back with Bob Knakal Chairman, New York Investment Sales at JLL. So, living through a pandemic has been very challenging for so many people, but it’s also provided an opportunity for people now to be better, do better and build something better. So I’m just curious within your business, is there any part of your business that you are reimagining or rethinking as a result of today’s reality?

BK: Well, David, I will tell you that I use the pandemic as an opportunity to create better resources to go into battle with. When New York I think was hit disproportionately hard during the pandemic, a lot of New York brokers that had focused on New York were all of a sudden doing a lot of transactions in Florida and Texas and Tennessee and markets where activity was very, very strong, but I chose not to do that. Number one, I don’t know anything about markets outside New York. I’ve done my entire career I’ve spent just working in New York City. So I didn’t want to go learn new markets. And I took an opportunity to beef up research that we had and understanding the market something I’ve wanted to do for probably 15 years, but just never had the time was actually you drive and walk. Every single block of Manhattan, South of 96th Street, I looked at every development site under construction, every potential development site had maps with me and different color highlighters who were highlighting different properties, different colors based upon what was going on there and looked at land sales study, updated a multi-family study with cap rates in GRMs, going back to 1984 to look at historical trends. And so, created a lot of basically ammunition that is serving us very well as the market came back in New York, the market really started to show tangible signs of recovery in April of 2021. And since then the market’s been going at a pretty good clip. And so the resources that we put together during the pandemic have helped us and helped our clients very significantly during the past 14, 15, 16 months. And we think we’ll continue to help those clients into the future.

DA: I love that you dug in and went deep and used that to your advantage, it’s brilliant. Before we get to our closing speed round one other quick non-scripted question. I read today in the Real Deal, a study came out from NYU, estimating that by 2029, the city’s office buildings will drop in value by 28% or $49 billion. From a buying perspective, from a transaction perspective, A, do you agree with it? And B, what would that mean? I mean, does that create a, I suspect it creates opportunity.

BK: Well, first of all the prognosticators, if they really believe that they can predict the future, they should go to Vegas. One thing I can tell you is that I believe that if you look historically at what’s happened in our real estate market, the peak of every cycle has greatly exceeded the peak of the prior cycle, and this has been the case, at least for the past 50 years. I’ve not studied the market before 50 years ago, but from 50 years ago forward, the peak of every cycle has greatly exceeded the past. And yes, buildings have been reimagined, reconstituted, recycled. And as I mentioned, it may have been built for one use and that use has changed and will continue to change based upon highest and best use. But the most important thing for New York is that people want to continue to come live and work here. I think that what I’ve seen and again, I’ve been doing this now going into year 39, I’ve never seen a more highly correlated relationship between politics and the commercial real estate market, policy is impacting things more than I’ve ever seen. And so I think our politicians have to be keenly aware that you have to make New York an attractive place for people to come, live, and work. And if people want to come live here, they’re going to work here, and people will figure out what to do with buildings that might not be serving the highest and best use today. So, I think that, similar to what we’ve seen in the hotel market, where the number of rooms, we had about 110,000 rooms, hotel rooms in New York in 2005, and in 2006 and 2007, about 30,000 of them were converted to condo, residential condo. And that actually helped the hotel market because there was a smaller supply so rates went up and occupancies went up and then people started to build hotels, and then we had this recent, during the pandemic hotels had a tough time and many of those hotel rooms are now being taken offline and being converted to other uses, what does that do? Well, that is good for the other uses, and it also helps the hotel market, because now we have a small supply and hotels are doing great today. So, you constantly have this ebb and flow. and I don’t know, I haven’t seen the assumptions made in that study or what they based it on, but what happens to the building if you have 100,000 square foot office building that currently is 60% or 70% rented and rents are going down and it’s an older building, so it’s not that competitive. What happens to that building in the study if all of a sudden the building’s vacated and is turned into a condo, a residential condominium? Did that office building get put in at zero value? How are you treating that value? What’s happening with rents? I’d have to see all the assumptions that that’s based on, but I think it’s very challenging to make blanket statements about the stock of properties, because you have ebbs and flows, you have increases in supply, you have decreases in supply. And so you have to look at a number of factors, but I think provided that the city remains an attractive place for people to live and work, then the fundamentals of real estate should continue to work. Look, the market has been, is, and always will be cyclical as is highest in best use for properties. And so you have to kind of take it in stride and see how things are going to perform. And again, as I said in the office market, there seems to be a very, very big gap between new construction and everything else, new construction is doing great, and the everything else is going to have to figure out how to be competitive. And there are a lot of very, very, very smart people out there who can figure out how to maximize the value of their buildings. And I think to the extent that we have a lot of office buildings in the city that again, the stock is old, generally old, ownership, on average, only 2.6% of the total stock sells in an average year in the city, which means that when someone buys a property here, they own it for an average of 40 years. So there are some buildings that had been owned for 60, 80, 100 years that maybe two or three partners got together and bought that property. And today it’s the third generation of ownership and there are 36 people who are getting checks from that building. A lot of those folks are passive. And if the building needs new elevators and a new lobby and new bathrooms, do they want to make that investment in that property? Or does that become kind of a zombie property? One thing I can tell you is that of those 36 folks there may not be one who’s a real full-time real estate person, but there are really super smart people in the New York City office market that can figure out how to maximize the value of that building. And ultimately, either through acquiring it through a sale or doing a master lease on it, or a long-term ground lease, or some way of figuring out how to maximize the potential at building someone will do it.

DA: I agree, and thank you for sharing those comments. And as much as there’s been the flight to quality and a flight to new construction, I do believe that some of these smaller players, smaller buildings also have a unique opportunity because not everybody wants that skyscraper experience, some want that seven, eight, nine, ten-floor building, more intimate, more boutique. And I think there’s an opportunity there then to differentiate to your points earlier around experience and service, and some of our new partners in New York City that are using our platform, HILO to create a more tech-enabled environment and deliver a better communication plan and a better engagement plan. They have an opportunity to differentiate in other ways that perhaps again, the new technology or sorry the new buildings, new construction might do it differently. So, there’s opportunity on both sides. It’ll be interesting and exciting to watch how people take advantage of that. And we’re certainly hope to be a part of those conversations. As we head into the speed round, it’s an opportunity for us to get to know you a little bit better on a more personal level. So I’m wondering if you can share one way in which the pandemic has changed your outlook on life.

BK: Well, I’ve always believed that family is the most important thing. And the pandemic certainly reinforced that also, extra attention to health, I think is very important. Just realizing that if you’re healthy, then a lot of other things can fall into place. So not to take for granted your health and to focus on it with eating habits, workout habits, that kind of thing.

DA: For sure, any travel destinations that you miss most.

BK: I miss going to the Cayman Islands. My wife, daughter, and I, would go to the Caymans probably twice a year. And for a while we didn’t have a chance to go, but we went recently had a great time and I absolutely love it down there.

DA: Amazing, amazing. Anything new on your bucket list that you’d like to experience?

BK: David, I have to say, not really, not really. I’ve been fortunate to do a lot of the things that I’ve wanted to do and I’d love to read, I’d love to spend a little more time reading. But the one thing I’d say is tangentially because my wife’s bucket list is to travel more. I want to travel more with Cynthia and my daughter, Sophie, and so that’s probably going to be a focus, but that is to create check some things off my wife’s bucket list.

DA: Amazing, that’s great. What is your favorite technology that is new to your life?

BK: Oh my gosh, technology and I are not friends. I’m very happy. I was able to join the Zoom with you today. And when you look at your own strengths and weaknesses, one of the top weaknesses I have is technology. So, fortunately I have a lot of people around me that are very good with it, but I’d say just using the normal stuff that everybody uses.

DA: Okay, fair enough. You spoke about this earlier, but maybe just to leave us with a final comment, your personal choice for days spent in person with your colleagues versus working from anywhere.

BK: Could you repeat the question David? I’m not sure I followed.

DA: Yeah, sorry, again, your personal choice for days spent working in person with your colleagues versus working remotely from the Cayman Islands from anywhere you might choose.

BK: My personal choice. My happiest place to work is from my country house in Connecticut in the middle of the woods, and it’s a very comfortable place to be. But I think you have to take everything in balance. I couldn’t work there 100% of the time. I love being around the folks that I work with, they’re a great bunch of people and I really, I need the vibe of being around everyone. So I’d say I don’t have a, if I had to just work one day, I don’t know which I would choose because you have to have a little bit of everything. Maybe I work the morning in Connecticut and then the afternoon in the office.

DA: I think that’s great, and I think that, I think if that is the outcome from COVID, if it’s enables us and makes it more acceptable to live that kind of lifestyle and kind of work style, I really think it’s awesome, I think and giving people the autonomy and the flexibility to make the right decisions and the right choices I hope is where we continue to net out. Bob, I want to thank you so much for joining me today on the program. It’s been an amazing conversation, so many great insights and learning for myself and for our listeners, and I really do appreciate you taking the time today.

BK: David, thank you so much for having me on it really was a pleasure.

DA: All right, I look forward to staying connected and continuing our conversation.

BK: Terrific, me too.

DA: Thank you, bye now.

BK: Thanks, bye.

DA: I want to thank Bob Knakal for joining me on this episode of TEN and for contributing to the global conversation around buildings, being part of a robust ecosystem that can help to build great companies and that they are vital in the effort to cultivate and support great people and teams. The future of the workplace will likely take many forms and we will continue to explore what that looks like together. Subscribe to TEN for more conversations with leading commercial real estate industry professionals and experts who all have something to say about tenant experience and the future of the workplace. We love hearing from you. So if you enjoyed this episode of TEN, please share, add your rating and review us to your preferred podcast provider. 

If you or someone you know would like to be a guest on a future episode, please reach out to me directly at david@hiloapp.co. And until our next episode, I wish you all continued success in building community where you work and live. Thank you.