Gary Phillips | Managing Director | Eastdil Secured | Insights into the office market in New York


DA: Welcome to TEN, the Tenant Experience Network. I’m your host, David Abrams. In this episode, we are connecting with Gary Phillips, Managing Director, Eastdil Secured. In this episode, we learn that Gary’s career journey began working at Deutsche Bank, where he was assigned to an economic group focused on real estate, and so began Gary’s residency in New York and his passion for the real estate industry. He attributes some of his success to his personal drive and nurturing long-term relationships. Gary has been exposed to all asset classes, but was able to share his insights into the office category and the challenges that it is facing, with consideration to the different classes within the overall office class. Gary provided a glimpse into the current state of the buy and sell market, as well as the new players that are entering the field to take advantage of current opportunities. We discussed the need to continue to create and support thriving business districts in cities, and in particular, the importance of patronizing local businesses. Gary provided some interesting thinking about the new role of HR departments and their connection to creating physical spaces that help to achieve corporate goals. Gary sees the CRE space through an interesting lens, and I look forward to tapping into his expertise again in the future. We’re excited to share this podcast with you, so be sure to subscribe to TEN so you never miss an episode of the Tenant Experience Network. And now I’d like to welcome Gary to the show. I’m really glad you could be with us today, and I’m looking forward to our conversation.

GP: Likewise, glad to be here and thanks for having me.

DA: Of course. So I’d love to begin with a little bit about your journey to your current position/role. How did you get started in the business?

GP: Sure, so a little bit of luck, and you know, when I first got out of school, of course it was 25 years ago, was in New York, and was part of Deutsche Bank’s banking program. You know, it’s a large class, and they allocate people as they see fit into different sectors, and I was placed in an economics group that focused on real estate. So I always was… You know, my entire professional career was in New York, focused on some aspect of commercial real estate, but it started in an economics role.

DA: So you were simply allocated to a group, and that set you on your career path?

GP: That’s right. Yeah, I didn’t come out of college thinking I was going to work in real estate.

DA: Right.

GP: So I wanted to work in finance, I wanted to work within New York, and I didn’t really have a preference, or even know to have a preference, in any respect, so, lucky me.

DA: Lucky you. Well, you know, I hear that sentiment expressed quite often with both, A, the fact that they really didn’t set out on a path to end up in commercial real estate, but more importantly, B, how fortunate they feel that they did land there. And for the most part, when they do land, they stay.

GP: Well, they either stay or they get weeded out. There’s a certain breed of character in our business, and you either have the chops to hang or you don’t.

DA: Right. In terms of stops along the way, you’re obviously at Eastdil now, but where did you begin and sort of, what stops along the way?

GP: Of course, not too many.

DA: Okay.

GP: But we’re all birds of flight for the first 20 years. And you know, first I was with Deutsche Bank, which eventually became RREEF. That was the first four-plus years. And then New York Clarion Partners on the private equity side.

DA: Right.

GP: And worked in an acquisitions role, primarily there for close to eight years, and then left there to start Allianz’s North American real estate investing platform, and was there close to eight years. And always flirted with the sell side of the business, but a bit of a brand snob, and you know, I always wanted to… If I was going to make this move, then Eastdil Secured was the place where I wanted to be. And you know, made the switch roughly four and a half years ago, and it’s been a lot of fun since.

DA: Tell me a little bit about the company, the current role, sort of, what their mission is and what your day-to-day is.

GP: Sure, so we’re a real estate, investment banking and advisory firm that also does brokerage. I co-head our New York business, but we operate as one seamless team internationally. So I get involved in a lot of our processes, client management, et cetera, particularly around the country, but sometimes overseas as well, given what my background is. But my day-to-day… Day-to-day, it’s hard to say, ’cause it’s different every day, but it’s primarily interacting with investors and clients.

DA: Right.

GP: Every day. Whether it’s in-person, whether it’s on the phone, whether it’s over Zoom like this. Preferably in-person, because, you know, that’s where you make the greatest impact.

DA: Right. Well, it’ll be through that lens that we’re looking forward to getting your insights and contributing to this conversation, so I’m looking forward to that. And of course, congratulations. The reason we reached out is you were announced as part of the “Commercial Observer” Power 100 list.

GP: Thank you.

DA: So congrats on that. That’s obviously a great success, and a huge achievement not to be overlooked.

GP: Well, it’s a lot of fun saying that, but it’s really a team achievement. You know, we’re all part of a greater team here, so I appreciate everyone that helps get us that luck.

DA: Absolutely. So you know, again, you explained that a little bit of luck had something to do with it, but why do you think, in the end, you were so uniquely suited to this opportunity? What has helped you to be successful? Because as you mentioned earlier, some people get weeded out, they might’ve been… You know, the luck might’ve been there, but they might not have lost it. So why you? What’s contributed to your success?

GP: Interesting question, because I’ve never really had to think about it, but it… Yeah, it comes down to drive. You need also… You need to be able to have the financial chops to cut it. And then it comes down to relationships, and appreciating what that really means, and creating, nurturing and you know, really maintaining those long-term relationships, which… It’s hard to get to the top of any part of this business without it. You know, everyone says that their industry is a relationship-driven business, but real estate, it’s truly the most important aspect.

DA: Right.

GP: And yeah, so I think, appreciating that at an early age, you know, certainly helped.

DA: I totally get that. And I think, a great insight for our listeners, the value of creating those relationships as early on as possible. And I do agree with you that this industry in particular is very relationship-driven. And that being said, you know, maybe we need to figure out, also, ways to sort of open up those barriers, where not everybody has access to those kinds of connections and network, and how do we give more people opportunities. So you know, a balance, I think, would be in order.

GP: That’s right. You got to push to make those connections.

DA: Yeah.

GP: And you know, fortune favors the bold.

DA: There you go. I think we can both agree that commercial real estate has just gone through one of the most turbulent periods of time that we, I, can certainly remember. I’ve been through a couple, and you know, we know that commercial real estate is the largest asset class in the world, but it has just gone through a period of time with prolonged periods of historically low levels of occupancy, and it’s now really rethinking itself. It’s really trying to figure out how does it meet the needs of people going forward? How does it deliver great space and service? We believe that the physical workspace is now much part of a much larger workplace ecosystem. And so we need now to compete with people working from anywhere, co-working space, the local cafe, a vacation destination… Maybe you’re going away on vacation, maybe you’ll do a little bit of work while you’re out of town. So just interested in your perspective, particularly through your lens, through the buy and sell lens, as to how the industry is responding to these emerging needs and rethinking itself. What are you seeing?

GP: Well, I’m curious to… you know, your first comment was that we just emerged from… I think we’re still in it.

DA: Okay, fair enough.

GP: And where you’re seeing most of the structural and secular change is really in one asset class. Within commercial real estate, it’s office.

DA: Yep.

GP: I do think that, primarily, like everything else, multi-family, logistics, even retail, you know, are exhibiting very strong fundamentals and are going through changes, but really, capital markets-driven, with regards to higher interest rates, the availability and cost of debt, but investor sentiment and the demographic fundamental tailwinds are also there for those sectors. Office is a completely different animal, and well, it’s the largest asset class, so it’s super important. It is definitely going through some changes that the other asset classes are not. And you know, when you narrow down… When you narrow it down to just office… Actually, there’s different asset classes within the asset class, if that makes sense. Brand new construction, the high-end, luxury side of the market, is definitely flying above the storm cloud. We’re seeing strong leasing activity within that space. There’s still not a vibrant financing market, but there is a financing market, and the equity capital markets are still there. Now, that’s been repriced similar to, you know, the rest of the commercial real estate world, but it’s still liquid to a degree.

DA: Right.

GP: There are segments of the office market that are likely going to see… I hate to use the word permanent, but there will be equity that likely never comes back.

DA: Mm-hmm.

GP: And you know, these are B and C properties that are not close to transit, don’t meet the physical characteristics of what tenants want today, with regards to light and air, core depth, et cetera, but also aren’t necessarily viable for alternative usage.

DA: Right.

GP: Whether that’s converting into residential, to life science, to storage or other asset classes that are going to be more financeable and certainly will serve a need for many of these urban markets.

DA: You know, I agree with you around the B and C space, and we do have some B and C buildings utilizing our platform, our technology, in Manhattan, helping to deliver a better experience, helping to digitize the customer experience and compete, to your point, with that flight to quality, and position themselves as technology-forward and really trying to change their game. And in some cases they’re fully leased and doing quite well. But to your point, there are a lot of other buildings that likely, you know, perhaps aren’t in desirable locations, or aren’t in proximity to transit, and if that conversion opportunity doesn’t exist, you know, it’s sort of, “Well, what next for them?”

GP: Yeah, I think that’s right. And then you have an entire segment of the market that just has been repriced and that’s not really financeable in its current state, so it’s going to require fresh equity, and what we’re likely to see is a complete market repricing for a large segment.

DA: Mm-hmm. So from a buy/sell sort of activity level, what, over the last, let’s say, 12 months, what kind of trends are you seeing? Is there more or less activity than perhaps 12 months earlier and in what spaces?

GP: So speaking for office, it’d be a quicker conversation, sales activity are tremendously down. Depending on the market, it’s anywhere from 60% to 80%. And you know, that’s driven quite a bit by one, investor sentiment, but you know, two, you know, the lack of a functioning finance market for that asset class, where we have seen buyers… You know, it’s primarily been users, which is something that’s very hard to predict, but also private high-net-worth who are not beholden to an investment committee, or aren’t necessarily running 100 different sensitivities on hold period IR analysis. They’re not running a DTS. They’re focused on the two main metrics, and that’s going to be basis and yield on cost.

DA: Right.

GP: And they’re looking at… They’re looking at this as New York is cheap once every decade or two, and there’s an opportunity to acquire real estate that otherwise would not have been available to them, that they can hold for decades to come. So in some respects, it’s a generational opportunity to acquire office product at a, in some cases, low land value.

DA: Right. So are you seeing new buyers, new buyer groups emerging? Are you seeing existing companies create opportunity funds? Like, who’s sort of at the table?

GP: Right now, it’s primarily, you know, the bid sheets, which are not… You know, you don’t have to scroll to the second page. It’s primarily those private buyers and high-net-worths. We do expect some of the institutions to come back between now and year end. I think some will be announced pretty soon. But it’s going to be primarily groups that have mandates to acquire value-add office. It’s not going to be necessarily the large US pension funds or odyssey funds that are coming back, that can be lured back to the market and think that’s probably a few years out, they are all over office right now, so they’re likely to be sellers over the 12 to 24 months. You’re going to see some institutional groups return to the market because the yields on the B and Cs are just going to be too attractive.

DA: Right. And do you think, in the B and C space, that there are a lot of players just sort of hanging on, they haven’t necessarily started, they haven’t promoted the fact that maybe they’re looking for potential dispositions, or are you seeing… Is there more inventory available now, or is it still relatively low, and kind of, you’re waiting for that storm maybe to hit?

GP: Well, there isn’t much product on the market right now. I think that every office building is likely for sale, but not necessarily on the market. What we’re likely to see… where we’re likely to see deal flow over the next 6 to 12 months is from… One’s going to be lender-driven sales activity, whether that’s a loan sale, a short sale, or a refi that comes up, where the existing sponsor isn’t looking to put in fresh equity in order to effectuate a refinancing. So they’re going to be force to sell based on that maturity. Or you’re going to see some of these odyssey funds or large institutional investors that are overweight in office, rip the bandaid off. Their internal marks are going to get to a point where it narrows to pretty close to where the stock market is, where they can justify the sale and redeploy the capital into higher conviction asset classes. So we have a building on the market right now that is in exactly that situation, I think, and you’ll see more of it.

DA: Mm-hmm. In terms of the buyers, you know, when you’re looking at properties, are they looking at… You know, obviously we’re very connected to the technology world and we think that technology can be a tremendous equalizer in helping to position buildings and help bring people back and engage people in a completely different way. So are you seeing buyers looking beyond the physical and thinking about, you know, how these buildings are run, or what technology may or may not be available to help engage with the tenants? Any conversations around that as you’re moving forward?

GP: Is your question more around the buildings that are less in favor and how you can retrofit it to… It’s an interesting question. Not yet.

DA: Okay.

GP: The focus has primarily been around, “Okay, can I buy something in Midtown or near Grand Central for what it would’ve sold for 20 years ago?”

DA: Right.

GP: That has been more of the focus, where you’ll probably have some sharp, tech-driven investors that are looking, they’re monitoring the market. I can think of a few. They haven’t pulled the trigger or anything yet. But that’s something that I wouldn’t be surprised to see-

DA: Right.

GP: You know, going forward. But the focus today and then from most of the larger institutions is going to be around the physical attributes, “Can I attract tenants to the office here?” And, “Am I my close to transit?”

DA: Right. You know, we think a lot about buildings and their place in neighborhoods and cities, and I think New York, obviously, is like just a tremendous case in point to this, that we can’t see buildings as just siloed, as independent from the neighborhoods and cities which they serve. And I’m just wondering about your thoughts, sort of the responsibility or the opportunity for buildings and workplaces, the role that they play in helping to create larger and more connected communities and cities? And obviously bringing back to cities, as it has so many different financial implications and economic implications.

GP: No question. It’s a sense of place. And we’ve been coming to the office since July 2020, so we’ve seen, you know, certainly, ebb and flow with regards to the return to work phenomenon. But you know, when we are back at normalized occupancy, and we’re getting closer… Depending on the day, it feels like Tuesday, Wednesday, Thursday are the most active days, Midtown’s very busy.

DA: Yeah.

GP: It feels like it… It feels like it did pre-pandemic. It’s hard to get a reservation, for the fast lunch spots, the lines are out the door, and then when you’re walking up and down Park Avenue or Madison or Sixth, you’re running into several people on the way to a meeting. So in many respects, it feels like it’s back. Now, you ask the retailers and the restaurants, they may say a different story, but just from a feel on the street and a vibe and energy level, you know, I would say the city center feels like we’re back to pre-pandemic and that’s super important. We don’t want people coming to work, and feeling like they’re the only people coming back to work and that it’s a ghost town. We want the amenities to thrive, we want the small businesses to thrive. Frankly, we not just want them, we to need them to. And that’s really the importance of bringing people back to the office on a more regular basis. I don’t think three days is going to cut it. We need these small businesses and entrepreneurs and restaurateurs to thrive in this environment, and the only way to do that is to have a thriving business sector as well.

DA: Yeah, I agree. And I was in New York just a couple of weeks ago, and I’ll have to agree with you that Midtown was packed, busy, thriving, energizing… It was hard to walk on the sidewalk, people lined up at every corner out of a restaurant, so I agree.

GP: And it’s night and day from some of the other major urban markets around the country.

DA: Right.

GP: And so we always like being the flag bearer here in Gotham, and you know, we’re happy that we’re hopefully leading the charge on, you know, returning to office space.

DA: Yeah, for sure. Alright, let’s take a short commercial break, Gary, and we’ll be right back.

GP: Sure, thanks.


DA: And now, I’d like to welcome back to the show Gary Phillips, Managing Director, Eastdil Secured. Gary, once again, thank you so much for joining me today.

GP: Thanks, David.

DA: We talked a little bit about technology, but I’m just curious, you know, we’re certainly seeing technology playing a significant role in reshaping how building operators are delivering great experience for their tenants and also impacting operations of their buildings. Workplace engagement is obviously becoming a very important discussion, uppermost in everyone’s mind. I’m just curious, through the lens of buy and sell, you know, what are you seeing people talking about, in terms of recognizing that we need to engage people in a different way? If the workplace, the physical workplace, is going to compete, and it’s going to be a place where people want to be, what are you seeing, first of all, from a technology perspective perhaps, that’s contributing to that, and again, just helping to position buildings as the place to be?

GP: I think much of that technology is going to be centered around the amenities within the building, if you’re strictly speaking from a landlord perspective. And obviously, tenants are going to have their own programs within their spaces, but a lot of that’s going to be focused on, I think, the amenitization of these assets. And some of it’s not going to be technology-driven, it’s just going to be human nature-driven. And that’s going to be activating outdoor spaces, creating a sense of community within a building. We’ve seen some office landlords build out amenity floors that almost that feel like a private club, which has become an increasing trend here in New York and other parts of the world. So I think that’s going to be a trend that’s going to be here to stay and not going anywhere. But it’s… Companies, they’re viewing their office space as it’s become part of the HR budget, and you need to create a place that people want to come to, people want to congregate at, and not only for recruitment, but also for talent retention.

DA: Yeah.

GP: And you know, everyone has a different opinion on this, but I believe that people are most productive when they’re around other people, and so employers finding ways to incentivize their employees without, you know, using the stick, and have them come into the office at a regular rate is… I think it’s going to provide dividends going forward.

DA: Yep, I agree. And I think those incentives are not only free lunch and some of those bells and whistles, but I think it’s re-imagining space itself and the way in which space now provides value and benefit to their employees.

GP: Yeah.

DA: And I think, you know, if you can create unique situations and unique opportunities for people, they’re going to want to be a part of that.

GP: No question, and I think at the upper end of the market, it’s going to be less price sensitive too.

DA: Right.

GP: Because if you think about it, the rent is a much smaller fraction of a company’s budget than their payroll.

DA: Right.

GP: And if you can create an atmosphere where you’re getting more productivity out of that very large expense item by incrementally increasing a much smaller part of the overall pie, it makes a lot of sense. So I think that, you know, to have the right space, you’re going to see… I think you’re going to see landlords be able to push rents to limits that will exceed their expectations.

DA: Right. I liked your sort of drawing the dotted line now between bringing HR into the conversation and that the physical-

GP: I never like to bring HR into the conversation.

DA: I know, but I think you’re right, and I think actually, HR departments have taken on a whole new value, purpose and role within companies. It used to be about processing payroll and providing health benefits. I think that the HR role has taken on a much wider view, and does now connect intrinsically to the space and creating those kinds of opportunities and using space as a way to engage their people and build culture and get the best out of them, so…

GP: It’s become a vital part of the C-suite across the board, and in some respects, we should all consider ourselves human resource managers. It’s vital to the success of any company.

DA: Yeah, I agree. Thank you for sharing that. Our closing speed round is an opportunity to get to know you, Gary, a little bit better. So when you’re not at work, what do you enjoy doing?

GP: I love hanging out with my family and my dog. I live in the Upper East Side of Manhattan, so we enjoy everything that the island has to offer, go out, eat out a lot and love Central Park.

DA: Great, awesome. What is your favorite drink of choice? Hot, cold, alcoholic?

GP: Well, I appreciate a well-made martini when the time is right. And then, I love wine, collect wine, a passion.

DA: Well, myself as well, so we can talk about that sometime. Either another episode all about wine-

GP: Yeah, or over a nice bottle.

DA: I love that, that’s great. Favorite movie or current TV series that you’re watching?

GP: “Favorite movie or current TV…” Well, I would… Actually, I like to ask this question to people, “If you’re on a deserted island, what three movies do you bring with you?”

DA: Right.

GP: You learn a lot about someone when you see their video collection. But “The Big Lebowski” is probably favorite movie. I’ve seen that more than any other movie, by a large factor.

DA: Right, okay. Name one way in which technology has improved how you live or work?

GP: What we’re doing right now.

DA: Yeah.

GP: You know, it’s greater flexibility and optionality. We are able to reach more people in a day than we used to, and you know, instead of running around, we’re able to have meetings like this on the regular. So I think being able to provide that flexibility, but also being able to harness it’s been… And being willing to adapt to it has been super important.

DA: Right, I agree with you. I like the word optionality. For me, what I’ve learned is it’s not always, but it sure is nice to have.

GP: Yep, exactly. I think what we learned is that we can work remotely for a period of time if we have to.

DA: Yeah, agreed, agreed. And going forward, I think that it’s nice to have that flexibility, so to me… I really, and not to take the middle road for the sake of not creating controversy, but I really do believe that the opposite ends of the spectrum, you know, mandating it versus, you know, 100% remote, I really don’t think those are the right options, and I do think giving people flexibility. And I don’t think it’s saying, “You have to come back three days.” Three days is still being a mandate, but if people find their way back to three days and sometimes four and sometimes five and sometimes one, you know, that’s all good in my opinion.

GP: Right, well, the beauty of the three-day work week is that you still need the same amount of office space.

DA: Right, true enough, true enough. What is your personal choice for days spent in-person working with your colleagues, versus working from anywhere?

GP: Oh, 10 out 10 in the office working with my colleagues.

DA: Right.

GP: Yeah, I’m not very… I’m not good at working at home. I’ll be distracted too easily and then, you know, run errands, et cetera. This is much… I’m 1,000 times more productive when I’m in the office and surrounded by my teammates, but also, clients.

DA: I think that’s a great testament to the fact that it’s not a one-size-fits-all, and we should not be prescribing what everyone ought to be doing, because there’s some people, even during the early days of COVID that, you know, were very uncomfortable working from home, either, small apartments and poor working conditions, and they would’ve done preferred nothing more than to have come back much sooner. So it is not a one-size-fits-all, and I think that creates a tremendous opportunity for the industry, and I’m excited to see where this continues to, how it continues to evolve. Thank you so much for coming on our program today. I hope that this is the first-

GP: Thank you very much.

DA: My pleasure. I hope it’s the first of many conversations that you and I have, I look forward to my next trip to New York and perhaps, getting together for that glass of wine.

GP: Would love to.

DA: Okay, thanks, Gary.

GP: Thanks a lot, David.

DA: Take care, bye now.

GP: Bye.

DA: I want to thank Gary Phillips for joining me on this episode of TEN, and for contributing to the global conversation around buildings being a part of a robust ecosystem, helping to build great companies and that they’re vital in the effort to cultivate and support great people and teams. The future of the workplace will likely take many forms, and we’ll continue to explore what that looks like together. Subscribe to TEN for more conversations with leading CRE 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 through 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 And until our next episode, I wish you all continued success in building community where you work and live, thank you.

Ryan Speers | Partner & COO | Workhaus | The future of work is flexible

Season 5 / Episode 7 / 41:20
In this episode, we learn that Ryan’s business is at the forefront of the hospitality and customer experience conversations that are happening as CRE continues to up its game on this front by offering essential amenities to help drive user engagement and enjoyment. Tune in to learn more about Ryan’s perspective on Workhaus being a tech-enabled business versus a technology business.

Lisa Davidson | Vice Chairman | Savills North America | An inspiring journey from Tenant Rep to Proptech investor

Season 5 / Episode 5 / 46:17
In this episode, Lisa sheds light on key market drivers influencing real estate decisions, such as the rise of amenities and spec suites. She describes the future of work as “accommodating employees with great space.” The impact that unique community spaces have on potential tenants as they are touring prospective spaces is something else she sees in the market.

Rob Kumer | CEO | KingSett Capital | Trends and success strategies in CRE

Season 5 / Episode 4 / 53:34
In this episode, Rob shares his 3 pillars for success in the office category and speaks about the importance of experience and the technological advances impacting all asset classes. KingSett is very focused on decarbonization, and energy management including deep water cooling and implementing new lighting systems.

Ryan Speers | Partner & COO | Workhaus | The future of work is flexible

Season 5 / Episode 7 / 41:20
In this episode, we learn that Ryan’s business is at the forefront of the hospitality and customer experience conversations that are happening as CRE continues to up its game on this front by offering essential amenities to help drive user engagement and enjoyment. Tune in to learn more about Ryan’s perspective on Workhaus being a tech-enabled business versus a technology business.

Lisa Davidson | Vice Chairman | Savills North America | An inspiring journey from Tenant Rep to Proptech investor

Season 5 / Episode 5 / 46:17
In this episode, Lisa sheds light on key market drivers influencing real estate decisions, such as the rise of amenities and spec suites. She describes the future of work as “accommodating employees with great space.” The impact that unique community spaces have on potential tenants as they are touring prospective spaces is something else she sees in the market.

Rob Kumer | CEO | KingSett Capital | Trends and success strategies in CRE

Season 5 / Episode 4 / 53:34
In this episode, Rob shares his 3 pillars for success in the office category and speaks about the importance of experience and the technological advances impacting all asset classes. KingSett is very focused on decarbonization, and energy management including deep water cooling and implementing new lighting systems.