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Design co-CEOs explain how office spaces should adapt to the needs of hybrid workers and the planet

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Design co-CEOs explain how office spaces should adapt to the needs of hybrid workers and the planet

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On this week’s episode of Fortune‘s Leadership Next podcast, co-hosts Alan Murray and Michal Lev-Ram chat with Diane Hoskins and Andy Cohen, co-CEOs of global design and architecture firm Gensler. They talk about the return-to-work trends revealed in Gensler’s workplace surveys and how the built design of office spaces should change to accommodate these trends. They explore the opportunities and challenges of converting empty offices, as well as the overall state of commercial real estate.

From there, Hoskins and Cohen discuss the future of sustainable building and design, and they share more about the process of co-writing their upcoming book, Design for a Radically Changing World—and how they’ve been able to successfully navigate being co-CEOs for 18 years.

Listen to the episode or read the full transcript below. Plus, see the video embedded below for highlights from the interview.


Transcript:

Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.

Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray.

Michal Lev-Ram: And I’m Michal Lev-Ram. Alan, we are recording this the week after Labor Day. And just like every year, summer is winding down, work is winding up for a lot of Americans. But this year’s post-Labor Day week feels just a little bit different. And that’s because this is the week that many companies are asking their employees to come back to the office, at least part time. And I can tell you sitting here in the Bay area, I feel it. Not only is everybody back from Burning Man, but they’re actually going into an office. So the 101 is packed. 

Murray: An office has got to be an improvement over muddy Burning Man. But Michal, let me push back a little bit. Let me challenge you on this, because I think we’ve been having this conversation. I think this is the fourth, fourth September we’ve been having this conversation about the return to office. And the first one, it was pre-vaccine, but I was doing some digging and looked at the office vacancy rates. They’ve actually been flat since 2021 at about 50%. And so, I’m not sure, for all the breast-beating and employers saying, “get back, get back, get back”—I think we may be seeing a new normal here. Yes, people are back in the office several days a week. The statistics show that people now spend maybe 25% of their work time at home, the rest of it in the office, and that’s up from only 5% at home before the pandemic. I don’t know if that’s gonna change. 

Lev-Ram: Yeah, well, our guests today, they have a lot to say about this, different perspectives about how this is also shifting the physical space of an office, how we actually think about design moving forward in light of everything you just said. And these guests are the co-CEOs of global architecture and design firm Gensler, Diane Hoskins and Andy Cohen. Gensler has 53 locations, real locations, physical, and 6,500 designers across the Americas, Europe, Asia, Middle East. They’ve designed some very high-profile projects, including airport redesigns like SFO’s—speaking of the Bay Area—T2 terminal. Given what you were just saying, Alan, they have worked on some really celebrated office spaces like the Marriott HQ in Bethesda. 

Murray: And you know, the other thing, Mihal, they created the modern newsroom. They did it for Bloomberg, they did it for the Wall Street Journal, they created a kind of a template that was designed to drive increased collaboration, not dissimilar to our office spaces here. So they really are a shining reminder of how important space is in creating culture. 

Lev-Ram: Yeah, Gensler is really heavy on research-based design, by the way. They shared some fascinating data with us, and they collected not just from their clients, but also kind of everyday people who use these spaces. They do annual surveys. And by the way, Diane and Andy are also co-authoring a book about how transformative design can meet the needs of our rapidly changing world. They refer to a number of what they call crisis multipliers, like the pandemic, the war in Ukraine, accelerating climate change, all that good stuff, that are rapidly changing our world, and how design has to rise to the occasion to meet these changes and challenges. 

Murray: I’m glad you kept saying “they” in that sentence, because we’ve been doing this podcast for three and a half years. This is the first time that we have had co-CEOs on. In my experience, the history of co-CEOs has not been terribly successful, but these are two people who really seem to have got it down. They really like to work together and compliment each other. 

Lev-Ram: Yeah, we’ve seen more examples of the co-CEO thing not working than working. 

Murray: You won’t name names. 

Lev-Ram: We can point to a few companies, Salesforce, SAP, where… Well, 

Murray: Oh, you did name names!

Lev-Ram: I just did, sorry, oops. But yeah, in this case, it seems to work for them. And co-authoring a book is no joke. Beyond the state of co-CEO ship and office redesigns, we talked to Diane and Andy about sustainable design as well. What makes a Gensler project Gensler, and their thoughts on how we all interact with the cities we live in. And again, how that’s really shifting. So let’s get to it. Here is our conversation with Diane Hoskins and Andy Cohen of Gensler. 

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Lev-Ram: We are very excited to host co-CEOs on the podcasts, maybe for the first time ever here. We will get back to how that works in a second. But first, I want to hear from both of you. What is Gensler? What defines a Gensler project? And I guess I should call on who I want to speak first, because again, this is the first time having co-CEOs. Diane, let’s start with you. 

Diane Hoskins: Sure. It’s great to be here. So what defines Gensler? Really, that has been something that Andy and I have worked on as co-CEOs for the last 18 years to take what was an incredible interior design and architecture brand and turn it into really a global design and creative engine. And really, that’s how we would define and describe Gensler. We focus on creating a better world using design as a tool to really impact the world. We want to talk about that quite a bit today, because really, at the end of the day, it’s all about people. So again, we’re 6,500 talented designers that come from all different kinds of diverse backgrounds. And we have one mission, and that is to use design as a tool to create a better world. 

Lev-Ram: Okay, so, Andy, I’ll turn to you. Obviously, the last three years have, in a very fundamental way, reshaped that world. I don’t think any sector was spared in that repositioning and redefining. And I know you’ve both used the term “crisis multipliers” to describe some of these changes, but can you explain what those multipliers are? And then how are they affecting design? What’s the role of design here? 

Andy Cohen: Thank you. Thanks again to both of you for having us on. You know, the crisis multiplier is really about what’s happened. There’s been crises over the years that have occurred in the world. What Diane and I have been brainstorming about and we’re just writing a book about is that crisis multiplierz over the last three years has been magnified. You know, you have COVID that hit, obviously, all the issues around COVID that have, and health and wellness of cities around the world. And that specific idea of crisis multiplier is what we are focused on. We are taking on the greatest challenges in the world and how design can make a difference, how can design could be the multiplier of change of positive solutions in the world. And that’s really what we’ve been leaning on. And one of the key areas that we’ve been focused on right now is workplace. One of the key challenges is radical change that’s happening in workplace right now and office buildings. and the return to office. So the crisis multiplier is the core, is the nexus point for us of what creates positive change for us in taking on these challenges in the world and how design can make a difference. 

Murray: So we could spend hours talking about the crises and the crisis multiplier. There’s so much rich information there, but let’s focus on the one that you’ve raised, which is the office work and the future of office work. The last time I had a chance to talk to the two of you was, I think, three years ago when we were just beginning to have this conversation about how the post-pandemic world would change work. and change our relationship with offices. I know the two of you have collected a lot of data on this. You’ve thought about it a lot. You’ve focused on it. What have you learned three years on? What do we know about that future of office work? 

Cohen: Okay, I’ll take that one. You know, Alan, thanks for asking that question. We’re at the greatest rethinking of workplace since the industrial revolution. The workplace revolution is on right now. And this massive change is happening. We’re at the, we, Gensler, are at the center of advising our clients. And like you, we work with the top 40 of the 50 Fortune 500 companies in the world. And we’re helping them right now. CEOs and companies are coming to us right now. on what the future of workplace is and this great transformation. Our strategy is to make the office, and this is really important, to make the office a destination, not an obligation, a place where people wanna be and not that they have to be. Making the office an experience multiplier where people have a sense of choice, flexibility and variety in the work environment. The research institute, the Gensler Research Institute. a workplace survey identified, right now, we just came out with it, identified why workers want to come back to the office. And the number one reason why they want to come back to the office is to get their work done, to get their work done. It’s a pretty phenomenal statistic that this came out. You know, at home, there’s been incredible distractions we’ve been hearing over and over again, the distractions of kids and roommates and family. What correlates to this is that 55% of the workforce today, 55%, soon to be 70% in 2030, are millennials. And workers, especially young workers, are seeking a sense of choice in their work environment, especially about being mentored and coached, which they lost out on the last three years. So choice looks like private workspaces, phone booth cubicles, private, quiet libraries, small three to four person conference rooms. Last point is from our survey, the number three reason that people want to come back to the work is to collaborate, to work with their teams. We’ve lost all the collaboration through these Zoom calls. And what our research showed during COVID is collaboration fell off 37%. And so that’s a really key statistic. We’re designing new offices that are more like hotel lobbies with a variety of work settings and that’s the key is that it’s not just amenity based but it’s about creating a different variety of work spaces for people to thrive in their office. 

Murray: Michal and I both want to dig into that a little bit more. I will say you were talking about the obligations of home life. Michal and I had an interesting conversation on this two days ago. I was saying how depressed I was to see school buses on the road because it meant that the summer was over and she immediately responded how happy she was that the school buses were on the road. 

Lev-Ram: Yeah, hallelujah, very different approaches. Kids are back in school. 

Murray: So, people do have other experiences, but Diane, sort of, you know, a lot of the press coverage on this has been that people, there are a lot of people who don’t want to go back to work. They want to, they like the flexibility that they’ve had over the last few years and they want to keep that flexibility and don’t like being told they have to come back to the office. I get everything Andy’s saying about creating inviting spaces that become destinations, not obligations, but how should employers deal with this desire on some workers to just have complete flexibility? 

Hoskins: Well, Alan, again, we’re all on the edges of what we think is actually a much bigger issue right in the center of this. To kind of pull back a little bit and go big picture, what were, you started the conversation with what have we learned in these past two and a half to three years? And something that we’ve, you know, again, it’s sort of like you get too close to something and then when you pull out, you actually see that there’s something going on here that was a little different than the one topic that we’re all kind of over focusing on. And that is that we’re in a significant part of an economic cycle right now. And if you look at, you know, from the S&L crisis, which I happened to start my career during the, you know, the 90s, so, you know, you had the S&L crisis, then you had the dot com, you know, 9/11 era, then you had the global financial crisis, now you have COVID, and you look at what happened with workplace in every single one of those downturns. What happened? Vacancy increased. Vacancy increased extremely in some cities. In fact, we’re not even seeing the levels of vacancy that we have seen in some of these other economic cycles. And so there’s a story going on here that’s conflating a little bit with attendance in the workplace, which is important. And we can get back to that point. But the fact of vacancy is actually a big part of what we’re experiencing and have experienced in every single cycle. And in every cycle there has been, and something that we’re studying, is that there’s been unique ideas that have taken hold in each of those moments. For instance, you know, during the S&L crisis there was, you know, a focus on flexibility when we, you know, saw the dot-com era happen. Kind of, you know, let’s… flatten our organizations, so there was an organizational response and also kind of tearing down the walls and creating visibility. Collaboration really was born out of the global financial crisis. In fact, coworking was born out of the global financial crisis. And here in COVID, we’ve got the notion of hybrid, which was kind of a necessary strategy through COVID, but has become a way. to decrease expenses, which is what is the normal response during an economic downturn? How do we limit our footprint, decrease expenses, and hybrid becomes a strategy to do that? So the question is, you know, the extent to which hybrid will continue through an upturn and what else might come to be as organizations begin to grow again? But again, this idea that once the upturn happens, what are going to be the solutions is something we’re actually focusing on right now. 

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Murray: Jason Girzadas, the CEO of Deloitte U.S. is the sponsor of this podcast and joins me today. Welcome, Jason.

Girzadas: Thank you, Alan. It’s great to be here.

Murray: Jason, our ideas about work, where we work, when we work, how we work, all of those have continued to evolve since the pandemic, is that a problem for business or isn’t an opportunity for business as a massive opportunity? 

Girzadas: It’s a massive opportunity. Although I think the answer is less clear. It is a profound set of challenges to be sure. But in the end, it’s an opportunity to create a workplace, particularly in the face of more long term systemic talent, workforce constraints and limitations that brings out the best of a workforce so people can be their genuine self at work can have heightened levels of productivity and feel supported and all that they do. But I don’t think the models are clear. And we’re seeing lots of experimentation. But that’s around hybrid and what does it mean to actually co locate in what degree of colocation matters, it’s also a function of how does technology get embedded into the workplace such that employees and workforces feel supported and enabled and then also the cultural elements related to diversity, equity, inclusion and feeling supported to be your genuine self at work. It’s the combination, Alan, of all those factors that leading companies will innovate around and find novel ways to bring together that will be highly desirous of leading talent and will be a differentiator in terms of businesses using their workplace in their work processes to win in new and different ways.

Murray: Jason, thanks for your perspective. And thanks for sponsoring Leadership Next

Girzadas: Thank you.

[music ends]

Lev-Ram: So it’s interesting, you brought up some of the innovations, the creative thinking that has happened at each of these pivotal moments in the past. And one of the things that we’re also hearing about, this isn’t so much about how people work, but it is about how we’re using space. And that’s the idea, the concept of converting office space into residential space in big cities. Obviously all of these trends and shifts are happening and they’re coinciding huge problems with homelessness, with lack of affordable housing. How do you guys think about that? I mean, is this something that cities should and can pursue? I know it’s kind of long-term thinking. It’s not like you just snap your fingers and you convert this real estate into something completely different. But Andy, maybe you can start here. How are you looking at that? Is there real viable interest in doing this? 

Cohen: There’s absolutely a viable interest and it’s a huge focus of our firm right now. With office utilization down at about 50% and with all the interest rates continuing to rise, there’s a tremendous, tremendous issue going on right now with an opportunity going on right now- the conversion of office buildings to residential. There’s a tremendous flight to quality. by tenants seeking Class A buildings right now in every one of the US cities that are fully amenitized. What we’re seeing is B and C class buildings are in a downward spiral, some going back to the bank or in extreme financial distress. Simultaneously our cities are desperately needing more housing. We’re hearing that throughout the nation right now and around the world that there’s a glut, a huge disadvantage right now of housing. So we’ve been focused on the office to residential conversions and we just created, and then we’re working with many cities right now around the US, we just created an algorithm that analyzes existing building portfolio for cities that takes into consideration the building’s location and how close it is to transit, takes into consideration the building footprint, the floor plates. Some buildings don’t work for residential because They’re much too big. But there are a lot of buildings that could be absolutely converted from our statistics we’re seeing and studying in many cities. We’re seeing that about 30% of buildings in the building portfolio right now can be converted. And just think if we can just convert 20 to 30% of our office building stock to residential, we’ll be able to solve many of these issues that are going on with the shortage of housing that’s happening in the US. 

Murray: I’d love to jump on that office building crisis that you’re talking about because it seems this hasn’t gotten the attention it deserves. When you combine the statistic you gave, only 50% utilization, and my understanding is that isn’t changing. That’s been flat for two years. There may be some CEOs who would like to see it change, but there doesn’t seem to be much movement. So you have 50% utilization. You have interest rates double what they were a couple of years ago, so if you had to borrow to finance your building, you’re facing a significant increased cost. And then you have that flight to quality that Andy was talking about. Here in New York, every meeting I’ve been to in the last six months has either been in Hudson Yards or One Manhattan West or One Vanderbilt, all buildings that didn’t exist before the pandemic, which must mean the buildings that did exist before the pandemic are struggling. How big a crisis do we have sitting in front of us?

Hoskins: So, again, this notion of flight to quality, that is definitely the case. Just to kind of back up into some data, if you look at net absorption in buildings, basically all net absorption exists in buildings that were built 2015 and earlier, and more recent. So in effect, anything that’s… older than 2015 has actually seen negative net absorption. They have lost tenants. So for every tenant that was lost, there wasn’t a tenant that came in. If it’s 2015 and newer, there was a tenant that came in for every tenant that was lost, and in fact, more than that. So there’s over 200 million square feet of net absorption in buildings. that are 2015 and newer. So if you talk to developers that own buildings that are newer than 2015, they will tell you that prices are going up, that vacancy is single digit. It’s, you know, again, it is like a tale of two stories here and really keeping an eye on both of those is important in this narrative. the extreme flight equality is definitely a characteristic this time around that wasn’t as extreme in any of those prior periods. So I would say this is a real characterization of this COVID era or the post-COVID era downturn. There was an absolute abandonment of buildings that were built. pre 2015, as well as, you know, again, what we’re seeing is investment in buildings that are right on that cusp. In fact, we have law firms that are now seeing price advantages by going into buildings that are maybe a B plus or even a B, where the owner had dollars to invest in a renovated lobby and renovated top floor amenities that are, you know, again, very important to employees of all of our companies. But to your point, Alan, you know, dollars for the investment are the key. So, you know, if it’s the big REITs or others who have access to, you know, global capital, they’re going to be able to pick up buildings that are able to be amenitized and play in this game. You know, the other side of the coin, as Andy was saying, we’ve actually, in fact, there’s a gentleman named Stephen Painter in our firm who has actually developed this algorithm that’s been used across the country. And he was saying yesterday, we’ve reached our 1,000th building that we have studied for office to residential conversion. That’s how significant this is happening in our cities across the US, including with our federal government. So when we’re looking at buildings that cannot play in that amenity game, they are going to have to find other uses. 

Murray: If I can just quickly follow up on that, Andy, you talk about amenities. My understanding is part of what’s driving this flight to quality is also sustainability. That the customers want buildings that meet the highest environmental standards, which tend to be the new buildings. How important is the push for sustainability in what’s going on in real estate right now? 

Cohen: There’s a huge push for sustainability. What most people don’t realize is 40% of all CO2 created in the world are buildings. And so clients are asking us to make sure that the buildings we design, the office spaces we design are sustainable. Also, millennials today are all saying they want the purpose of their organization to deal with climate change, to deal with sustainability. So we’re seeing companies and CEOs coming to us saying, We want to make sure we have a healthy work environment. We want to make sure we have a sustainable work environment where buildings are not taking energy from the grid, but being net zero and net neutral to the grid. And that’s been really, really important for our clients and for people in the workspace for the purpose and culture of their organization, that they believe that we really need to take focus on climate change. 

Lev-Ram: So I want to go back to the book that you’re co-writing. I know sustainability is one of many things that you’re going to discuss in it. But tell us a little bit more about the book. The title is Shaping the Future of Cities Designed for a Radically Changing World. What do you hope to accomplish with this book, and why did you decide to write it now? 

Hoskins: Look, you know, it’s funny, and we kind of tell this story in the book. I guess I think it was 2019. Andy and I were in Tokyo at the time and we were, you know, had been doing meetings on the West Coast. We were flying to Asia to do a whole week and a half of meetings in cities where we have offices in Asia. meet with our teams, meet with clients. And I don’t know, it was kind of one of those who were dead tired and looked at each other and just talking about anything. And the topic of writing a book came up because we’re a firm that is touching countries, cities, communities, cultures, all over the world. And we’re starting to see that just through our own influence the ability to take great ideas and share them, that we’ve become part of an ecosystem, an important part of an ecosystem that is elevating and helping cities to be better, and helping to surface ideas maybe more quickly than they would have just organically by virtue of the fact that Gensler is there, that Gensler is part of that project. And we’re seeing the impact of design, not just Gensler design, but design, you know, done by any firm. Often people look at design as a, you know, kind of a luxury good or something that is only for a small part of a community or a city. And we really wanted to communicate the fact that design is for everyone and that we need design today more than ever. 

Lev-Ram: So I’m not gonna ask you who’s a better or faster writer, but I do wanna ask how does co-authoring a book work? I’ve co-written articles and that can be a bit intense, but how did you divide and conquer and who does what? 

Cohen: As with everything we do, we do it together. We’ve been at this for 18 years and we could finish each other’s sentences. It took a long time, it took about a year and a half to coalesce our ideas. And as Diane mentioned, what really coalesced everything and pulled it all together was coming out of COVID, we realized that design is so important in the world and we wanted to take a stand about how we’re taking on those great challenges. I could add now that we’re done, I could say it was fun. It was an interesting process. Diane and I, again, we worked together for so long, and we have similar ideas and approaches that we really wanted to share to the world, the special nature of what design can do. 

Murray: Well, I got to dig a little bit deeper on that because the history of co-CEOs, um, there’s not a huge history, but there is some history. It’s not particularly good. In most cases, it hasn’t worked particularly well. So what is it about the two of you that makes it work? I mean, for most people, you know, at some point they feel like, Hey, am I the CEO of this organization or not? If I am, uh, Why do I have to deal with this other annoying person who’s at my side all the time? Why does it work for you too? 

Hoskins: Well, look, we believe in co-leadership very, very strongly. In fact, we really feel that if you cannot co-lead, you can’t lead. That leadership today is based on collaboration, mutual respect, building ideas with others, being able to recognize that someone else has a great idea or someone recognizing that you had a great idea. and really being able to then move quickly to solutions. And you’ll see in our organization, everyone is a co-leader. Office leaders are co, our regional leaders are co-leaders, our practice areas are co. And as I like to say, you know, most CEOs have 24 hours a day, we have 48 hours a day. 

Murray: More power to you, Michal. I think there are a couple of CEOs out there in California with you who we need to have Diane and Andy talk to. 

Cohen: I would just add one thing really quick, and that is that we really believe that everyone has aces in spaces, things they’re great at and things they’re not great at. And we believe by combining people’s aces, it creates one plus one equals five. And that’s what our firm’s been all about. It’s all been about co-leadership, the idea by coalescing great ideas together. Diane and I, our aces are very different. would you put us two together and the sparks fly. You  asked about the book before, that’s how the book came about, because sparks fly because we come from different backgrounds.

Lev-Ram: So I’m gonna ask a quick final question to the two of you. And this is our new favorite question, which is what book are you currently reading or have you read recently that made a big impact on you? And you cannot say the book you just wrote.   

Hoskins: Oh my goodness. You know, it’s funny because it will go back to our book. But in doing our book, it made me go back and read other books, right? You start to say, Oh, wow, you know, wasn’t there something, that there was a great book that there was something about it? What was it? And how do I bring that thinking into what we’re doing? So I really, you know, admire an Inconvenient Truth. I admired it when it came out. I felt like it sparked a movement. It wasn’t necessarily a beautiful book, but it was all about sharing knowledge to help others start to see something that wasn’t necessarily obvious. And that is what we’re trying to do in our book is to share something that others may not see as obvious. And then also to pull in a lot of data because I really appreciated how data and information graphics were used. So I don’t know. That’s a book that I’ve recently kind of picked up again and really admire. 

Cohen: I’ll focus it right back on Gensler, because I’ve been with Gensler for 43 years. So I’m definitely reading different books. But the book that Diane and I have focused on right now, different than the book that we mentioned before, is we come out with design forecast every year. And right now we’re in the middle of design forecast. So right now I’m in the middle of reading all the prognostications of the future of the world right now that our leaders are developing. So it’s been, it’s an amazing co-pulling together. all the different ideas in our firm and where the world is going. 

Lev-Ram: I was expecting a murder mystery in there, but no. Diane, Andy, thank you so much for joining us today. 

Murray: Yeah, it’s a great conversation. Really, it is a reminder of how powerful design can be in shaping our world and our lives and our experiences. So thank you so much. 

Hoskins: Thank you, Michal. Thank you so much, Alan.

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Leadership Next is edited and produced by Alexis Haut. Our theme is by Jason Snell. Our executive producer is Megan Arnold. Leadership Next is a product of Fortune Media.

Leadership Next episodes are produced by Fortune‘s editorial team. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.

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