Looking for Office Space?
This may be your chance to snag golf simulators, pickleball courts, and chicken fingers. Desperate landlords may even show you their financials.
Here are today’s highlights:
Gene Marks is predicting an A.I. backlash.
Barnes & Noble has decided it wants to be just like those independent shops it displaced.
A couple of class-action lawsuits could change the way we buy real estate.
Brazil is welcoming the migrant crisis other countries are trying to avoid.
This is a pretty good time to look for office space: “This may seem counterintuitive at a time when most employers are taking a wait-and-see approach to their office needs to account for a rise in remote work, a stagnating economy, and rising interest rates. But Insider's reporting shows that this is precisely why some office landlords are rolling out the red carpet for prospective tenants. As office vacancies soar to record highs in some markets, office landlords often have no choice but to find new and creative ways to attract new clients.”
“Landlords are pulling two main levers to attract tenants during this difficult time. One is to lean into the tenant's need for flexibility by providing more advantageous lease terms or conference rooms for rent. The other lever is to bring in amenities that can make office spaces more attractive to workers.”
“Of course, pulling these levers requires capital, so landlords with access to cash will come out on top. Some tenants are even demanding office landlords prove they are financially sound by sharing their financials — and some landlords are complying, brokers said.”
“‘When you have 55-year-old managing partners of a law firm looking for office space, and they see the golf simulator, they get pretty excited,’ he said.”
“While tenants of 28 Liberty have to pay to use these services, they can play a game of pickleball before work and watch a movie with a beer and some chicken fingers brought to their seats, all without leaving their office building.” READ MORE
Gene Marks says Microsoft and Google are facing an A.I. backlash: “Both tech firms have announced that their added AI tools will cost. And it will cost a lot. Both companies plan to charge $30 per month per user for any organization that wants to use Copilot or Duet. Which means that my company, for example, with only 10 users, will be paying $3,600 a year for A.I. That’s a lot of money. And for what? A nascent, unproven, and potentially unwieldy tool that could likely create more problems than it solves. Most of my clients use either Office 365 or Workspace for their office systems and, anecdotally, most agree. They’re not going to pay. And that’s a problem for Microsoft and Google.”
“Most businesses are still trying to get their arms around the benefits of this technology and how they can use it in their businesses. Other than poking around with tools like ChatGPT to help create a recipe or write a blog post a typical manager or office worker will need time to truly understand this functionality.”
“Training and education will be needed, and people are going to be frustrated by this. They’re going to ask why the glorious, earth-changing, mind-blowing promises of AI, which is supposed to increase productivity and reduce overhead, is actually creating higher costs and an added burden.”
“My company and my clients already pay for Office 365 and Workspace and our understanding — now that we’ve been forced into the cloud-based-monthly-fee-model — has always been that software makers would commit to offering better, reliable, and more useful software for the same price in order for us to continue to pay their monthly fees.”
“Copilot and Duet aren’t separate, standalone applications like Word or Sheets. They’re built into Office and Duet like any other new feature set. So why charge more? It seems premature and a little bit greedy.” READ MORE
A.I. is having an impact on the creator economy: “In Creator Now's survey, 97 percent of creators said they were already using A.I. in their creative process. Those creators said they used AI to increase workflow, fill in skill gaps, create better quality content, and reduce costs. Still, some creators said they'd experienced disadvantages from using A.I., and 23 percent had experienced ethical dilemmas when using AI. Over half of the creators expressed concern that A.I. could lower their value as a creator, especially if more platforms begin to embrace AI-generated content.”
“Creators said they used A.I. to increase speed, fill in skill gaps, create better quality content, and reduce costs. Thirty-five percent of creators acknowledged the need for more education around A.I. to help harness these tools effectively, and 23 percent said they advocated for increased access to more user-friendly AI tools.”
“Ninety percent of creators said they were using ChatGPT during their content creation process. The next-most-used A.I.-powered software was MidJourney (31 percent), then Google Bard (19.7 percent), Eleven Labs (16.1 percent), Stable Diffusion (11.2 percent), Veed.io (9.6 percent), Runway ML (8.2 percent), Claude (4.2 percent), and Perplexity (3.9 percent), among others.”
“Thirty-one percent said they were using it during their editing process. Other ways creators said they were using A.I. included generating ideas (56.7 percent), researching topics (47.1 percent), writing scripts (44.6 percent), creating thumbnails (34.1 percent), data analysis (32.8 percent), and editing (32 percent).” READ MORE
Is it too soon to declare self-checkout a failure? “When self-checkout kiosks began to pop up in American grocery stores, the sales pitch to shoppers was impressive: Scan your stuff, plunk it in a bag, and you’re done. Long checkout lines would disappear. Waits would dwindle. Small talk with cashiers would be a thing of the past. Need help? Store associates, freed from the drudgery of scanning barcodes, would be close at hand to answer your questions.”
“Before self-checkout’s grand promise could be sold to the general public, it had to be sold to retailers. Third-party firms introduced the kiosks starting in the 1980s, but they didn’t take off at first.”
“Self-checkout is expensive to install—the average four-kiosk setup runs around $125,000, and large stores can have 10 or more kiosks apiece. But write one big check up front, the logic goes, and that investment eventually pays off.”
“The widespread introduction of self-checkout kiosks did enable shoestring staffing inside many stores, but it created plenty of other expenses too. Self-checkout machines might always be at work, but on any given day, lots of them aren’t actually working.”
“There’s little evidence that self-checkout is reliably faster than the old cashier system, and that feel of convenience has always been largely a trick of perception.” READ MORE
Barnes & Noble is trying to look like the independent bookstores it put out of business: “The design of a new location in Brooklyn reveals the polished concrete floors from its past life as a Barneys New York. A Barnes & Noble recently opened in California with cerulean walls, and an experiment in robin’s egg blue is in the works for some East Coast locations. ‘Any design agency would have a heart attack if they could see what we’re doing,’ James Daunt, the Barnes & Noble chief executive, said. ‘We don’t have any architect doing our design at any stage. There’s no interior designer.’”
“New York City has nine Barnes & Noble stores featuring four different logos above the front doors. Two stores are new; one has been fully renovated; and the others have had some updates but are mostly frozen in time, the still-functioning remains of bygone retail strategies in a company — and industry — that has undergone an upheaval.”
“The Upper West Side renovation cost $4 million and is on track to pay for itself in a couple of years, according to Mr. Daunt. ‘I’d be surprised if we don’t end up doubling its sales,’ he said. Next month the chain plans to open its largest new-format store: a 35,000-square-foot location in Paramus, N.J.”
“The new look aims to encourage browsing, which Mr. Daunt believes improves customer satisfaction. ‘If you just want to buy a book, the guys in Seattle will sell you a book,’ Mr. Daunt said. ‘The enjoyment and the social experience of that engagement with books in a bookstore? That’s our game.’” READ MORE
The commission model is under attack: “A pair of class-action lawsuits challenging real-estate industry rules—including one that went to trial beginning this week—and continued pressure from U.S. antitrust officials are threatening to disrupt a compensation model that hasn’t meaningfully changed in decades. Home buyers rarely pay their agents. Instead, sellers pay their own agents, who in turn share their commissions with the buyer’s representative. In the typical transaction, total agent commissions are 5 percent to 6 percent of the sale price. For a $400,000 home purchase, that is roughly $20,000, split two ways.”
“The plaintiffs in the class actions, who are home sellers in different regions of the country, say the longstanding industry rules amount to a conspiracy to keep costs high in violation of U.S. antitrust law. Buyers, they say, have little incentive to negotiate with their agents because they don’t pay them directly, while sellers are loath to experiment with a lower commission rate for fear that agents will steer clients away from their home.”
“An academic study released this month provides some evidence of these concerns. It found that home listings offering lower buyers’ agent commissions take significantly more time to sell and are much less likely to sell at all, even after controlling for factors such as the home’s age and location and listing-agent attributes.”
“In a report released this month, Ryan Tomasello, a real-estate industry analyst with Keefe, Bruyette & Woods, predicted that the lawsuits could lead to a 30 percent reduction in the $100 billion that Americans pay in real-estate commissions every year and push well over half of the roughly 1.6 million agents out of the industry.” READ MORE
The Senate has voted to overturn a small-business-lending rule intended to help underrepresented businesses: “The Senate on Wednesday voted to overturn a Consumer Financial Protection Bureau rule requiring lenders to report demographic data on small-business loan recipients, defying a White House veto threat. Sen. John Kennedy (R-La.), who sponsored the bill to invalidate the measure under the Congressional Review Act, called the regulation ‘intrusive’ in a floor speech before the Senate voted 53-44 to scrap it. The House must still act on the resolution.”
“Supporters of the rule say it will help ensure that lenders distribute loans equitably to underrepresented borrowers. Senate Banking Chair Sherrod Brown (D-Ohio) defended the rule, saying it would shed light on ‘gaps in the small-business lending market.’”
“Senate Minority Leader Mitch McConnell (R-Ky.) praised the resolution, casting it as an effort to ‘chip away at yet another example of the Biden administration’s run-away regulatory state.’” READ MORE
Brazil is embracing the migrant crisis: “In doing so, Brazil is drawing migrants into its economy — filling many of the grueling jobs that its own citizens don’t want and powering its agricultural-exporting machine. The government has relocated more than 114,000 people, or about a quarter of the Venezuelans who have come to the country since 2018 — a clip of nearly 2,000 a month — primarily to the wealthy south, a historical center of agribusiness. The newcomers have taken up jobs in crucial sectors, including in the world’s largest meat-processing companies, or they’re connected with a sponsor or shelter to take them in while they look for work.”
“It’s helping Brazil’s thriving agribusiness, as a country that’s already the top exporter of beef and chicken tries to cement itself as the world’s slaughterhouse.”
“Venezuelan migrants crossing the country’s northern border are greeted by officials waiting to process paperwork and visas; private recruiters offering jobs; a government providing airfare to relocate them to far reaches of the country.”
“Migration experts say Brazil’s approach is unique because of the extent to which the government is trying to integrate the Venezuelan newcomers. The program has also survived three different administrations from right, hard-right to left.”
“Conversely, when a government doesn’t step in to aid migrants, that’s when they ‘become a burden. They are not contributing to the economy, and you have to maintain them in a sub-optimal area of the country, which can create problems,’ Acosta said.” READ MORE
THE 21 HATS PODCAST
We Haven’t Signed a New Client in Eight Months: This week, we meet Jaci Russo, the co-founder and CEO of BrandRusso and the latest addition to the 21 Hats Podcast team. Jaci tells Jay Goltz and Laura Zander how she went from working for Barry Diller to starting her own marketing agency. Jaci also explains why she recently decided to introduce a four-day workweek and why she thinks her agency has now gone eight months and counting without signing up a new client—the longest such stretch in more than 20 years in business. “I find it interesting,” responds Jay. “You just said this is the first time you've ever had such a long period without new business. And, ‘Oh, we went to a four-day workweek.’ Hmm, how interesting.”
Plus: Laura talks about what happened when venture-backed competitors came for the knitting industry and how stressful it is to buy and operate another business in another state.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren