Where Part 1 of our interview with Boston Properties’ EVP Bryan Koop focused primarily on what FLEX by BXP is and the business case for the experiment, Part 2 focuses on success metrics, the tenant experience, and what happens when you mix the flip-flops and t-shirts of tech culture with the suits and ties of traditional corporate culture.
Q: The FLEX space here in the Prudential Tower is the first of many others. How do you define success in the short, medium, and long term?
In many ways we’ve already proven out the concept in the short term. The feedback from you and other tenants in the space has been very positive. The speed at which everybody’s been able to move in has proven to us that this can happen quickly. We opened July 1st and we’ve already got five of our nine suites leased.
I think the medium term is really about meeting the customers needs and learning where we can improve on what we’re doing. FLEX is a new product line, so we do expect to see some growing pains here and there. We’re going to be spending a lot of time with the customer asking, “Did we meet your needs? What can we do better?”
10 years ago, we would get calls from clients saying, “We saw a young man wearing flip flops! Flip-flops are not allowed in the building! Please don’t let him wear flip flops. Also, it’s winter and it’s not good for his health.”
For us, one of the neat things about FLEX is that we’re working with clients on a much more personal level. The groups who work in these spaces are small, tight-knit teams, and that makes for much faster feedback cycles. In a traditional long-term lease for a larger space, once we move somebody in, if we want feedback, we need to call ahead, get a meeting set up—jump through a lot of hoops, basically—just to get fresh information. Compare that to FLEX, where I can pop in on a client to say hello, see how everything is going, and they’ll be able to offer us feedback then and there. Just last week I walked into your neighbor’s office and they gave us three ideas within 30 seconds. That’s just totally different from what we’re used to.
In the long-term, success is really about answering the question, “is this something that’s going to prove to be really beneficial for our whole portfolio and our asset base?” FLEX is something that really enhances the whole Boston Properties platform. For every million square foot tower, let’s say, why wouldn’t you have 50,000 square feet of FLEX space? You guys in the tech world talk about scalability of platform all the time, but in the real estate industry, we haven’t really looked at it that way. Well, it’s time to change that. We think that a competitive advantage for Boston Properties is our platform, and FLEX would be a product that can really leverage that platform.
Q: Can you explain that? How do you see real estate as scalable?
The groups who work in these spaces are small, tight-knit teams, and that makes for much faster feedback cycles.
Let me frame it this way: As anyone who has started a business will tell you, recruiting and retaining the best talent is by far the most important part of growing a business. Where traditionally startups had to settle for back-office space in a mediocre location, FLEX offers startups and smaller companies an opportunity to lease space in a Class A building, which is not common in that kind of client. With FLEX they can say, ”Holy Cow, we’re in the Prudential Center! We’ve got Eataly below us, we’ve got health clubs, steakhouses…” and that makes recruiting so much easier.
We think that’s a great value proposition for the future; for us to be exposed to a bunch of great companies. Why? Companies in this sector are poised for growth, and as they grow, FLEX can accommodate them. Eventually, many of these companies will grow out of FLEX and into what we call the ‘long and strong’ sector. That makes FLEX a pipeline for the rest of our business.
To give an example, we had a company called Constant Contact who came to us back in 2000 when they were just coming out of bankruptcy and they only needed a few thousand square feet. That wasn’t something we normally did, but we loved their leadership so much that we said, “You know what? Let’s just roll with these guys a little bit and see how it goes.“
It went pretty well! In a handful of years they grew to occupy 250K square feet with us. Internally, we would call that a “great case study.” But really, it was just a FLEX space, right? At the time we looked at it like, “oh that’s just a highly unusual situation.” But now we see it for what it is—not unusual at all!
So we see FLEX as a more programmable, structured way to do what we’ve done with other companies. And with that comes scalability. Companies can grow with us, and the service we provide them changes according to their needs.
Q: What about other stakeholders?
From the customer and investor angle, FLEX space shows really well. When you’re a smaller company, you have to toe a very fine line in terms of the image you project to the world. If your space is too fancy, customers are going to think they’re being ripped off and investors might think you’re spending irresponsibly. On the flip side, if you’re in a low-end space, that’s going to throw red flags as well. FLEX offers a middle ground where customers and investors are coming into a high-end property like the Prudential Center, but they also see that FLEX is an affordable option. Customers get the message that you’re the real deal—that you’ll be around for a long time—without thinking you’re ripping them off, and investors see that you’re being smart with their money by not signing some expensive, long-term lease.
We see FLEX as a more programmable, structured way to do what we’ve done with other companies. And with that comes scalability. Companies can grow with us, and the service we provide them changes according to their needs.
We think that the number one rule of real estate—and we may be the only people who believe this—is that space and place drive behavior. And if you believe that space and place drive behavior, space and place therefore drive productivity, it drives culture, it drives the performance of an entire company. And if we deliver great space and place for you guys, your probability of being successful goes way up. So we see that as the reason why we’re in this industry, and the FLEX product to us is a great demonstration of that. You guys can build your culture, celebrate your wins, and use your space in the best way possible. That to us is more important than imposing a bunch of strict rules on you guys.
Q: We have a bit of a running joke around the office about the elevator demographics during rush hour here at the Prudential Tower. The building is mostly occupied by very large, traditional companies, and we’re this tech startup with a casual culture. So here we are in our t-shirts and sneakers with a messenger bag over our shoulder getting on the elevator with people wearing suits and carrying briefcases. How does that ‘culture clash’ change the overall dynamic of the building?
This is actually a really great question with an answer that’s more nuanced than what most would expect. Today, what we’re finding is our more traditional clients—law firms, investment banks—are seeing a need to adapt and change their cultures to fit a worker demographic that’s less concerned with formality and tradition. They’re seeing that their talent is acting differently, and is more diverse at every level. So I think the more conservative businesses are coming around and slowly becoming more open to loosening up, and the startups like you guys coming to work in jeans and t-shirts is doing a lot to push them in that direction.
10 years ago, we would get calls from clients saying, “We saw a young man wearing flip flops! Flip-flops are not allowed in the building! Please don’t let him wear flip flops. Also, it’s winter and it’s not good for his health.” Fast-forward to the present and we’re finding almost the opposite: our tech clients feel more uncomfortable being around suits than the suits feel being around flip flops.
That said, it’s important to point out that a casual/conservative culture mix isn’t a good match for every building. At 200 Clarendon—what used to be the John Hancock Tower—we divided that building into two lobbies with separate entrances. One lobby serves the lower floors where most of the tech companies are, and the other serves the upper floors where the traditional companies are leasing space. It’s really something we’re going to be evaluating on a case-by-case basis.
That wraps things up! Huge thanks to Bryan Koop for taking the time to talk with us and to the entire FLEX team for a genuinely incredible experience so far. You can find more information about FLEX here, or reach out to Boston Properties’ Victoria Paolino at vpaolino@bostonproperties.com
