Last week, LeasePilot Co-founder and CEO Gabriel Safar joined Chris Rising on “The Real Market” podcast to talk about the intersection of tech and commercial real estate leasing. The two discuss the common roadblocks leasing professionals face and how tech offers solutions.

Listen to the podcast:

iPhone users can use this link to stream the podcast directly.

 

I foresee a time in the not-too-distant future where this technology is where all leases are done. —Chris Rising

During the interview, Gabriel references some LeasePilot blog content, which we’ve linked below.

The Call Center Model

Adopt this clever strategy during the negotiation process and tenants are much more likely to conclude that many of their requests are unnecessary. The best part? They come to this conclusion on their own. Read More »

Get your Outside Counsel on Fixed Fees (and Have them Love it)

Most CRE companies using outside counsel would jump at the chance to pay their lawyers a flat fee for every deal. Law firms, however, aren’t typically so enthusiastic about the idea. So how can you get your outside counsel on board with flat fees? One of our customers came up with a pretty clever solution. Read More »

Few CRE tech buzzwords command more investor interest than Artificial Intelligence (AI). It’s the new hot thing. And while AI is an undeniably exciting technology, does it deserve the hype it gets? For some applications, the answer is unequivocally, “yes.” For others, AI may be more trouble than it’s worth. In the case of lease abstracts, the answer is, “maybe.”

There’s probably nothing more loathsome than finding all the key details buried in a 60+ page lease and formatting them into an abstract. Yet, since a lease abstract is such an integral part of business operations, it’s something that must be done. Tell a lawyer or leasing admin that there’s an easier way to abstract a lease, and there’s a good chance you’ve just won his or her undivided attention.

Artificial Intelligence

In a nutshell, AI approaches the abstracting process by brute-force data extraction and analysis. Armed with programmatic logic and a language algorithm, AI-based lease abstraction software approaches the abstracting process by tirelessly combing through every word, clause, sentence, and section of a lease in order to make sense of it. After some intensive data-crunching, AI software delivers a report of its findings which, hopefully, offer an accurate summary of a lease. It’s important to note that AI still has a ways to go before it can produce abstracts independently; it’s not completely error-proof (and may not ever be). To ensure total accuracy, the results will require some degree of human audit.

A good rule of thumb is that AI will generally suss out 80% of the key info in a lease. The rest still requires manual review by an expert. Despite the ‘babysitting’ AI-based lease abstraction requires, it’s a step in the right direction.

While it may not be perfect, AI as an abstracting solution is well-suited to address the problems companies face in two types of situations:

1. A company that’s just acquired an asset and inherited the existing leases
2. A company that needs to collect and parse data from a library of already-existing but loosely organized leasing agreements

For a CRE company facing one or both of these challenges, AI promises to be a time-saving solution. But when it comes to working with new leases, AI is an unnecessarily complex solution that still requires human oversight. In essence, it’s a band-aid solution to a latent problem inherent in the leasing process. It doesn’t address the root cause of the problem: an antiquated drafting workflow.

A Different Approach

When a lawyer looks at a lease in MS Word, s/he doesn’t need to read from beginning to end to understand it. S/he has the training and experience to see the interconnectedness and dependencies (e.g. if A changes, then B and C must also change) that form the lease’s underlying structure. That’s more or less how AI approaches the lease, too: over time it ‘learns’ the structure of the lease.

But, as we’ve already noted, there’s an inherent logical structure that forms the underpinnings of every lease (it’s not a James Joyce novel with layers upon layers of obfuscated meaning and endless scholarly debates). Leases are more or less straightforward and predictable. If this is the case, does it really make sense to approach the abstracting process with a brute-force learning algorithm?

That’s a rhetorical question. Of course it doesn’t.

Traditional, logic-based software excels at tasks with a high degree of predictability. So rather than try to build a solution for lease abstraction that fits into an inherently broken process, we designed LeasePilot to eliminate the shortcomings in the leasing workflow from the start.

LeasePilot is aware of the interconnectedness of every part of the lease. Simply put, if one part of the lease is modified by the user, LeasePilot will update/add/remove language elsewhere in the document if necessary.

For example, if a landlord isn’t able to complete a credit review of the tenant before sending out the first draft and subsequently determines that guaranty of the lease is needed, adding one would modifications to several different parts of the lease: provisions such as default, notice, and financial reporting would need to be modified, and a completed form of guaranty needs to be added as an exhibit. LeasePilot handles these changes instantly and automatically; all the user has to do is check a box and input guarantor details one time. LeasePilot modifies the lease accordingly.

But sometimes, a lease needs to be changed in a unique way that deviates from the standard terms. In these cases, LeasePilot’s in-browser text editing gives users total control over every sentence, word, and character that appears in the lease while still maintaining the underlying data integrity. It’s this combination of automation and granular control that sets LeasePilot apart from other more generalized document automation solutions.

When a lease is built from this kind of programmatic, structured data, generating an abstract is a trivial task. In many cases, the abstract isn’t even necessary. The important information from the lease can be automatically injected into other software systems like MRI, VTS, and others.

Abstracting: AI vs Smart Automation

At the end of the day, both approaches to lease abstraction are an enormous improvement over the status quo. As noted previously, AI excels in situations where the lease is already executed. On the other hand, software like LeasePilot is built with a different approach in mind; one where data about the deal is tracked and organized throughout the entire process. In other words, AI is a reactive approach to solving the problem of abstracting, and LeasePilot defines a proactive approach. Both options serve different needs.

If reading the words, “turn your in-house legal department into a profit center” makes you raise an eyebrow, you aren’t alone. Short of turning lawyers into part-time salespeople, how could a legal department focusing on leasing generate new revenue for a commercial real estate company? Here’s how one LeasePilot customer did it:

Background

The company, which we’ll call OfficeCo, owns most of its assets as part of a joint venture structure with different equity sources. The in-house legal team drafts and negotiates all leases on behalf of OfficeCo and its JV partners. Each asset has an administrative budget which includes the legal spend for leasing. OfficeCo passes the leasing costs on to the assets by charging the asset back for the in-house legal team’s time.

All told, OfficeCo reduced the cost of an average deal by about 35%. With an average of 90 leases per year, that adds up to a total of $315,000 in new income.

Based on past experience OfficeCo knows that in a typical year, the average lease costs $10,000 in internal legal billing. So as part of its joint-venture agreement, OfficeCo charges a flat $10,000 fee to each asset for every lease. From the perspective of the JV partners, flat-fees are highly desirable for the certainty and predictability they provide.

For OfficeCo, the flat-fee structure presented both a risk and an opportunity. If average costs increased, the company would be on the hook for paying the difference. But, if the company could make its leasing process more efficient and reduce the average legal spend per lease to under $10,000, it could monetize the efficiency gains and capture formerly unrealized income.

Talking about efficiency is one thing. Actually finding it is entirely another. In leasing, the changes with the potential for the largest impact aren’t often straightforward or clearly identifiable (if they were, there’d be no need for this blog post!). Often, finding the most effective ways to cut costs requires a bit of creativity.

OfficeCo, to their credit, have an incredibly creative executive team. All told, the changes that they made reduced the cost of an average deal by about 35%. In real terms, that means that every single lease generated roughly $3,500. With an average of 90 leases per year, that adds up to a total of $315,000 in new income.

How they did it

The primary problem facing OfficeCo was one of predictability. While $10,000 was a safe(ish) average, it was an oversimplification of the reality: from lease to lease, the cost often varied by as much as ±25%. OfficeCo assumed (correctly, it turns out), that designing a reliable leasing workflow with more predictable costs would have the ancillary benefit of reducing costs. It’s a ‘two birds, one stone’ situation: the steps required to reach cost consistency will also reduce overall costs.

In most cases, the requests were predictable. Predictable requests mean predictable responses, and predictable responses are perfect for a software-based solution.

As OfficeCo acquired assets over the years, it inherited a multitude of leasing forms from different JV partners, lenders, and prior owners. Most of these base forms were more or less the same, differing only in small ways. The lack of a single, centralized ‘source of truth’ led to multiple independent templates, each evolving in its own unique and unintended ways. Managing these discrepancies was nearly impossible, and added unnecessary complexity to the process.

So the first thing OfficeCo did was simplify its language library by assessing and consolidating all of its leasing templates. This step took the company roughly 3 months to complete.

Eliminating and/or consolidating redundancies got OfficeCo halfway to where they wanted to be. But without a centralized database and an operationalized procedure for managing updates to the lease forms, it wouldn’t be long before things devolved right back to where they were. OfficeCo needed a reliable way to ensure that its lawyers would always have an up-to-date ‘source of truth’ for the language library going forward.

The company looked at a dozen or so different solutions which ranged from basic, off-the-shelf content management software to custom-engineered solutions built from scratch. When the dust cleared, LeasePilot stood out as the best solution due to its ability to manage a document and language repository, as well as for the automation tools that streamlined drafting, redlining, and revisions made during negotiations.

Results

Recall again OfficeCo’s base assumption about efficiency: reducing the cost variability from one lease to the next would also make the entire leasing process shorter, more efficient, and overall less expensive. Once the consolidated lease forms and asset information were imported into LeasePilot and the lawyers started using the platform, OfficeCo’s hypothesis was proven correct.

What’s more, after crunching more numbers and comparing the new leasing workflow to the old, OfficeCo learned that the bulk of the legal team’s time wasn’t spent on first drafts—it was spent on revisions and changes to the lease. Tenants would often return a bloody redline filled with change requests. Responding to those requests generally took at least four hours of a lawyer’s time. In most cases, the requests were predictable. Predictable requests mean predictable responses, and predictable responses are perfect for a software-based solution.Before using LeasePilot, OfficeCo’s legal team typically spent at least 3.5 hours assembling a first draft based on the LOI. With the automation tools now at their disposal, first drafts were usually turned around in 45-60 minutes. That’s a reduction of nearly 75%!

The Power of Software

In addition to the base forms OfficeCo loaded into LeasePilot, the company added fallback options which could be be inserted into the lease with a few clicks. Unlike other document automation tools, LeasePilot is aware of the interconnectedness of every part of the lease. This is important because much of the language in a commercial lease is dependent on language or provisions that appear elsewhere. Simply put, if one part of the lease was modified by the user, LeasePilot will update/add/remove language elsewhere in the document if necessary.

For example, if OfficeCo was unable to complete its credit review of the tenant before sending out the first draft and subsequently determines that they need a guaranty of the lease, adding one requires modifications in different parts of the lease: provisions such as default, notice, and financial reporting would need to be modified, and a completed form of guaranty needs to be added as an exhibit. LeasePilot handles these changes instantly and automatically; all the user has to do is check a box and input guarantor details one time. LeasePilot modifies the lease is accordingly. 

For the rare requests that deviate from standard terms, LeasePilot’s in-browser text editing gives users the granular control over every sentence, word, and character that appears in the lease. All told, this level of automation ended up saving OfficeCo as much as 4 hours of legal time per revision.

Conclusion

While OfficeCo’s success at turning a profit from their legal team is uncommon, it’s not an anomaly or the result of special circumstance. The reality is most commercial real estate companies using in-house counsel just simply haven’t considered that the legal team could generate revenue. All it took was a shift in thinking and a few smart changes to their workflow.

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.

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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.

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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

In a competitive business landscape, efficiency is everything. Long-term, sustainable growth is often best achieved by refining existing processes and identifying opportunities for improvement. In commercial real estate, lease drafting and negotiation is one process that is ripe for improvement. The challenge is, everything we know about the leasing process is so entrenched, it’s tough to see how to improve it.

Hurry Up and Wait

The commercial lease drafting and revision process is a waiting game. You wait for lawyers to produce a first draft of a lease. Then you wait for the tenant’s lawyers to review and make change requests. Then you wait until everybody in both parties can free up time get on a conference call to negotiate and discuss those changes. Then you wait for the lawyers to make revisions. Rinse and repeat for every round of negotiation.

If the process of moving a lease from LOI to close takes 90 days, what’s the ratio of time spent waiting to time spent actively working on the lease? The answer varies from company to company and from lease to lease, but in general it’s safe to say that while the lease is in negotiation, most of that time is spent waiting. So if we’re trying to identify the low-hanging fruit for efficiency improvements, addressing a lease negotiation’s time spent waiting is a good place to start.

A problem of bandwidth

Call up any commercial real estate attorney and ask for 3 hours of his or her time to draw up or revise a lease. “Sure,” s/he’ll say, “I’ll be able to look at this two weeks from today. Does that work?”

Not really. But do you have a choice? The legal protections provided by a high-quality lease are invaluable. Legal expertise and attention to detail are of the highest importance. They can’t be compromised for the sake of efficiency. While an experienced paralegal or leasing admin could, in many cases, handle the drafting and revision work, the number of dependencies in a typical commercial lease often means that one small change necessitates dozens of other changes elsewhere in the document. The stakes are often too high and the leases too complex to entrust management of the lease document to anyone but a lawyer.

Traditionally, if you wanted to reduce lease drafting and revision cycle times, you only had two choices: (1) hire more lawyers in house, or (2) spend more on outside counsel. Neither of those options is ideal. Either solution would cause a significant increase in overhead. The productivity gains you might achieve are likely to be out of proportion with the overhead you added to achieve them.

Work smarter, not harder

To shorten leasing timeframes by eliminating unnecessary waiting time, it often makes sense to rely on technology. A tech-based solution to the problem of lease-drafting efficiency offers a cost-effective, scalable alternative to throwing more people at the problem. As we’ll see, most commercial real estate leases are structured in a way that makes software-based automation possible. 

Earlier in this article we touched on the concept of dependencies within a lease. Changing the commencement date offers a simple example of a dependency: rent escalation tables need to be updated, renewal dates need to be adjusted, etc.

From this perspective, the difficult part of revising a lease isn’t editing a specific piece of text. The difficult part is knowing everything else in the document — it could be dozens of places — that also need to be updated to reflect the change. Lawyers are good at this because they’ve developed a “map” of the lease in their mind; they’ve learned to think about a lease programatically.

Computers are pretty good at thinking programmatically too. If you were to map out and connect all of a lease’s potential dependencies, you could theoretically have a computer handle the drafting and revision with minimal human input.

That’s exactly what LeasePilot does. We take a property owner’s forms, boilerplate language, and asset information and use it to create a “map” of the potential dependencies and connections within a typical version of that owner’s lease. With this map, the process of drafting and revising a lease becomes infinitely easier. Just select the asset from a database, tick a few checkboxes to select the terms and clauses that should appear, and enter the information unique to each individual lease (tenant name, commencement date, base rent, percentage increase, etc.), and the software automatically generates a lease that’s 100% accurate.

With much of the risk now removed from the drafting process, you no longer have to rely on an experienced lawyer to create a mistake-free lease. In most cases, first drafts and revisions of standard terms can be done by a paralegal or leasing admin, freeing up the lawyers to work on more complex legal issues instead of spending valuable time using the Find and Replace tool in Word.

Tying it all together

The obvious benefit of this is less time spent drafting. In many cases, it’s possible to generate a first draft of a lease in less than 30 minutes. That’s a significant time savings in its own right, but recall that the majority of the time a lease spends in drafting and revision, it’s sitting idle waiting for a lawyer to free up enough time to work on it. So while automation software can significantly reduce the time spent actively working on a lease, does it also reduce the time a lease sits idle?

The answer to that question is a resounding “YES!”

By ‘mapping’ and connecting all potential dependencies in your forms and boilerplate language, LeasePilot ensures that with every edit and revision, all of the affected language elsewhere in the lease is updated accordingly. This predictability and reliability means that in most cases, drafts and revisions can be handled by an experienced leasing admin or paralegal instead of a lawyer. All that time spent waiting for a lawyer to free up time? Gone. An admin can handle it. Now, instead of spending time putting together a lease, lawyers can spend time working on problems that require their expertise.

The benefit isn’t only for in-house legal teams, either. If you’re sending a lot of leasing work to outside counsel, getting them to use LeasePilot can help you negotiate a fixed-fee payment structure. It’s a win for everyone.

A few weeks ago, the LeasePilot team moved our operations to Boston Properties’ FLEX space on the 29th floor of the Prudential Tower in Boston. As real estate people, we’re thrilled with the Flex concept and see it as an important new direction for the future of office leasing. In short, FLEX strikes a balance between the high-touch, all-inclusive experience of coworking spaces like WeWork, and the traditional hands-off office lease.

We sat down with Bryan Koop, Boston Properties’ Executive Vice President, to talk about what FLEX is, the market changes that led to the initiative, and why it’s poised to become an important segment of the company’s asset mix.

The interview covers a lot of ground, so we’ve split it into two parts. You can view Pt. 2 here.

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Q: For the uninitiated, what is FLEX by BXP?

FLEX by BXP is a workspace where the name is a reflection of all the benefits and attributes that we’ve determined that the customer wants. It’s flexible in its term; we’ll do a few months or we’ll do a couple of years. You can configure your space any way you want it. If you want to hang a sign, hang a sign. If you want to hang a giant model airplane from the ceiling, you can hang a giant model airplane from the ceiling. We really believe that our customers should be able to use the space as they see fit.

It’s also flexible in terms of how you can grow as a company. So if you have 2,000 square feet and you need another thousand, we can take down a couple partitions and you can expand the space. Or you can move down the hallway to a larger space without re-negotiating the lease or worrying about sub-leasing your old space. We want to make it as easy as possible for the user, thus the name FLEX.

We found we had an ‘invisible’ client already in our buildings that we were not exposed to.

Q: What kind of company is an “ideal” or archetypical tenant for FLEX?

We’re already finding that FLEX is resonating with the tech community because, as you guys at LeasePilot already know, things move extremely quickly. Companies see explosive growth, they get acquired by larger companies, they merge with other companies, etc. Tech is, by nature, a more nimble industry with growth cycles that are much shorter than what you see in other, more traditional industries.

So that’s what we’re finding: the two zones have been tech, and then existing clients who have short term needs. We’re also seeing our existing customers who have longer-term leases in traditional office space—the “long and strong” sector as we call it—that say to us, “Hey, we’ve got a new project or product line we’re rolling out and we want to keep it separate from the main organization, but close enough that we can work with the team on a daily basis. Can you get us space for six months to a year?”

Q: Where is Flex space available?

Right now the 29th floor of the Prudential Center is the first space we’ve dedicated to FLEX. But we’re already far along in the planning stages for a few other properties in the Boston area, including the planning and design phase of adding FLEX space to The Hub on Causeway, which is the project next to the TD Garden.

In suburban areas, we’re approaching FLEX a little bit differently. We’ve got small spaces in the suburbs—one and two thousand square feet that are between gaps in our suburban buildings—where my team is saying, “Hey, can we do what we’re doing [on the 29th floor of the Pru] in this individual space?” and I say, “Why not?”

Q: How long have FLEX plans been in the works? What factors—market or otherwise—did you consider before making the informed decision to move forward with the idea?

We’ve been looking at it seriously for probably three years. And in the last two years since they’ve zoned it we’ve been able to put a laser focus on planning and designing FLEX space on the 29th floor of the Pru.

Sure, we could throw a party every once in a while, but we decided that’s not a major selling point for a FLEX client. They don’t need us to entertain them, they don’t need us to build their culture. They just need great space and place.

As far as the market research we did, one of the things that we found really intriguing was that in the Boston region—where we have about 14 million square feet of office space—there are over 110 subleases where our existing clients are subleasing space to somebody else. So we took a look at how large those subleases were and what the terms were, and we found some eye-opening data. One of the most important takeaways was that a sizable percentage of those subleases—I think it was actually 37 percent—had terms of less than two years.

The other important takeaway from this research was that most of these subleases were between three and five thousand square feet. So basically we found we had an ‘invisible’ client already in our buildings that we were not exposed to. This gave us the hard data we needed to prove that there was a significant number of this type of client.

Q: Despite the data-backed evidence, FLEX is still a new and unproven direction for Boston Properties. Was there any internal resistance or challenges that had to be overcome to get the green light?

There really wasn’t. Boston Properties has been around for a long time, and one of the reasons for that is our adaptive capacity to change with the market. We’re always asking, “How do we innovate? How do we design space better? How do we stay focused on our customers’ needs?” And as we interviewed more and more of our customers we continued to see this need for flexibility and agility. That feedback combined with the hard data we gathered and our drive to adapt made FLEX an easy sell internally.

Q: What other challenges did you face during the planning phases of FLEX?

The primary challenge was defining the scope of what FLEX should offer. Imagine a linear diagram and at one end you have the ‘long and strong’ leases—200,000 feet with Google, 200,000 feet with Ropes & Gray, 400,000 feet with Bank of America—where the customer plans the build-out, buys the furniture, etc. On the other extreme you have the month-to-month coworking leases that offer what is essentially a turnkey experience that includes not only a furnished work space, but also a built-in workplace culture. Networking opportunities, guest speakers, and other culture-building events are a huge value-add for startups that are too small to develop a culture of their own.

We determined that, as a company we’re not structured to provide the high touch, always-on work space that you’d find at a WeWork or other similar coworking space where you’re throwing wine and cheese parties, planning networking events, and essentially handling the administrative business of your client. We felt like that was a skill set that the coworking industry is doing very well. Leading the way, in fact.

As we interviewed more and more of our customers we continued to see this need for flexibility and agility. That feedback combined with the hard data we gathered and our drive to adapt made FLEX an easy sell internally

We think there’s something in between these extremes, and that’s the zone where a company says, “You know we’re mature enough that we really want our own space. We want to build our own culture. We’re capable of doing our own administrative work. We really want the space to be our space, not the coworking brand and culture.”

We’re highly confident that we can deliver that concept and that type of product because that’s not too far away from what we do every day. We make sure that the building’s operating great. We make sure that everything’s clean. We make sure that it’s the best possible space and place. And then, the add-ons for FLEX are a common area kitchen, conference rooms, and other small, incremental add-ons that we’re highly confident we can provide. Sure, we could throw a party every once in a while, but we decided that’s not a major selling point for a FLEX client. They don’t need us to entertain them, they don’t need us to build their culture. They just need great space and place.

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In part 2, we talk about the future of FLEX and what happens when the t-shirts and flip-flops of tech culture collide with the suits and ties of traditional corporate culture. 

To Err is Human

During a relatively routine test of the state’s emergency missile warning system, a technician at the Hawaii Emergency Management Agency opened a drop-down menu and was presented with two choices: “Test missile alert” and “Missile alert.” On January 13th, 2018 at 8:07 AM, he accidentally selected the wrong option, initiating a full-on missile alert sent to every cell phone in the state. In an instant, one small human error launched the entire Hawaiian archipelago into a state of chaos and hysterics.

Thankfully, most human mistakes don’t cause statewide panic. But nonetheless, mistakes—especially ones in business—can lead to some serious problems.

In leasing, information gets re-keyed all the time (CRM → lease; lease → abstract; abstract → financial software; etc.), and each time it gets re-keyed, the error risk is compounded. The solution, of course, is to minimize redundant data-entry procedures through the use of software.

For a highly impactful example of how software eliminates risks and drives efficiency in the real estate world, look to the lease abstract.

Lease Abstracts: An Essential Headache

As a centralized hub of information, lease abstracts are a connecting point for nearly everyone in a commercial real estate organization. Without an abstract, the pace of daily operations in legal, accounting, and asset management would slow considerably.

Unfortunately, extracting the essential information from a 60+ page commercial lease and formatting it into an abstract is a tedious, time-consuming job that nobody is eager to do. And that’s putting it politely. There have been attempts to make the process easier through the use of AI and machine learning, but even with these solutions the underlying problem remains: leases are fundamentally unstructured documents. In simple terms, that means that every letter, number, and symbol in the document is treated equally by a computer.

An Ideal World

In a better world, leases would have an underlying logical data structure. Building information, commencement dates, rent tables, and other important information would be indexed and the relationships between these variables would be defined. By adding a data structure to the document, generating an abstract would be trivial. Just tick a few checkboxes to indicate the information you’d like to appear in the abstract, click a button, and in a few seconds your abstract is generated.

As it turns out, that’s exactly what LeasePilot was built to do. It’s a data-first solution to document automation. That’s a strong value proposition in its own right, but it’s made even more powerful by the fact that LeasePilot is an open-ended platform.

If you’ve used MRI or similar software, you’re probably well aware of the headache caused by re-keying data from an abstract into a new account record. In most cases it takes several hours, and like abstract creation, it’s a job that nobody does voluntarily. But with structured data, it’s a job that doesn’t have to be done at all. Data that would otherwise need to be pulled from an abstract can be sent directly from LeasePilot into MRI, bypassing the need for an abstract altogether.

How it Works

Leasing is, by and large, an analog process with a number of digital band-aids slapped on top to ease the pain. Digital documents, for example, have made file creation, editing, and organization easier, but the information contained in each MS Word document is isolated from the larger business ecosystem in which it exists. For all practical intents and purposes, this means the data is still analog. That is, in order for it to be useful in other contexts like accounting and finance, a human must act as a bridge, manually transcribing information from a Word document to wherever else it is needed.

A truly digital workflow eliminates this need entirely. Instead of information existing in isolated, unstructured silos (Word documents), it exists in an indexed, structured database and comes together when and where it’s needed.

Integration with MRI

Software like MRI makes the ongoing management of lease agreements a breeze. What isn’t a breeze, however, is the process of manually entering deal terms into MRI.

Enter: MRI integration with LeasePilot. By tying the two platforms together, data can be passed seamlessly from one platform to another.

New Leases: If you’ve just executed a lease, all of the deal data contained in the lease is passed over to MRI, pre-populating all relevant fields.

Renewals and Amendments: If you’re renewing a lease or adding an amendment, the document can be automatically generated in LeasePilot. Just input the updated deal terms into MRI and send the data over to LeasePilot. It really is that simple.

July 1st marked a major milestone for the LeasePilot crew: after 14 months based in WeWork @ St. James, we’ve got new digs! Our new home is on the 29th floor of the Prudential Tower, one of the most iconic buildings in Boston. We’re still settling in and setting up, but we’ve finally got some room to stretch our legs and grow.

We’re real estate people aiming to change our industry, so naturally when we went hunting for office space, we hoped to find a landlord that shared our values. Enter: Boston Properties & their Flex initiative. Flex fills a much-needed gap for established startups and fast-growing companies looking for something more permanent than WeWork and other co-working spaces, but still need the flexibility to be able to change and expand their space as they grow.

For us, it’s perfect: Standing desks and chairs are provided, internet is included, and the walls are whiteboards (literally—every interior wall is fitted with floor-to-ceiling whiteboards). We have room to grow and one hell of a view. 

Oh, and the most important part of the whole deal: all-you-can drink nitro cold brew. There’s regular cold brew and iced tea as well, but it’s the nitro brew that has us enraptured (and caffeinated).

The verdict 

We love it here. Kudos to Boston Properties for a great idea and an exemplary execution. The Flex concept blazes a new trail in office real estate, and we’re thrilled to be part of it.

The call center model has a singular purpose: to incentivize customers to stick to a set of standardized options.

By framing a change request in this way, the tenant takes ownership of the delays rather than the landlord.

The relationship between tenant and landlord is a tenuous one. Both parties seek to minimize liability, which frequently leads to conflict. And conflict, as we all know, leads to unhappy customers. While it may not be feasible to avoid conflict altogether, there is one relatively simple step landlords can take during the lease negotiation process: adopt the Call Center Model.

In the lending world, Principal Financial offers an ideal example of how the Call Center Model should work in practice: they have standardized “gives” that their business units can easily offer to borrowers. But when a customer makes a request that deviates from the standardized set of terms that Principal Financial offers, the customer is informed that their request needs to be escalated and undergo a lengthy legal review, adding an additional 2-4 weeks to the lending process.

This delay forces the borrower to step back and ask, “Is my request really worth the delay it will cause?” More often than not, the borrower concludes that cost of holding out for a relatively minor change isn’t worth the delay it causes. In other words, it forces the customer to do a cost/benefit analysis about whether or not their request makes a material difference in the long run. And in most cases, the cost of the delay far outweighs the benefit.

In the leasing world, tenants typically aren’t faced with the same cost/benefit analysis. It’s relatively common for a tenant’s attorney to mark up a document until their pen runs out of ink. From their perspective, the worst-case scenario is that the landlord’s attorney rejects the edits and both parties continue to negotiate. The hard work of wading through countless proposed modifications to determine what is and is not reasonable falls squarely on the landlord’s legal team.

By applying a Call Center Model to the commercial leasing process, the landlord is able to effectively tell the customer, “I’d be happy to make that change, but since it is a deviation from our standard terms I need to submit your request to our legal team for review. That process takes an additional X weeks. Is that OK?”

By framing a change request in this way, the tenant takes ownership of the delays rather than the landlord.

This may not work for every lease—sometimes the property owners don’t have enough leverage—but for smaller, cookie-cutter deals where the real estate company has significant leverage it’s very effective. Bottom line: encouraging tenants to accept standard terms has the potential to eliminate much of the back and forth during negotiations, resulting in a significant reduction in the time it takes to go from LOI to close.

BONUS: because the Call Center Model shifts the cost/benefit analysis to the tenant, it offers landlords a friendlier way to say ‘no’ without actually saying it; boosting customer satisfaction and starting the relationship off on the right foot.

Call Center Model + Lease Automation = A Perfect Match

An automated lease-drafting solution like LeasePilot dovetails seamlessly with the adoption of a Call Center Model for negotiation. Leasing reps and other non-lawyers can generate lease drafts using their company’s own boilerplate language in minutes instead of hours.

To show what this means in practice, consider a TI Allowance. Adding a TI Allowance is as simple as clicking a button, entering the amount of the allowance, and selecting how it gets paid. The lease draft automatically updates in multiple places simultaneously and with the correct language updates, calculations, and formatting applied. Pretty neat stuff.

Now, imagine using this kind of automation on all of the 100+ lease concepts and alternatives that a real estate company uses for first and subsequent drafts. The advantage is monumental.

Every day it seems there’s a new app on the market that promises to boost work and/or life productivity. While having so many options at your fingertips might initially seem like a good thing, the irony is that the process of vetting all these productivity apps can cause your own productivity to take a nosedive.

To save you some time, we’ve put together a list of the productivity tools that we believe should be in every CRE professional’s toolkit:

Asana

When it comes to project management, keeping track of the many moving parts is always a challenge. Asana is a planning and project management tool that can tame even the most unruly projects by monitoring every deadline, assignment, tasks and subtasks, dependencies, and so forth. It’s a to-do list, a calendar, a reminder app, and a notes app all wrapped up in one.

Key features include:

Assigning Responsibilities

As you create lists, Asana lets you assign each task to a member of your team. This ensures accountability and avoiding the classic “I thought he was supposed to do it”.

The Gantt Chart

Asana recently added a “timeline” feature to their system (basically a Gantt chart). It’s a lifesaver. This feature lets you view every aspect of your project on an interactive calendar. The user sees the path to attaining a goal as a series of interconnected tasks along with their deadlines, responsibilities, and dependencies. Not to mention, as you edit the timeline, tasks, and dates update across the app accordingly.

Honorable mentions: Trello, Airtable, Basecamp

Slack

You may have heard of Slack, you may already be on it. If so, you probably understand why it is the best communication “de-clutterer”.  Here at Leasepilot, we use Slack as an alternative to email – it allows for easy company-wide communication, simple document sharing, and accessible updates from social media or incoming leads.  Slack is THE communication system for the business world, their motto “where work happens” is right on target.

How Slack does it all:

Compartmentalize to organize

Slack allows you to create communication “channels”, different chats that are each relevant to a different topic or team. By compartmentalizing conversations, you can end your days of searching through group messages or email threads.

Updates always!

Slack integrates with all your favorite tools. It can notify you about changes in google drive, a new lead on HubSpot, updates on Salesforce, and much more.

Honorable mentions: Skype for business, Discord, Stride

Airmail

Though we would love to use Slack for all our communication – email isn’t going anywhere. With that in mind, Airmail is a great option for simplifying and organizing your inbox. This client provides a ton of life-hacking features such as the “send later” option or customizable folders like “to do,” “done” or “memos.” To put it bluntly, Outlook and Apple Mail look like a cluttered file cabinet next to Airmail – so save yourself from headaches and try it out!

How Airmail organizes the inbox:

The Snooze Feature

Using the “snooze feature” you can delay the receival of an email until the proper time. Say you get an email about tickets to a show, but don’t go on sale until next month. Airmail lets you snooze the email so that it arrives back in your Inbox on the sale date.

Smarter Notifications

We all know that email notifications are as annoying as the clutter in your inbox. Through customizable notifications, Airmail make sure you are only updated when the important messages come in.

Honorable mentions: Google Inbox, Boomerang

Hubstaff

Hubstaff is a time tracking tool that accurately tracks the time you spend on different projects and clients. It removes several admin tasks from your plate so you can focus on finishing work instead of tracking it. Hubstaff has a simple interface that lets you easily switch between your tasks, so no second of work is unaccounted for.

How Hubstaff helps you save time:

No more manual timesheets

Hubstaff automatically generates online timesheets from the time that you track. This means that you won’t need to worry about inaccurate entries on your timesheet or completely forgetting to log the work you did.

Streamlined payroll

Aside from time tracking and timesheets, Hubstaff is also capable of sending payments automatically to team members. Hubstaff will automatically calculate payment amounts based on their hourly rates and the total time they have worked. You can schedule the app to send on a weekly, bi-monthly, or monthly basis.

Grammarly

Grammarly is the “spell check” for when you are not using Word. Grammarly helps you fix the grammar, spelling, word usage, even the quality of your adjectives when you are writing on the web. From an email to your boss to blog posts on Facebook, Grammarly gives you polish when it matters most.

Why Grammarly is great:

Have confidence in complexity

Unlike many grammar tools, Grammarly gives you accurate and context-dependent solutions. From repetitive words to comma usage, this tool will give you confidence that the wrong “there/their/they’re” will never
again slip into an email.

Teach a man to fish

Teach a man to fish, and you will feed him for a lifetime. Grammarly wants to help you improve your overall writing ability while correcting it. Grammarly gives you detailed explanations with the solutions to your mistakes and progress reports to help you track your improvements.

Honorable mentions: ProWritingAid and GrammarLookup

DocuSign

DocuSign is one of those tools that make us exclaim “how did no one think of this sooner?” This product answers the call for a better system than printing a document, sending it, signing it, sending it back (the classic way – with stamps), then scanning it on to a computer and filling it away in that giant cabinet. Instead, as their name implies, DocuSign lets you email the contracts in order to obtain secure electronic signatures and Voilà! Deal closed.  

Why we love it:

Signatures everywhere

DocuSign lets you affirm a document from anywhere in the world. Totally legal and totally life-changing. Jim may be in Argentina for a month, but he can still sign that lease!

It’s Green!

By sending your contract electronically, you can avoid printing out that hefty 70-page contract. And if there is a typo? No need to recycle, just email another version.

LeasePilot

It wouldn’t be a top 6 list without some shameless self-promotion, now would it?  Still, when it comes to leasing, we think LeasePilot could save you some serious time and money. LeasePilot uses simple forms and your boilerplate language so that anyone can write a quality lease without a law degree. The business team can use document automation tools to create even the most complex contract, while lawyers can customize through the use of word processing tools.

Why it’s a game changer:

Never not data

By using interconnected forms, every piece of data in a lease is recognized as such, so it doesn’t need to be extracted later. This means LeasePilot can automatically generate abstracts or collect data for ERPs. How simple!

Fewer lawyers

Why are you paying a legal team to spend hours interpreting an LOI for negotiation they weren’t involved in? With LeasePilot business representatives can draft the first versions of the lease themselves, without sacrificing quality.

Easy Updating

Say you update the price of rent on line six, boom! Every calculation or reference to that number updates throughout the document. Consider it the superior alternative to “find and replace” and a calculator.

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There you have it, our top picks in productivity tools for CRE. Let us know if you think we missed any, and thanks for reading!