Proptech Primer: HqO CEO Chase Garbarino On the Post-COVID Office
Disrupting the way companies have done business for years is what the technological revolution is all about.
Like, for example, the way Airbnb created hotel alternatives that didn’t exist until Airbnb and similar tech startups came along; the way Lyft and Uber disrupted the taxi business.
In commercial real estate, it’s less obvious. But, that hasn’t stopped property startups — commonly called “proptech” – from starting up.
One of the more impactful proptech startups has been HqO, whose mission is to make the office-building experience a whole lot more than just providing four walls and some empty space in between. Instead, it addresses tenant demand for a range of services one might have expected out of a hotel concierge.
The Boston-based company provides tenants with an app that they can use for anything from ordering lunch to booking a conference room for an important meeting. Check out their website (https://www.hqo.co) if you need to know more.
The firm is part of a large and diverse group of companies that applies computer technology to a large and diverse range of real estate functions, from the myriad contracts and subcontracts it takes to construct a building, to managing its energy use. This category of companies basically didn’t exist until after the last great financial crisis.
Chase Garbarino is co-founder and chief executive of HqO. He spoke at length to Commercial Observer in mid-December. His remarks have been edited for brevity and clarity.
Commercial Observer: Explain for the uninitiated what is HqO?
Chase Garbarino: HqO is a tenant experience company. We provide software to commercial real estate landlords, so that they can have an app for a building, so the tenants in the building have an app they can use throughout the day in that property.
We’ve heard a lot lately about offices going in the direction of hotels, where the concierge provides services to guests to keep them happy?
In general, hotels provide a product or service. The expectation of today’s consumer is that they have a tech-enabled experience. Office properties have lagged in providing that value. The experience at the office has become more like a hospitality experience at a nice hotel.
And, a core component of that is being able to do a lot of things through software that you previously have not been able to do. Whether it’s ordering something from the ground-level retail utilizing the app, ordering cars, admitting a visitor — all those are immediately accessible through one landlord app.
Can you give me examples of services that HqO provides?
We break the tenant experience into eight categories: There’s accessibility, food and beverage, mobility, security, entertainment, education, wellness, and workplace.
If you think about mobility and transportation, a critical part of the building experience in any building you’re at is how you get to and from that property. So, if the building has a shuttle, you can see the schedule on the app. Within food and beverage, we’ll provide you catering, or a way to order food from both on-premise food service options as well as neighborhood food service options.
Within wellness, as an example, we have a marketplace of service providers who will come to the building, so the landlord can provide, say, a health care provider that provides some sort of on-premise service, and then tenants are able to set up appointments through the app.
One last one I will mention is, you can integrate with the emergency notification system, so you can get a push notification on your phone if there is an emergency.
Why does HqO have so many different offices in so many different cities?
We tend to partner with the top innovative landlords, and they’re in lots of different places. We go where our customers go. If we’re going to start software at a property, we go anywhere in North America or Europe.
I notice you’re in London and Paris.
We’re also in Rotterdam. We work very closely with [real estate investment and management company] Jamestown, and they happen to have offices in Rotterdam. We go where our clients go.
How many people do you employ?
We’re 106 people on the nose, as of today.
If I asked you the same question a year from now, what would be your answer?
We’re telling our investors we will be just about doubling that number. That’s our plan.
Will you do that by adding multiple locations, or will you be adding people to the locations you currently have?
All of the above. Probably 75 to 80 percent of head count is at our headquarters, which is in Boston [at 38 Chauncy Street]. But, we have people in Paris and London, in New York, in Texas, and in California, and we’ll be adding to just about all of those. Probably, all of Europe, and in New York.
Do you have other cities that you are looking at?
Probably in North America, the big hubs, obviously. We’ll be looking in Toronto; we’ll be looking somewhere in the Southeast, we have to determine exactly where, Atlanta or Florida. We’re looking in Chicago; we’re looking at some of the hubs out on the West Coast as well.
You hear a lot about up-and-coming cities like Nashville and Austin these days.
We’re interested in doing business in kind of second-tier, up-and-coming cities, but I’m not sure if we’ll put people permanently located there, but I do think we’re exploring those locations. It almost feels contrarian to go into some big markets if you’re not in some of the smaller markets right now, but we’ll go where we think there’s the best talent. There’s a pretty public move of Silicon Valley to Miami, for example. We’ll look there.
What are we talking about in terms of square footage of your headquarters in Boston?
About 8,500 square feet. We’re currently in the process of trying to lease some more floors, so we’ll probably double the footprint here in Boston, as well as a couple of those locations we talked about earlier.
What do you have in New York?
In New York, we have five people sitting in probably about 1,500 square feet [in a Midtown address]. We’ll look to grow there as well.
Is that your typical satellite location?
Yes, for the time being, and then we’ll continue to grow our client base in a market. We’ll grow head count and footprint. We’re certainly poised to do that in London where we have some folks.
What do you think brokers ought to know if they’re dealing with HqO?
The first and obvious thing with us is that we are a unique tenant. We care pretty deeply about physical space, and the value that office space brings.
The second piece you need to know about us is having a point of view in how technology is going to keep people productive together. What we’ve seen from COVID is that you’re starting to hear from a lot of companies that having employees working together in person is incredibly valuable. So, there are elements of flexibility that are beneficial, and there are certain times to get individual work done.
But, lots of companies are also realizing that learning, collaborating, are very, very hard to replicate using technological tools. Technology is a complement, not a substitute. That’s really important.
How has COVID affected HqO?
Like everyone, we took a number of measures to reduce expenses and triage the situation, in terms of what impact it’s going to have on commercial real estate, our customers and, ultimately, what that means for our business. What we’ve seen — and, obviously, we cover this space closely — offices are empty because of COVID, but it’s a pretty resilient category; leases tend to have some length to them, and rent collection has been good.
There’ll be increased vacancy in 2021, but what it’s done [is] it’s made technology a must-have, instead of a be-nice-to-have. And it’s kind of provided us a nice tailwind, where some landlords that I think have thought, “It’s nice but I don’t need,” now are saying, “We absolutely need technology to facilitate the return to office, tenant success, building procedures, safety procedures.”
People expect technology to be present at the property. Some people have learned to do some things remotely; but really, what you need to do to be a successful landlord and tenant post-COVID is to really create value-added experience to give people a strong reason to come to your property.
Once we got through the initial freeze of COVID, it’s been a tailwind for us here. It’s been beneficial.
We’ve heard a lot about how remote work and working from home are going to remain once COVID is over, and that will lead to utilization of less space. What do you see?
Overall, for office absorption, there will be a retraction the next few years. And remote will make it possible for companies to stay on the stage. We think, though, that, ultimately, what will probably pan out [is] you’re going to have a lot of companies move away to some degree from less square footage per head, cramming more people into less space. A lot of people are talking about spreading out, more so within their space.
There were cracks already showing with people crammed in open floor plans pre-COVID, where different types of work needed to get done. It wasn’t super-beneficial from a layout perspective. I think, ultimately, companies that figure out, not remote, but have flexibility, and really think about how people need to balance work and life are going to be the winners. Particularly down-market, the biggest pain that will be felt is down-market, Class B.
Do you guys service a lot of Class B properties?
It’s probably two-thirds Class A, one-third Class B. I think where, Class B in particular, we see tech people giving up product, so that subleasing is going to be a challenge for a lot of folks. They always come on Class B before it comes on Class A. We will be seeing a lot of subleases come on after the first of the year in Class A. Particularly, with some more smaller companies that are more nimble, that might have a younger average age. They really need to make some hard investments in technology.
What do you think is the least understood thing about tech and tech startups, and the companies we have come to call TAMI (technology, advertising, media and information)?
Probably the hardest thing for landlords to understand is, particularly with some of the smaller tech companies is, how short term their operating plans are. They have to be reasonable, and they have to empathize with the other side. We’re a bit larger now, but understanding how a landlord works, so we get it more than your average technology startup. There’s an amount of risk to really short-term leases, and there’s costs to taking that on. But, there can also be tremendous upside.
We saw this in ’08-’09, when there were a lot of vacancies, there was significantly greater motivation for landlords to take risks. New York City went from heavy Fortune 500, finance, the FIRE types [finance, insurance, real estate] to a significantly larger tech economy in New York. And they were able to get space and cluster more together more effectively.
You’re going to start to see opportunity for people to do innovative companies and get space at rates they couldn’t get before, and that’ll be a good thing.