WPP’s Bruce MacAffer On the Comm Giant’s Real Estate Strategy During and After COVID
Over the past 20 years or so, some of Manhattan’s most game-changing commercial real estate leases were by a single company, a one-time maker of wire shopping baskets.
London-based public relations and advertising conglomerate WPP — which stands for Wire and Plastic Products — was behind member advertising agency Ogilvy & Mather’s move to 636 11th Avenue, a trek to the warehouse-dominated Far West Side years before Hudson Yards came along. It also authored the move to 200 Fifth Avenue of another ad agency, Grey Global, keynoting Midtown South’s transformation into a home for creative companies.
And WPP was behind media investment company GroupM’s relocation from Midtown to 3 World Trade Center. Embracing what were originally designed to be trading floors, GroupM’s commitment helped make the tower happen and gave new life to wide floors that might have gone unfilled.
WPP employs 107,000 people across 112 countries. Twenty-one companies are listed on its website, roughly all engaged in advertising, corporate brand strategy and reputation management; PR and public affairs; and data collection and analysis. It had $70.9 billion of billings in 2019.
Bruce MacAffer, as WPP’s head of group real estate in the Americas, oversees the offices on Fifth and 11th avenues and at the World Trade Center, as well as more than 7 million square feet and 400-plus properties in the Americas.
He talked with Commercial Observer the day before Thanksgiving about the heritage of those decisions, as well as what the future has in store for WPP and its real estate. (The short answer is that WPP is whittling its footprint.)
The interview has been edited for brevity and clarity.
Commercial Observer: Explain for the uninitiated what WPP does.
Bruce MacAffer: We’re an advertising and media conglomerate, a communications experience for commerce and technology. We provide the power of creativity. It is a holistic approach. We’re an advertisement, marketing and media company — and part of that involves data.
Is there a reason why the company maintains separate units?
Historically, it was to the customer’s advantage. In order to serve several different companies in the same sectors, you really had to have separate agencies.
Over time, though, the companies have more and more come to us and asked for us to work across our companies to bring in the best that we have. That has also shifted our real estate strategy. We’re now, in most major cities, putting our companies in one building.
We still maintain separate brands, to treat companies individually, to maintain client confidentiality, and the desire for separation from their competitors. Each of [our] brands brings their own angle on how they bring the best of marketing to their customers.
Our real estate strategy [lately has been] much more consolidation, and less emphasis on everyone having their own buildings or places. Within New York, we’re going down to a lot less.
WPP has been involved in a number of game-changing moves in New York. Does the company seek out pioneering locations, or did it just work out that way?
Both. We’re an advertising company. We’re a marketing service company to several large global brands. We have to keep our costs reasonable. So, we often seek out the new hot areas, and we’ve been very successful moving to World Trade and Midtown South.
But, even in Chicago, we went to the new Fulton Market District. And, before that, we moved to River North, which was very popular. And the Merchandise Mart, we anchored that redevelopment.
We often try to find new development, or we try to create new development in new areas, because of [the need] for talent. In order to attract young marketing talent and tech talent, you have to go to the next cool place, and you have to figure out what that is. We’ve done that in Shanghai, we’ve done that in a lot of different places. We did it in London.
Part of it is place-driven, and part of it is the desire to be on the forefront. You can go to a lot of places and find cheap real estate, but [the goal is] to find well-priced real estate and a rising vibe.
So, as time goes along, you’re seeing more clients who want to benefit from all that WPP is capable of, regardless of what brand it’s associated with. Does that affect WPP’s real estate?
Very much so. Our company, for a couple of years now, the company has said, ‘We’re going to build new buildings, and we’re to throw our companies together.’
And we’re about halfway through a billion-dollar construction program of building unified campuses in each of our major cities around the world. We just opened one in Chicago. We’re constructing one now in Toronto. We are doing one in San Francisco. We’re going to be looking out for locations in Los Angeles and Atlanta, and about a half-dozen other cities.
Quite frankly, it’s one of the pillars of our corporate strategy. Everyone is going to sit together. It just creates a lot more flexibility [for us]. Our new building in downtown Detroit is going to open in February. It’s going to be a game-changer for our company.
So, you expect Ogilvy and your other advertising brands are going to play nice and share their toys?
Kind of. So, again, our Chicago building is like all our major brands in the U.S. Agencies definitely have different floors. But we built a six-story staircase in the building so all our floors are connected. And that was the whole idea. The whole building is agile, even though brands are assigned to a floor or a neighborhood, they can really sit wherever they want. There are certain confidentiality requirements, certain areas that are walled off, but, in general, they’re in the same building.
You don’t have situations were one entity is competing against another entity?
Oh, definitely, we do. We have rules around client confidentiality, we have protocols. Your client has their own confidentiality, whether you’re sitting next to your partner, or you’re not sitting next to your partner. So, we have very strict protocols around confidentiality. But they all sit in the same building.
Within the marketplace, we don’t really have that many conflicts. In L.A., for instance, we’ve always had several buildings, and we have [companies] on separate floors. But, in general, you don’t have a huge concentration with the same client across our businesses in the same marketplace.
How does that affect what you’re doing in New York?
We always have a lot of real estate on the market. In New York, we’re shutting down a few of our buildings, and combining people across brands into fewer buildings.
So, what is on the market in New York?
We’re shutting down a few of our agency buildings, and combining them into fewer buildings. I’m not sure what is public on the market, what I know is on the market, what I see listed. I really don’t want to [go there].
It seems like New York is the headquarters of the old WPP, where there are clear distinctions between companies?
Right. For 20 years, most of our companies haven’t made their own deals. We have helped supply their own separate headquarters.
Up until five years ago, our policy was that our companies in New York had separate headquarters. That was mostly driven by the fact that, in 2010, we had a bunch of acquisitions and, in 2009 and 2008, we had 55 percent of our portfolio coming up at the same time. We also made a concerted effort to separate out our lease expirations in our buildings.
Now, we will have times where we have different agencies in the same buildings. Our companies [have been] transforming a lot since 2017. We’ve been combining companies, changing how we run; we have transformed ourselves into a creativity and digital giant. We’re still the largest in the industry.
So, our companies are no longer so protective of their agency turf. Everyone knows we have to work together. Everyone knows that, one day, you’re part of one company, then you could be part of another company. We just announced two mergers. Everyone knows the importance of cooperating.
You’re in all these cool places, I would imagine you would try to keep the coolest of them.
Some. Right. Agency location isn’t determining what real estate we’re keeping. We’re getting rid of about 700,000 square feet of real estate, which is about one-third of our New York portfolio, maybe about 25 to 30 percent.
And we are keeping our popular locations, yeah. We’re still making decisions.
You guys value being in New York.
Yes. We have a strategy, looking at consolidating some offices. But there’s no question, even with this recession, we’re a creative agency, and we recognize the importance of being in a city like New York, which attracts the top grade of talent. We have our hubs, we have a huge number of agencies in Kansas City, and they have a large and creative workforce there, especially on the creative side and around tech. But they all recognize the value of being in New York.
That being said, around the world, we have lower-cost production hubs, we have boutiques in places like Buenos Aires and Spain. But, if you’re going to be the largest agency, you have to be in a lot of cities. We’re not going anywhere.
I think what COVID has done is [show us] we could have a lot less office space with the same number of people. COVID really supports the space agenda we’ve had for years. Now, companies are realizing, ‘Oh yeah, you don’t have to have a desk for every person.’ And you have to space them out. People don’t need a desk just to put pictures on it.
I was going to ask you about the impact of the virus.
A large amount of space issues in New York are being driven by the way the virus is changing work. It’s actually helped drive some of the agendas we’ve known for years. People don’t need to own their space. What’s important now in the office is the collaboration. People are doing a lot of the creative work at home. So, when people return, hopefully, it will be much more collaborative.
People used to find [collaborating] annoying. But now, people want to collaborate. Basically, we feel we can operate with 20 to 30 percent less office space. They’re doing a lot of studies on workplace strategy, data collection. People are finally realizing what we’ve been trying for years — we’re much more agile with less office space.
Talk to me a little bit about the physical impact of the virus. I presume only a certain percentage of your workforce here in New York is actually coming into New York.
That’s right. And our company is not encouraging people to come back. People [don’t] feel pushed to come back. Our company, like everyone, is globally allowing everybody to work from home.
Here, in New York, we started a program in October: If you need to get out of your house, your options would be open. But, generally, office tenants are [occupying] only 2 percent nationwide. And that’s fine with us. We’re not looking to push past that. Are workspaces ready? Yes.
The workspaces are ready for people to return, but no one has returned. I go back to the office occasionally, but most people are not. And that’s not just here in New York.
Once we get beyond the pandemic, what do you think the lasting impacts are going to be?
We think that people will be working from home more. Before, people might work from home one day a week, maybe. Now, one or two days a week, maybe more.
We’re a collaborative company, and we want to support the creative process. The people who are staying home will be working on more singular stuff. Office spaces will become more collaborative spaces, event spaces. People will come back and do something with each other. We have already started acting, pulling out more benches, and putting in more collaborative spaces.
Even when they come back, initially, they are going to want to be in open spaces.
You talked about reducing your footprint in New York, and maybe some other markets. Is that a short-term strategy or a long-term strategy?
It’s a long-term strategy. We feel with the change in work patterns, it’s something. We might be wrong. But it’s not that we are right or wrong on this. We are kind of enforcing the change.
For years, the trend has been to look at utilization and not the head count. On the best days, peak occupancy is probably 60 percent on a floor. So, we’ve taken 20 or 30 percent out of that now. We still have excess capacity, but we feel that maybe people fit in more with us this time. We don’t feel that, once we start to grow again, we will have to add a lot more space. People will be more used to flexible working.
Does WPP have a policy toward coworking and flexible offices?
We have done several deals with WeWork (WE). They are housing our campus location in Denver. We have done deals with them in NYC, around the U.S., and across the Americas region, and globally as well.
Client confidentiality and data is a big part of our business. There’s always concerns [about] greater transparency and lack of borders in a flex-office environment. But you can go to Industrious or WeWork and get your own space in a way that is well-priced and flexible.
We’ve done it, but we’ve done it in limited ways. We’ve been working with the WeWorks and the others to find the right middle ground, and build more flexibility into our larger projects, and we’re going to do that in our next round of North American campuses. We’re always working with companies to try to find the right answer, and sometimes we do and sometimes we don’t.
No one likes long-term these days. These companies offer flexible terms. It’s always a mixture of time, place and circumstances.