Lendlease’s Melissa Román Burch on Why ‘the Office Has to Do More’
The company’s development chief in New York sees challenges ahead for office development and design — but also opportunities
In almost every New Yorker’s peripheral vision is the name Lendlease.
They are one of the city’s go-to general contractors, those companies that oversee some of the largest and most complex building projects in the whole world. Lendlease’s U.S. operation ranked second behind AECOM Tishman on The Real Deal’s latest list of top general contractors by size of project in Manhattan, Brooklyn and Queens, with 7.6 million square feet.
Projects the Sydney, Australia-based company can take credit for include the Sydney Opera House and the National September 11 Memorial and Museum in New York.
Their name is emblazoned on many a fence sign outside of a U.S. construction project. But there’s more to Lendlease than the building project. They are also an integrated real estate company with a global footprint that invests in property on behalf of pension funds, sovereign wealth funds, investment managers and insurance companies.
They don’t just do new construction, either; they do renovation work as well. “No matter what stage of the project, we’re ready to add expertise and value every step of the way,” they say on their website. And, with tenants arguably more in command and more particular about what goes into their office space than ever before, this becomes a central issue for Lendlease as well.
Melissa Román Burch is the company’s executive general manager for development in New York. She ranked No. 36 in May on Commercial Observer’s annual list of the 100 most powerful people in commercial real estate. In the same month, she chatted with CO about the complexities of what Lendlease does.
Here are some of her answers, lightly edited for clarity and brevity.
Commercial Observer: What are Lendlease’s major projects?
Melissa Román Burch: We are really a global firm with global operations around the world. We have a very active development pipeline, across the asset classes, such as multifamily rental, office space, condominium, neighborhood retail and amenities, and affordable housing. I will focus on our office activities — we are a global manager and developer of office space, and we have about 25 million square feet in our development pipeline worldwide, largely in support of large-scale, urban regeneration projects, generally in a mixed-use format.
London, Chicago, L.A., Singapore, Sydney — we really have an interesting purview of office globally. Of course, each city is different, but we’re seeing some interesting things emerge, things that have been developing over the last five to seven years. These all really pre-date COVID, and what we are finding is that many of these things are certainly accelerating trends toward what we view as ways the office market is really developing globally.
So, you are seeing some office trends emerge, separate and apart from whatever changes COVID is forcing on us. Can you be more specific?
If there’s anything that COVID has accelerated, it’s the idea that work isn’t a place, it’s an activity.
What we’re in the process of doing is really trying to reshape the office, to become the location of choice for collaboration. This was happening pre-COVID, but now I think with the temporary threat of remote work, people have been really asking the more existential questions about office.
Places and spaces that are really purpose-built are some of the most exciting assets that are really, really collaborative and innovative. We’re finding that there’s a lot more variety in the office environment. We need spaces for people to be alone in the office, to be creative, to entertain, to socialize, to collaborate. And those spaces look very different than one particular office or one particular cubicle. What we’re finding is that this variety is really a part of what has come into the workplace, where there are different types of environments that people can use to match the type of work they need to do.
So you’re not sitting at your desk all day long — you are moving throughout the workplace, depending on the environment that suits the type of meeting, or the type of collaboration, or the type of activity that you need to do.
The second trend is there’s a lot more common or community spaces. A lot of the dialogue over office space, really over the last decade, has been around densification — less space per employee. And what we’re finding is that companies want to dedicate less space to head-down work, or to just case work, and more space for social hubs and connection and places for really serendipitous connections.
We’re finding that the spaces that employers are dedicating to desk work is shrinking. And the amount of space that employers are dedicating to social hubs, and areas for coffee and for water-cooler talk, or having lunch in the office is growing. A lot of that has to do with culture creation. Culture is really created in the bringing together of people, and the need for the social and common areas.
I think the third thing, which is probably on some levels the most important, is health and well-being. What if your office environment was a place that actually stimulates your health and well-being, and being productive and earning a paycheck? That’s where we see things we call amenities, and wellness rooms and access to light really being paramount.
There has been a lot of work on — and I’m a real believer in — biophilic design, which is an office design philosophy that really embraces humans’ needs to have a connection to nature, whether that’s outdoor terraces, rooftop gardens, perhaps some fresh air, taking in some vitamin D, some sunshine. Whether that means better air quality and better filtration inside of the building, as well as having a lot more plants and natural materials inside, we’re finding that wellness is critical and is really now coming into the workplace.
Because workplaces are not where you go from 9 to 5 to do an office job. It really bleeds into your morning, it bleeds into your nights, and it’s more of a lifestyle. People come to the office to do work, they come to the office to socialize, they come to the office as a touchpoint for culture and other after-work activities.
All of this is to say that the office has to do more. And health and well-being is part of that broader understanding, that work is just one dimension of a person’s life.
So, rather than just hard hats building a box, Lendlease is involved in the creation of spaces where wellness, joy and purpose for office workers happen. Give me, please, an idea of what Lendlease can do to go beyond the box.
You have exactly summarized what Lendlease is doing and who we are. We are a developer of offices and other asset classes. We are an owner, developer and manager of office assets. So, when I talk about a 25 million-square-foot pipeline of office projects, I’m not only talking about projects that we’re building — I’m talking about projects that we are the developer for, and that we are repositioning, together with our tenants; we have a deep tenant roster.
We’re helping to answer what is it that companies are seeking as they look to attract the best talent, and competitively position themselves for success.
All of that work around that 25 million-square-foot pipeline is really about getting companies to be more competitive. That’s why we are so specific, and it’s based on conversations with our tenants. This isn’t about what we want for the world, as much as it’s about being great partners with our tenants and thinking about how we work together.
And, as a global player, we have the ability to take ideas and bring them from one place in the world to another place. I have found a lot of inspiration from Australia, around health and wellness and worker well-being, in which our developments in Sydney and Melbourne have led to repositioning and brought success to that with our tenants.
As we look to develop projects in the U.S., and certainly here in New York, we are really able to bring those best practices and real observations and case studies, which are not theoretical, but have actually played out in other parts of the world. And we can bring the best of those ideas to bear here locally.
In terms of your observation about hard hats, we’re thinking not only about the tenants and the occupiers of the spaces we’re creating — we’re also thinking about the process of building it and how we build it consistent with Mission Zero. Mission Zero is a very exciting corporate mandate and initiative that we have around being absolute carbon-zero by 2040.
We are a 1.5 degree-aligned company. Which means that our mission as a firm is to live in a world that is warmer by no more than 1.5 degrees Celsius. So, the actions we take as a builder, developer and investor in office space go toward achieving very specific targets around carbon.
We feel like we have an opportunity to have a leadership position. We’re one of the early property firms that have made a commitment to be part of this 1.5 degree, Celsius-aligned global mission. Our residential portfolio is already net-zero carbon. Our office portfolio is also officially certified carbon-neutral. That’s a specific office portfolio comprising about $11 billion of assets.
One of the trends that we see a lot in new office construction is terraces. Are terraces pretty much mandated for new construction now? And are terraces being designed for work, or to give people a place where they can decompress from work?
We are seeing a lot of interest from tenants for outdoor space. People want a homier lifestyle. Terraces are absolutely something that we are incorporating into our projects.
It takes on a number of different forms. Depending on the type of building, you may not have the opportunity of terraces on every floor. But what you are seeing are some common rooftops that can be accessed, as well as some tenants’ spaces on a selective basis having access to private outdoor space.
A lot of it is very dependent on the type of building. A lot of brand-new office space being delivered in Midtown and Hudson Yards, a lot of that has a focus around fresh air and has limited opportunities to actually go outside. Finding appropriate and creative ways to incorporate terraces is a really critical part of the design process.
To your last point: What are people doing on these terraces? This goes back to the trend and observation we have that people want more variety in the office environment. Consistent with that, people want to be able to do a wider variety of activities in one location. Terraces are a great example of that. People should be able to work at 5, should be able to have team meetings at 5, projects that need to be done with a screen in front of you.
A lot of workers have laptops and other mobile communication devices which enable them to utilize technology and work on terraces as well. So, you have to think about those outdoor environments, you need to have shading, or sometimes you just want to sit in the sun. Sitting in the sun at 2 o’clock to do a project in New York City is probably not a comfortable place to be.
So, we’re also making sure that the design that’s being built is flexible, and can accommodate a range of sun and temperature and weather conditions.
Are we seeing a new era of massive construction in New York and nationwide, or are we entering an era of retrenchment?
In the office sector, there are going to be winners and losers. New construction of assets has a real place in the future, both in New York and across the country — because we have the ability with new buildings to design them with the workplace of the future imbued through the building in a way that it is designed, in the way that it is built, in the way that it works with the community, and to create great places.
That is harder to do in some older stock. Owners and landlords that are willing to invest in their buildings; to upgrade them; to bring in state-of-the-art, air filtration systems; to change out windows, creating access to light — those are going to be the buildings and landlords that do well. Flexibility is going to be an important dimension of the workplace.
The office stock in New York City is quite old. We think it’s in need of an upgrade. As the city has modernized, a lot of the buildings in the Hudson Yards district, and even some buildings that have been built in Midtown East, have enabled for new office product to come into this market [and] have rewarded the investor. I think we’re going to find that there’s going to be demand for new space, that companies will be looking to make choices for their employees about where to locate, and they’re going to want to have something like that so they can compete and attract the best talent. Office space is fundamentally the talent magnet for companies.
In New York, for many years now, we’ve seen the trend of renovation of vintage buildings, particularly for tech and creative companies as tenants — like at 200 Fifth, 111 Eighth, the Starrett-Lehigh building. They seem to prefer the classic old buildings over the brand-new stuff. But there’s only a limited number of those kinds of buildings. Is this trend going to continue or are we going to see a changeover to new building stock?
I think there’s a couple of dynamics that feed into that. The first is that a lot of that has been driven by the quest for large floor plates. You see buildings like the Google building on Eighth Avenue or the one that they’re occupying at 550 Washington, the former St. John’s Terminal, where you have very few building typologies that are enabling one-of-a-kind, office workplaces that really can’t be replicated in new construction. You can’t find a development site of that size and scale. We’re talking floor plates that are 80,000, or even as high as 200,000 square feet.
These are enormous floor plates that are creating office communities. It’s more of a horizontal world than a vertical world.
The other is really about office flexibility. This is where new construction can do a better job in providing a greater feel and accepting different types of lifestyle in the office design itself. Many new-construction buildings are very corporate and very buttoned-up. There are companies that are occupying buildings like that; there are several examples.
It’s about providing a variety and just making sure, as a developer, that the building has a personality — a point of view — and they really are accepting the engine of activity and innovation that’s taking place inside of those four walls.