A Proptech Principal and a MIT Lab Chairman Start Talking …

For those who love to nerd-out at the increasingly crowded intersection of real estate and technology, two representatives of both disciplines who are more than happy to deep dive into the subject are Chase Garbarino and Steve Weikal.

Garbarino is the co-founder and CEO of HqO, a Boston-based tenant experience proptech platform. Weikal is the industry chair of the Real Estate Transformation Lab at the Massachusetts Institute of Technology’s Center for Real Estate in MIT ‘s School of Architecture and Planning.

The two came together in an exclusive conversation with PropTech Insider last week to muse broadly about real estate and proptech issues such as systems thinking (they will explain), tech, capital and civic design.

Their thoughts offer a peek into HqO and MIT’s private Strata conference to be held on Oct. 16 in Boston. The conference will feature real estate and tech speakers, including Uber co-founder and CloudKitchens CEO Travis Kalanick, plus representatives from BXP, Tishman Speyer, MetLife, Vornado, Related Companies and Grosvenor.

This interview has been edited for length and clarity.

PropTech Insider: What is the relationship between HqO and MIT?

Steve Weikal: HqO is a member of MIT’s Center for Real Estate. The center has about 20 corporate members that we engage with. They join through a membership program that gives them access to certain activities that we have at MIT, and also the faculty and the research. Also, more specific kinds of engagements, where MIT gets to engage with the industry. The industry learns from MIT what our latest thinking is, and then we get a better understanding of how industry is approaching the ongoing transformation related to technology.

Chase, specifically, what does HqO get out of this relationship?

Chase Garbarino: It’s obvious that the MIT brand speaks for itself. So we know the quality of the institution. I’ve known Steve and his colleague, James Scott, for several years. And every time they invite me to speak at a class or participate in an event, we just continue to kind of chew on what I think is the nexus of the right ideas. 

One of our initiatives at HqO is that we’ve fundamentally believed that we have these two really important constituencies for this moment in time: You have all these people working on AI over here, and you have all these people in the built world over here, and they’re not talking enough to one another.

You look at the AI summits that have happened in the first half of the year, and they’re constantly talking about the real estate needs, electricity needs and energy needs. And there’s not a single real estate person in the room at these AI gatherings. And then you’re at the real estate groups, and they’re all talking about AI, and there’s no real AI people in the room. I think the only place that brings those together well is the group that Steve and James and everyone at the real estate program have been doing for a long time. 

Obviously, MIT does the AI side pretty well. A lot of the real world advancements that a lot of people want and expect would be good for society need to bring these two groups together. Steve and I started chatting about it, and we said, “What are some things we can do?” We’re working on a few of those.

On the other side of the coin, Steve, how does M.I.T. translate the feedback you get from companies like HqO to what you’re doing at MIT?

Weikal: A great question. It’s very important for the research groups to have some sense of what’s happening out on the front lines in the real world. MIT has a long history of engaging with industry for that reason, so this innovation doesn’t happen in a bubble. Over the 150 years of MIT.’s existence, they have a history of engaging with industry in a way that is both productive from a research and academic standpoint, but also fruitful for the companies that are taking the knowledge that we uncover and then applying it in a real world capacity.

What is the mission of your organization within MIT? Is it to teach the future proptech professionals or real estate executives?

Weikal: This year was our 40th anniversary. We were founded in the same year as the Media Lab, which is also in the School of Architecture and Planning. It was founded by some great real estate people here in Boston for two reasons. One was to really get a better understanding of how the industry works. I think back in the `80s, the industry was starting to offer legitimate asset classes and institutional asset classes. So there was a real hunger to understand how the industry works and how it was going to become a third of the well-balanced portfolio. I don’t know if they predicted that back then, but we know that now. The second reason was to train the next generation of leaders. 

I suspect at that time, you looked at the companies, and it was still very entrepreneurial. There wasn’t really a kind of formal training for real estate. You’ve reported on academic real estate programs and their different flavors and structures, but MIT was the first one-year program, and it was for mid-level career, mid-level real estate professionals. We continue to support both the research side, and, because it is MIT, a tech lens. But now it’s a deeply technical lens. We now teach data science. I teach a proptech course with James Scott. We are adding that to the portfolio of training. 

It’s all to prepare the next generation of leaders for this new landscape of real estate industry going forward.

On the website for your conference, it mentions systems thinking, tech, capital and civic design as topics of discussion. These are broad terms not usually used in the proptech world, at least not extensively. What do these terms mean to each of you? Let’s start with systems thinking. What does that mean?

Weikal: I think the intention behind this gathering is to have a conversation that’s not the typical real estate conversation. It’s not just a room full of real estate people. We think it’s useful to hear from non-real estate people about this fascinating, kind of quirky, confusing real estate industry.  And we think it’s good to hear from our own colleagues on campus who don’t know anything about real estate, as well as other people out in the world from technology and all the other disciplines.

Regarding systems thinking, there’s a whole group of expertise here at MIT that talks about systems dynamics and things like that. But I don’t think we’ve ever looked at real estate that way. A lot of the real estate programs are focused on the asset, which is great, we teach that. But, 40 years ago, it was pretty visionary to put the real estate program in the School of Architecture and Planning, not in the business school — to have this lens on real estate that includes the architects and the planners and the Media Lab. And we have the nanotechnology department, the material science department, and the concrete sustainability hub. All of these really smart people who don’t necessarily know about real estate. 

I think it’s useful, especially going forward, that we try to refer to the built environment, because it’s not just about the buildings. It’s really about the buildings and the infrastructure and the energy and the climate and the people who use the built environment. That is a systems conversation, and much bigger than the building itself.

Chase, when you’re talking about these terms, how does a tenant experience platform company like HqO fit into that? Why is that relevant to what you do?

Garbarino: To build on Steve’s point, I think you can boil down the change that’s happening in commercial real estate in the sense that it was once a very linear, project-based business. Developers would pick the location, they’d secure the financing, hire the architect and the construction firm. They would build the building, and, depending on the economic environment, at the end of the building life cycle, we get our return. 

What we’re seeing is that tech companies want to describe themselves as real estate platforms. But when you look at the technology companies that are true platforms today, I don’t think that a linear, project-based model is really optimized for the speed at which business happens. You see this in the downward compression in lease terms and tenant-friendly terms for opt-outs, soaring tenant improvement bills, and stuff like that.

HqO is focused on tenant experience, but, if we want the tenants to be successful, we need to think about the whole ecosystem, which Steve articulated well. The whole system needs to operate and to cater to a much more complex business environment of people who are dealing with things such as: What does the world of hybrid look like when you look at economic cycles? What’s happening between interest rates and tariffs? There’s a lot of noise and it’s hard to pull the signal from that. We’re trying to bring systems thinking to the industry, so that they can be successful with a platform like ours.

Outside your respective organizations, are you trying to educate owners, investors, tech people or all of the above?

Garbarino: I think the core problem that Steve and I were chewing on was two basic constituencies: The people really doing impactful things in AI, and then the people who are, let’s say, the decision-makers in commercial real estate. Why aren’t they communicating more? They need each other badly. So, we started to think about the personas on the real estate side. The capital providers, and the owners and operators need to be paying attention to this.

Ultimately, where we landed was decision-makers in that kind of ecosystem, who can wear different hats, whether it’s an investor, an owner, or even some very high-up people in leasing. It’s like: Who are the people setting strategy and policy, and how do we bring them to the table with brightest minds working on the most impactful technology platform we’ve maybe ever seen?

Weikal: We first wanted to take a look at how we retrofit cities. If we assume that the future is going to be tough, is there going to be more or less agglomeration? We look at New York City, with all this energy and electricity and people living there. They’re not necessarily working there lately, and the rents are through the roof. So, does that mean cities are going to evolve and be different in the future? How are we going to retrofit them? 

I don’t know that every city is going to look like New York, where it’s all about living there and not about working there, but let’s just stipulate that the future is going to be very, very different. We’re not going to have these single-use districts. It’s going to be a different kind of mixed use. It’s going to be highly enabled, dynamic and fluid.

The other conversation we wanted to have was about the instances where people are building cities from scratch. Whether it’s California Forever, or New Murabba in Saudi Arabia. Those are two very different versions of that. The third conversation, the thread is: How are we going to pay for it? 

This is so innovative and we’ve never done this before. These product pipes are different, the uses are different, and the use of technology is different. We’re not so sure that the traditional structure of capital markets is set up to do that.

So, the people who control the capital, whether it be government money, institutional investors, VCs, are they aware of these issues? Can they help in a U.S. that now seems almost unable to build expansively, unlike foreign sovereign fund nations?

Garbarino: I don’t think they are totally aware of all of them. They’re aware of some, absolutely.

I would say the area we want to build on with this that’s of interest is in regard to the regulatory policies in cities. We talk a lot about regulatory policy, as being similar to an operating system model: If you have a community where different cities can compete — a Linux, completely open-source model, and then Apple, which is very closed. So there is a very interesting opportunity to compare things like what they’re doing in Riyadh versus what they’re doing in Miami versus what they’re doing in Singapore. 

When Steve and I talk about it, it’s not necessarily advocacy for one model or the other, but I think it is a worthy conversation to be thinking about how the capital plays and then how the people who regulate that need to be thinking, which is a very different landscape than how most of the rules were written however many years ago.

Weikal: I’ll give it a different, complementary wrinkle. My colleague, professor Dennis Frenchman, referred to this idea of real estate fracking. Now he was talking about this back before COVID, but it still applies. 

And HqO is an enabling technology, amongst many technologies, to break up and reconfigure what Dennis referred to as using technology to break up the use, sometimes the physical space, but break it up and reconfigure it in higher-value combinations. In other words, if you had a fully robotic building that has robotic walls and it’s all tech-enabled, you could have meetings in the morning, offices in the afternoon, dance club at night, and people could sleep there overnight. That means the building has this kind of 100 percent utilization going on. But how do you underwrite that? It could potentially generate a whole bunch more money than we ever thought was possible. It’s like coworking on steroids. 

This idea of fractional ownership and paying for what you use and not having long-term commitments is very exciting, because, on a per square foot basis, it’s much more valuable. But to Chase’s point, we have to figure out the regulations and zoning.

Philip Russo can be reached at prusso@commercialobserver.com.