Entertainment businesses thrive on creating a unique experience. Place makers can follow their path—and imagine their way to stellar returns.
The commercial real estate world suffers from a failure of imagination. When it comes to creative problem solving, practitioners now have an opportunity to leverage their strengths at one of the most disruptive times in U.S. history.
| Disney uses the New Amsterdam Theatre to launch most of its Broadway releases, such as Mary Poppins. |
Much of what is written about commercial real estate focuses on the transaction and the financial underwriting of a project or deal, whereas little attention is paid to the idea of place or the experience of service. But it is the realm of execution—which is powered by imagination—that drives the experience and, ultimately, the financial performance. Those of us in the commercial real estate business need to move away from a strictly financial explanation of cap rates and returns on investment, as important as they are. We are here to design compelling places and services. When we do this well, the financial returns can be stellar.
I have had the good fortune of having what some have described as an eclectic career in the real estate industry, including leadership stints at the Walt Disney Company and Vivendi Universal. Now, as I contribute to the growth of Transwestern, a multidisciplinary real estate services and development firm, I am struck by the importance of enhancing the guest, or client, experience by designing effective workplaces and services and focusing them in areas where we can methodically accelerate our market share.
The entertainment business provides models for competing in the world of office leasing, property management, and commercial development, illustrating the connection between operations and the real estate itself. Where does the real estate business end and the operating business begin? Entertainment firms, retailers, and hoteliers have an innate sense of this. They know their customer; they experiment and integrate design into the bricks and sticks, as well as the service. This perspective offers several lessons:
- Be an integrated business thinker. Often, the best solutions or ideas come from analogies derived from other industries. Step away from the immediate problem or opportunity, seek a better understanding of all the issues, and draw an analogy. Ask yourself how innovations outside our industry can be applied within our industry.
- Bring all services to bear on the client relationship or project. Our business is not simply the transaction or the project. Those end results are created by an understanding of how projects work, how work flows through them, and, as a result, how they should be designed. The industry is actually a collection of specialties that together provide a tangible product.
- Technology and security are changing everything. The effect on how we think about the workplace is changing both subtly and rapidly. Coffee shops and airport lounges are viable workplaces now that people are able to connect from anywhere, yet teams thrive when working together. How can the real estate industry reconcile the tension of the human need to work together while leveraging the advantages of decentralization enabled by technology?
- Conduct little experiments constantly. Stop theorizing and just do! Small experiments are a small risk worth taking, especially when taking no risk at all is simply dangerous.
- Imagine what you want your project or client experience to be, then get to the numbers. Amazing things will come from this approach in terms of how we think about the workplace—proximity to amenities and services, productive and efficient transportation, decent and affordable housing options. These, too, make place. Flatten the organization and make sure each business line is talking to all others and can point to at least one large client relationship that they share.
- Do not seek answers in conventional wisdom. If you were to look at a problem from a different angle or use another industry’s analog, would you generate a different solution?
Through my experience at Disney and Vivendi Universal, I learned that only when I had the courage to depart from convention and slam multiple disciplines together did the best ideas flow and the greatest profitability ensue.
During the 1990s, the Walt Disney Company’s motion pictures business was fragmented in multiple locations in and around London. The usual 25- and 30-year lease terms in the U.K. were not well-suited to rapidly changing businesses that could plan just three to five years ahead. Our team struggled with how to create a workplace that could combine multiple businesses while providing the flexibility of a shorter-term lease. We looked everywhere and, though we found some promising physical solutions, we could not find a term solution that provided strategic flexibility. We were stuck.
We stepped back, cleared the whiteboard, and considered two things. How many other companies share our problem? Answer: most global multinational corporations. How would we look at this if we were a developer? Answer: we would be looking at unconventional sites—not leases—to leverage our imagination and create flexibility.
We concluded that a potential market of multinationals shared the same quest for flexible terms in large, column-free lease positions offering an amenitized workplace. Acting as master developer, we bought an existing office building and retail mall over the Hammersmith subway station, reached an agreement with the London Transit Authority to place a platform over the tracks, and assembled the adjacent land to develop a new office building that ultimately connected to the existing structure. We leased shorter-term space to Coca-Cola, British Telecom, and others. Their space provided flexibility for Disney (and for them), offering in-project amenities and prime transportation access. More than ten years later, this development remains Disney’s London headquarters.
Had we not stepped away from the problem and looked at it from another angle, we would never have arrived at this solution, which culminated in a workplace and financial boon.
Most people know about Disney’s mid-1990s repositioning of the New Amsterdam Theatre on 42nd Street in New York City as the launch pad for most of Disney’s Broadway releases, which have had continued explosive success throughout the world. This resulted from Disney’s Animation Group, under the direction of Peter Schneider converting animated classics into musicals, essentially matching up Disney Animation with Disney Development. A parallel breaking of silos occurred among Disney Development, Walt Disney Imagineering, and ABC News when these groups collaborated to transport the Good Morning America (GMA) program from a stage sequestered on the upper west side to the maximal visibility of 1500 Broadway at Times Square.
Office space over the Hammersmith subway station serves as the London headquarters for |
Building on the relationships developed on the New Amsterdam project, we combined forces to develop a studio within an office building. Instead of looking at this as simply an office lease, we took on an underlying retail lease, deriving advertising revenue in real space (billboard and JumboTron) and on airwaves. In this context, rent was considered very economical.
We could have simply rented a theater to showcase Beauty and the Beast or just retrofitted the GMA studio. Instead, we imagined a broader outcome. We leveraged our real estate strengths into creating compelling places and applied that to live theater and television. Both solutions required collaboration with other business lines. No single group within Disney could have pulled it off without the others.
At Transwestern, these lessons are applicable to our work on both the services and development sides of our business, just for starters.
Our management services group focuses less on property management in the old-school way and more on being an environment creator and sustainer. Through that window we run our operational, engineering, sustainability, and construction management practices, ensuring a superior work environment at a profit for our client. We are mindful in each of our business lines to enhance the place (the real estate) and to enrich our clients’ experience with us, as well as the tenants’ experiences in the buildings.
There are many more exciting applications for transforming how we define place and creating financially rewarding returns and greater adhesion to our client and the guest/office tenant.
What I learned at Disney was how to fuse the art of entertaining with the bricks and sticks of a place, and then provide an overlay of service in such a way that it remains special every time you experience the place or service. When the experience is good—even sometimes outlandish—it will attract people, companies, and capital. Improve your understanding of the experience of your customer—in human and financial terms—and you become the better mousetrap. When a place or service is designed well, it is powerful, and one instantly realizes that when experiencing it. That is what our industry is really about—and that is exciting.
