Are VCs the new leaders in workplace?: A Conversation With Hugh Scott
This week, coDesign sat down with Hugh Scott (Scotty), Executive Managing Director at JLL to get his thoughts on the 2022 commercial real estate market and the future of the workplace. Scotty has experience - he’s been representing tech and venture capital clients for the last 17 years. In the tech world, he’s assisted companies like Cloudflare, Pinterest, Roblox, Square, and Lyft, and his venture capital clients include Andreessen Horowitz and Greylock.
It was interesting to learn from Scotty that the private equity world has been taking a different approach to their real estate portfolios than most other organizations. Rather than treading with caution and waiting out the pandemic, these companies have been making bold real estate decisions and signing longer-term commitments for higher-end, luxury space. In fact, Scotty has never been more busy trying to meet the many requirements kicking off within the private equity vertical. According to him, name any VC firm and “they’re in the market in San Francisco, Menlo Park, or New York,” proof, at least to Scotty, that the San Francisco Bay Area will continue to be a thriving market.
Quality workplace design seems to be a top priority for these VC firms. “These organizations are laser-focused on solving for many of the qualitative components of their new space, namely natural light and views (if possible), and they want this super cool, well-designed space…Knowing full well that construction costs have not come down, it’s interesting to see how many VCs are out there and focused on the design of their space and how important these more modern and collaborative design components are to their younger partners,” shared Scotty. To these venture capital firms, concerns regarding cost come secondary to those surrounding culture building and bringing energy to the office. The proof? That there’s a significant shortage of high-end properties with inspiring workplaces in San Francisco, and as such, many of the luxury properties within certain parts of the city are going for a pricey 120 to 200 dollars per square foot. Still, there doesn’t seem to be an issue with interested parties vying for and building out this type of high-quality space.
Our conversation led us to this question: will the approach that venture capitalists are taking to their workplaces trickle down to their portfolio companies? Scotty thinks that it will. He shared, “...there’s a lot that the VCs influence. They influence things in different…ways, but when you’re a portfolio company coming into a [VC office] and you see how [they’ve] spent 400 bucks a square foot on their space, you think, ‘Wow, this is really cool. I want something like this.’” If VC firms create exciting workplaces that draw employees into the office, and if they’re able to create buzzing, energetic spaces, why wouldn’t others follow suit?
Typically, when we think about what Scotty calls the “follow/leader approach” to corporate decisions, including ones regarding real estate, we think of smaller companies observing and copying what large, successful tech companies like Google, Facebook, and Apple are doing. But, our conversation with Scotty left us thinking that VC firms may be the new set of leaders that smaller companies will look to for direction. Only time will tell.