Bloomberg Audio Studios, Podcasts, radio News.
You're listening to Bloomberg Business Week with Carol Messer and Tim Steneveek on Bloomberg Radio.
Hey, Carol, I don't know if you heard about this, but on Sunday, as it approached the narrow bob Elman deb straight off Yemen's coast, a commercial ship in the Red Sea changed its destination signal. It's something widely available on the Internet for most vessels, so anyone can see it. It changed it from an Iraqi port to all crew Muslims.
I saw this. This is pretty cool.
Yeah.
The changed it for a good reason.
Yeah, this is the whole point of changing this was a message to the houthy militants of Yemen who say they're targeting ships linked to Israel and to its allies to pressure them over the war in Gaza. So the idea was, okay, well, our ship will be safe if we change our call signal and say, okay, we're all Muslims here, so don't attack us.
Yeah.
I think it's incredible, all right, And then you know, you've got a lot of stuff going on in terms of concerns about Red Sea not getting around it. If you have to go a different route, the extra costs, and then there's also the drought in the Panama Canal. Needless to say, global shipping has been upended in recent months in a big way.
Well that's why we invited David Dyker on the show. He's Associate partner and Shipping Practice co leader at Mackenzie and Company. He joins us from Summit, New Jersey. David, good to have you with us this afternoon. You guys crunch the numbers at Mackenzie. What's a bigger deal here? Is it the disruptions in the Red Sea or is it what's happening in the Panama Canal which is having a bigger global economic impact.
Well, first of all, it's great to be on the show. I've been a long time fan, and it's great to be speaking with both of you. In response to your question here, the answer is you're not gonna like it. But the answer is both right. You can't look at any of these in isolation.
Right.
So when we were first of you looking at the Panama Canal back in October, when they had started to announce some of the restrictions, you know, we had started to look at the numbers. Then but then when you start to compound this with the situation in the Red Sea, it obviously changes everything. So no ship or no investor that has approached just as looking at either of these in isolation, all right.
So all right, they're all looking at it together. That makes sense, right, If you're running a company or an organization, you kind of need to keep your eyes on it. Having said that, and I'm assuming some of your customers or your clients are reaching out to you. What are you saying, I mean, do they need to start making some changes longer term? Or I mean, how do you assess the situation like this in an environment David where I think it's safe to say over the last couple
of years, we've talked about the pushback on globalization. We're near shre and like, how how are you advising some of the folks in your world, the clients in your world.
Yeah, you know, the first question I usually get from a lot of investors is, David, when are we going to have a normal year?
Give up on it?
And the answer is, I don't think that we will ever have a normal year. In shipping, you always have to remind everybody just as technology and you know, the products that we manufacture are getting more and more sophisticated. The supply chains and the logistics that support them and
provide those manufacturing components are getting even more sophisticated. So the number one piece of guidance that we give to to investors that approach us, to our clients that are manufacturing these goods is this is business as usual and will continue to be business as usual for the future. Just supply chain disruptions that last a month or longer are now becoming more and more frequent, and on average are happening every three point seven years.
But how much are people taking that advice and actually saying, Okay, I'm going to build a plant in my backyard or I'm going to make sure that I've got the ability to access either my supply chain make sure that my suppliers are more locally based. How much of that is actually resulting in action that changes how we've been doing things for decades.
Quite a lot of it. And so there's two main things that we see a lot of our clients doing. The first is that they are elevating the importance of
their supply chain organizations. That means not only building the capabilities and the in house technologies, and a recent pal just showed with our supply chain executives across a lot of our client base is that ninety eight percent of them plan to increase their spend and supply chain related technologies over the next five years, which is very significant
compared to pre pandemic. The second thing that they're doing is just as you were alluding to, is they are starting to look at a longer term supply chain plants and starting to think through, Okay, what are some of the strategies I need to have in place for events that I can't necessarily foresee. That means omni shoring or potentially looking at potential different routes that they can take to get to some of their manufacturing locations. Now everything's on.
The table, So David does it. I'm wondering, like, you know, obviously understand the economic implications of this, but I'm thinking about, you know, other geopolitical associations or implications of this. I'm thinking about, you know, there are certain things that we can actually build closer to home, but there are certain things like commodities that just can't be things like cocoa for example, or coffee for example. Things that you know,
we rely on to be shipped from all over the world. Here, what ends up happening to our economy? I mean, do we all become more insulated.
The pushare is to become more and more resilient. And if we were to put this back and focus of the Panama Canal and some of the commodities that you're mentioning there are going to be dramatically affected. You if you look at the Panama Canal, those economies that bear the brunt of this are those that are closest to the canal and a lot of those a lot of those economies are very tied to perishable goods like bananas or other refrigerated cargoes there. And the answer is those
things cannot just disappear. We have to reinforce and make those supply chains more resilient. And where we can't, ultimately you'll see these companies have to increase the costs that they ultimately pass on to customers because it's just become more expensive operate those supply chains.
Yeah, it's interesting and at a time when we know that certainly the US Central Bank, you know, we had another hot inflation print and it's just you know, struggling to make sure that prices no longer are rising at the levels we've They've come down a lot in the last twelve months, but you do wonder about other stress points that either put a floor in prices. As we sit right now. Having said that, one thing I think about, David is I've been to the Panama Canal. I've seen it.
It kind of blew my mind having seen it in video and so on and so forth, Like you just realized the importance this is in terms of trade. Sue has obviously very important, the Red Sea too, the Panama Canal. Are you starting to think about a world where maybe we don't have access to the Panama Canal because of climate change?
Now, in conversations that I've had with major logistics providers, investors and shippers that are that are tied to the canal for economic reasons, you know the canal is still a very critical part to all of those chains. Uh. And you know, the canal can tell you itself that they're they're actively looking at various means where they're going to ensure that the canal stays open. It is too critical of an international trade pathway for for us not to continue to maintain.
We talked Panama Canal, we talked Red csu As Canal. What is the other geographical area that we need to have our attention to that we're not necessarily talking about, David.
If I could answer that question, I don't think I'd be sitting in this seat.
But is there anything on your radar right now that you know you're starting to see bubble lot that is an area of concern, especially with with climate change.
You know, again, I go back to my original point here with these are today's supply chains being so sophisticated and so so tight, or you know, a lot of shippers are still despite you know, what we went through in COVID still want to go back to just in time inventories. You know, it is any sort of disruption that could that could come to the forefront here, So I don't want to spec it could be, but I can tell you it could pop up in any place around the world.
David.
It sounds like though we as consumers have to get used to something that shocked us during the pandemic of empty shelves, and I feel like I increasingly walk into places and shelves are empty. And maybe that's because of the just in time inventory. Nobody wants to be stuck with excess inventory? Is that a fair assessment? And just got about twenty seconds here. Sorry.
I still believe that the sophistication of our logistics providers and the shippers out there will ensure that we won't have any stock outs here. So we'll see.
Yeah, time will tell, right, David, great to check in with you. Nice to be talking with someone who's a fan of the show, so thank you for that. David Dyker. He's Associate partner and shipping practice co leader of at mackenzie and Company. Joining us on Zoom from Summit, New Jersey. But I do think about supply chains, right, we continue to be talking about them post pandemic. How many years are we out here? In four years?
But it's not just pandemic, it's pandemic, climate change, politics, it's it's wild.
Yeah, serious issues. All right, folks, don't go anywhere. I got a special treat coming up in just a moment right here on Bloomberg Business Week.
My whole world around domans that one.
Okay, bear with me here, take a moment and think about your life, think about your daily routine and the built environment that you interact with, your office, your workspace, the roads, the parks, public transit, all of the things that are around you, and equally important, what you find on the other side of all the doorways that you walk through. Maybe it's just me, but these things have a huge effect on my life and my wellbeing. So we're really interested to talk with our next guest because
this is their world. Andy Cohen and Diane Hoskins are the co CEOs of the privately held global architecture design and planning from Gensler. Gensler's got more than fifty locations and six thousand employees around the world in the America's euro Up, Greater China, Asia, Pacific, and the Middle East. They do more than two billion dollars a year in revenue, and they count eighty percent of the top fifty Fortune
five hundred companies as clients. Needless to say, they got a good idea about what's going on around the world. They're also the co authors of a brand new book out today, designed for a radically changing world. Andy, Diane, welcome, good to have you here in the Bloomberg Interactive Brokers Studios. We're going to get to the book in just a bit, but we got a good chunk of time with you guys.
You have an amazing view on the global economy. Diane, just talk to me about how business is right now, what you're seeing.
Hey, Tim, Carol, it's so good to be here. Wow, we're seeing that. You know, again, things are moving quickly and changing from what we might have seen five years ago, and certainly during COVID there's you know, we're in a world where you know, new cities are being created I won't say overnight, but you know, again at such a rapid pace. You know, we were just in India and you know, to see the kind of energy and excitement goinging on and the transformation that we're part of as
a design firm in Bangalore. We were just in Mexico City hearing a lot about the near shoring and the energy that that's bringing to the economy there and obviously, excuse me, opportunities in the built environment as well. So you know, again, as a global firm, we're part of this transformation that is literally happening, you know, around the world. We were at COP twenty eight and in Dubai and
you know, again all of what's happening in the Middle East. So, you know the United States, there's amazing things happening that hopefully we'll talk about as our cities are you know, finding their path. But we're very bullish, well.
Safe to say we have a sensitivity about cities too, and we think it's really important that if you have healthy cities, you have healthy countries and healthy policies. Like it kind of starts at that level, but I want to dig a little bit deeper, Andy, because you guys do have this incredible global perspective. Any so that there are companies, are you know, cities slowing down on projects because of uncertainty about.
What's to come again, like Diane said, it's where of this global perspective. We worked in over one hundred countries last year. You know, we're seeing the US right now in definitely in the work sector, in the office sector definitely slowing down. We're in four sectors in our firm, we have work, lifestyle, what we call cities, and health and wellness. We're seeing our work sector definitely being hit
right now with the slowdown in office. Although we're doing a ton of office to REZI residential conversions.
Right now, are you really a ton of those right like old office buildings.
Older office buildings. What we're seeing is because office buildings right now they're only fifty percent occupied. We're seeing this unbelievable flight to quality that's going on right now where tenants really only want to be in highly amenditized quality buildings that are brand new or newer, and the older building stock millions upon millions of square feet what we call B and C product B and C buildings are
really really problematic. So we have done we created an algorithm recently that we're able to study entire cities or whole portfolios of buildings and analyze them quickly to see which buildings can be converted from office to REZI and about twenty five percent of the building stock in the United States and around the globe can be converted.
Diana Howe, I mean we've heard for years since the pandemic that oh, it's just too expensive to convert on a large scale old office buildings into housing. I mean, think about it from the perspective of the plumbing, and there's some lack of windows. I mean, how do you do this efficiently? Is it something that is realistic to do to offices that aren't used?
Yeah, as Andy said, we've created a tool where we can answer that question really quickly.
So some buildings, it works in some buildings.
Yeah, what's in that tool?
Yeah?
What is it? No, it's you know, we've put together, basically a way of bringing all the analytics that would probably take you know, a pretty extended period of time to study, into a very concise set of metrics that predict the viability of an office building becoming residential. So the window to the core, you know that dimension. Obviously,
super deep apartments are not going to work. You know, the Florida floor height again, you know, there are ideal Florida floor heights for residential that are different in many cases than office. The loading dock, by the way, makes a huge difference. What's going on with you know, the column base. So all of this basically we do a scoring and literally, if it's eighty or above, it's viable. If it's below, maybe not so much.
And you said that algorithm says twenty five percent can be reworked, which makes me think that other seventy five percent do you think ultimately it's just have to be either torn down or done away with.
Well, we're doing a lot of adaptive reuses right now to other types of uses. But definitely the reason why we're studying residential is such as short as a residential and so we need more residential and this is a sustainable way of doing it. Instead of ripping a building down, we can reuse the building, which is so much better for the environment. I should also add, Diana, I just went this morning. We saw a project called a Pearl
House and it's here in Lower Manhattan. It's the first unbelievable successful conversion from office to REZI and it was a building built in nineteen seventy and we were able to literally turn it inside out and turn it from a standard office building into residential and we think it's going to be a home run here in New York.
It's really cool to hear about this because again again it's like we've heard about we've been talking about this for years, and it's like it's good to finally see this happening. So, Diane, how susceptible is Gensler to blips in the economy? Because the reason, the reason I ask it's and I don't think it's an obvious answer, is because yes, a big portion of your revenue does come from offices, but also a lot comes from municipal municipalities.
You do airports, you do courthouse renovations, parliament. So so how much of that is dependent on you know, fluctuations within the global economy.
Yeah, you know, over the last twenty years where we've been co CEOs, we've really focused on diversification and really looking at all of the kind of a three sixty from as Andy said, sort of this work sector which we've been talking about, that's the office buildings and then the spaces inside those buildings. But even that is like you know, you've got tech, and you've got financial services,
and you know, professional services. But you know, right now one of our fastest growing practice areas is actually aviation. And you know, you look at the stimulus, the you know, infrastructure bill that got passed not that long ago. You're starting to see amazing project going on all over the US in terms of these you know, much needed new terminals. We all go, you know, overseas and see great terminals, but we're starting to see some amazing opportunities here in
the US. So you know, again that diversification, whether it's another massive growth area for US is sports stadiums and you know again we all just saw the Super Bowl, but you know it's so important in our communities to you know, entertainment in sports as well, so you know, the and let's say hospitality. I mean again, since COVID, we all know, the hospitality sector has been just on a rocket and that reflects also back into the work that we're doing.
Let's get back to our guest because still with us as Andy Cohen and Diane Hoskins, co CEOs of the privately held global architecture design and planning firm Against there. They've got a new book out. It's called Design for a Radically Changing World. Tim and I throughout the day have been just kind of having some fun even with
the titles. I want to go right to one called social and racial justice because I think about how we have done in general housing for decades and kind of separating lower income and then developers maybe they throw a few units like how do we do and Diane, let me start with you, how do we do this better?
Yeah? You know, it's about equity, right, for so many years, you know, and in so many of our cities there are communities that just haven't had the investment. And so you know, at Gensler. We're really being mindful about seeking out opportunities to work on projects that are helping to create more livable streets, more green space, you know, helping to create schools that are you know, uh, exciting children to want to learn and grow, but.
For not just one member of the social strata.
Correct, yeah, exactly, for every for everyone, for everyone, And it's it is about equity and how do we bring that through design?
And you and Diane argue that design can be a more powerful tool than policy when it comes to changing cities for the better.
Explain, well, sure, I think first let's talk about the context. For the first time in human history, more people live in cities than not fifty five percent of the world's population lives in cities, and by twenty fifty seventy percent of the world's populations lives in cities. So the design of cities are obviously going to be really important for the global population. And we believe and this has to
do with policies moving forward. We believe in the philosophy and through our research of a twenty minute city and the twenty minute city, and we learned this through COVID, is that everything is walkable everything you need in life. Every amenity that you need in life is walkable grocery stores, restaurants, retail, healthcare. Education is older than a walkable district. Now in a small city that would be twenty minutes. In a city like New York, you might have you have multiple twenty
minute cities. But this philosophy of acxis and amenities, even having to do with racial justice, is the idea that you have these amenities that your fingertips and about that design can make a difference in these in our world.
How do you make sure it's affordable amenities that are within everybody's reach, because that maybe is not always I don't know if that's within design you know capabilities, or is it like how do you work that in as well.
Again, at the end of the day, design isn't about the price tag. It's about the decisions that we make as designers. Where to put, you know, the green space, where to put you know, instead of a wall, maybe it's it's shrubbery, or maybe it's the way that you move from one space to the other instead of something that's very rigid and kind of onerous. You know, it's about experience and you know at the end of the day. You know, design is about a you know, a thousand
choices we make with the design problem. And again I go back to it's what we focus on, you know, it's what we focus on. Design is for every neighborhood in a city.
But our client's all sensitive to that. I mean, I do always wonder, especially if it's a tougher economic environment, right Tim, and I constantly here we are going through earning still and it's you know, the bottom line, and you know what gets a stock moving, it's a buyback. Sometimes there're a dividend or cost cuts in these you know, thank you, Mark Zuckerberg. The year of efficiency continues for many.
So Andy, come on in on this, Like when you guys are working on a project, how important is it that it's access for most How do you incorporate climate change aspects? How do you do it? Make it greener, make it better for our clients.
They're looking for it all they want to make really they want to make sure that it's equitable, but they also want to make sure that it's financial financial, and so we're constantly balancing the two. And I'll talk about housing for a second. We do a lot of housing and much of the housing today about every project ten to twenty percent is affordable housing that's being factored into the performance.
Is that more than has been in the past.
Absolutely, Okay, most projects residential products would have zero affordable and now based on the demographics of the community, developers are building that into their performer and make it work. And that gives us the ability to create you know, equality and design to make sure that designs for everyone.
Diane Andy mentioned climate change and curious how you design in a world where extreme weather events are happening more frequently beyond just putting everything on stilts, because that's certainly one way to do it, But that I mean, is that the is that like the only option for low lying environments or even Lower Manhattan or Red Hook in Brooklyn.
Do you not develop?
Well, Look, you put your finger on probably the most critical issue of our time, which is climate change, and this is impacting all aspects of the built environment. You know, percent of global emissions and CO two are from buildings. I mean, it's a huge issue. It's both how we make the buildings, the concrete and steel and all of that.
So this whole idea of you know, adaptive reuse that's that's really literally, we can cut in half the amount of emissions from our buildings if we can reuse buildings, so that's a big piece. And then of course creating efficiency in our buildings, so you know, that's one piece of it. And you're bringing up resiliency. And the point there is that we have to think about the climate not just this year and next year, but in the
next fifty years. And so we need to create the systems and the design, the orientation of the building that is going to allow that building to be able to be usable and valuable into the future.
I love that this idea. Andy, come on, I got a thirty seconds here.
You know, climate change is the moral and business imperative of our lifetimes. As Diane said, forty percent most people think that autobiles are in industry are the largest. It's buildings that produce the most amount of CO two. We have put in place that by twenty thirty all of our buildings will be net zero, and that's really really important. That's the focus for us. And I'll give you an example of one quick project. San Francisco Airport, the first
net zero zero waste airport in the United States. So even publicly like you were mentioning Tim, it's coming that municipality is a pushing for net zero.
It's a nice thing to hear, an upb thing to hear, because it does feel like sometimes it's a tough climb, especially when it comes to climate change. Andy Cohen Diane Hoskins, co CEOs at Gensler their new book. Check it out, Design for a Radically Changing World. It'll definitely get you thinking when it comes to your neighborhood and just developments in general. This is Bloomberg