To further Leverage.com’s mission of democratizing knowledge about commercial real estate, we started an interview series with all kinds of CREF pros: everyone from multifamily and medical to cannabis and construction. This time we connected with Hasier Larrea, Founder and CEO of Ori, a company that designs and installs space-saving, transformable furniture and architecture.
Here’s how our conversation went:
Joseph Rauch: Great. Well, thanks so much again. And yeah, I’ll start. At Leverage.com, we’re super focused on commercial real estate investments. And obviously, I noticed all these different, very well-known developers and investors you’ve worked with. How has Ori helped them increase their profits, whether it’s just getting more for the spaces they’re investing in, or maybe being able to sell more units or lease up at a faster rate?
Hasier Larrea: Yeah. So I mean, first of all, think about Ori basically as a toolkit that allows you to multiply a space. Now the moment you multiply space, you can look at it from the renter lens or from the developer lens.
A hotel room furnished with Ori Products | Image Provided by Ori
From the renter lens, at the end of the day, you need to think that the moment you multiply space, and you make a smaller space feel like a bigger space, it’s always going to be more affordable. Because the biggest cost of a condo or a rental apartment is the square footage. The bigger the square footage, the bigger the money you have to spend.
Now, from a developer standpoint, you need to look at it from a different lens. And at the end of the day, what every developer cares about when making an investment like this is the ROI. What is the return on investment? And the way they look at it — the way our partners look at this — is, I would say, from three different angles.
The first one is price per square foot. Even though the solution can be actually more affordable for the tenant, the reality is that from a price per square foot, you can charge more by making these smaller units feel like they were much bigger. So the price per square foot is number one.
Number two is the — as you very well said — the speed to lease, if you can differentiate your property from the property across the street and your units are more functional, you can lease faster, which has a clear effect on your performance as a building.
The last one is retention. And when we think especially about tenant retention and multifamily buildings, they have very low retention rates in this industry. Like it’s about 50%, a typical retention rate, which if you were to compare with any other subscription model — we could look at our rental model and subscription model — 50% would be a disaster. But in multifamily, it’s very well accepted. As you know, that’s what it is.
But what if we could increase that 50% to 55%, to 60%, whatever that is. So that’s also another lever you can play. So at the end of the day, think of this as a toolkit for multiplying a space, for multiplying experience of a space, and really kind of tackle those three levers for making a property have better returns.
JR: Awesome. And I want to ask a bit about the kind of markets and types of residents who are interested in Ori because when I first — when I was first introduced to it, I made the assumption that OK, this is probably really only popular in big cities like New York, where it’s so expensive to get a small space, even, and then you want to maximize that space. But I was looking at your portfolio, and I see options in Oakland, Spokane, New Rochelle, Boise. So I wanted to ask you, what do people feel like they’re getting out of Ori, besides the space savings? Because clearly based on your portfolio, it’s not only that it’s just big city people who have this tiny amount of space.
HL: Yeah, I think not. That’s a very interesting point to bring up. Because if you had asked me five years ago, I would have had the same intuition, like, let’s think about New York, San Francisco, Seattle, Boston. And the reality is that we are getting as much or even more traction in places like Fort Worth, Boise and all the other cities that we talked about.
And it’s interesting, because I mean, there can be different ways to analyze that. I mean, we could say that a space is at a premium no matter where you go, in some ways, so the concept of building a building — multifamily building — is usually a concept of taking studios, one-bedrooms and two-bedrooms, and basically creating a mix of them and building a building. And the reality is that the idea of making a studio feel more like a one-bedroom or a one-bedroom feel more like a two-bedroom and two-bedroom feels more like a three-bedroom is a pretty universal concept of value.
We also see that in those secondary, tertiary markets, sometimes the need for differentiation is even higher — and the competition — so that’s something we see, too. So we’re seeing the solution’s been applied in very different use cases.
Also, another intuition people have the first time they see Ori is that Ori is just for micro units, and that couldn’t be farther from the truth, because micro units are definitely a good application for space multiplication, where space is really at a premium.
The Ori Pocket Closet | Image Provided by Ori
But when you look at some of our solutions, like for example, the Pocket Closet, which brings you a walk-in closet on demand at the press of a button, that’s something that you could apply into master bedrooms, whether it’s a one-bedroom, a two-bedroom or three-bedroom. And one thing we learned through our research in that specific example, is that one of the most coveted features in apartment living these days is walk-in closets. But walk-in closets take so much space that they make the rest of the space feel small. So what if we could bring you the functionality and experience of a walk-in closet without the need for all that space?
So you start seeing trends like that, that are really pretty universal. And that’s why we see with all the different products that we have, how we can tackle cities big or small, buildings big or small, apartments big or small.
JR: That’s great. That makes sense. And then, speaking of using it in different kinds of spaces — not only micro units — that brings me to another question I have, which is, do you think it would make sense, or that there would ever be a demand for developing Ori products for commercial spaces like offices, maybe now that people are starting to come back to them more? Or even potentially certain types of experiential retail spaces, or anything like that?
HL: So, I mean, it will 100% make sense. The question is when we get there because residential in itself, and hospitality, which are the two markets where we are embarked right now, are so large that they’re keeping us pretty busy, and with a lot of exciting growth opportunities.
But the reality is that — and we have a vision video that actually shows some examples of what it would mean to bring the magic of Ori into the specific examples that you brought up, like office spaces or retail spaces – at the end of the day, the way we looked at this back at MIT, where we started the research before we were a company — we did a lot of research at MIT.
And what we used to say all the time, is that urban spaces in general, no matter what type of space, are too valuable to be static and non-responsive. So that applies, for example, to retail spaces. Imagine, what if you could have 24/7 usage of a space where a store like a clothing store could turn at 6 p.m. from a clothing store into a restaurant, the restaurant could turn into a bar at 9 p.m. and the bar could turn into a club at midnight, and then back to the beginning at 9 a.m. club is closed. Now we get back to a store. Think of all the possibilities.
Same idea for commercial. Think about the idea that when we were building an office space, imagine we didn’t have to choose the amount of rooms and the size of rooms. What if we could have an office space that gives us six private spaces that at a press of a button become two kind of bigger spaces, but then go to one space, to six spaces again? What if we could change the space on demand?
So that is the idea — the idea of space on demand. I think that’s what Ori is tackling. We talk about mobility on demand, we talk about entertainment on demand, we talk about all these things on demand. What if we could bring that idea of on demand, which is used when you need it, to a space itself?
JR: Right. Wow, that’s so cool. I want to touch on this because I would have missed it if you hadn’t brought it up. You mentioned that hotels are really big for you. I actually didn’t know that. I was so focused on the multifamily part. How are hotels using it?
HL: So you probably missed it because it’s very, very recent. Our real focus, when we started the company, was residential. But about three, four weeks ago, we announced a collaboration at CES with Marriott International. So when you think about applications in hospitality, there couldn’t be a better partner to do this with. And the idea is, how do you bring this concept of residential into hospitality, with the idea that hospitality and residential are two industries that we’ve seen converging for a long time?
In most cases, we’ve seen residential developers getting inspiration from hospitality. But in this case with Marriott, now you’re seeing hospitality also getting inspiration for residential. And that’s what we are looking forward to seeing some of these applications. There’s some materials online where you can see some of those designs that we did together with Marriott, and you will get a bit of a sense of how you could think of the hotel room of the future between a Marriott and an Ori company.
JR: That’s great. Awesome. Yeah, I mean, this might be different than what it is. But like, in my mind, I’m already picturing, let’s say, I go on a business trip. And you know, you’re in a hotel room, and the bed is taking up most of the space. But maybe it’s cold outside, or maybe because of the pandemic, you want to just have a nice office space. But usually, the way hotel rooms come is that the office is this tiny little table that’s tucked away in the corner or something. What if you just press a button on your phone, and then suddenly, you have this big office space for your business trip?
Ori products allow the same room to become a lounge… | Image Provided by Ori
…a bedroom | Image Provided by Ori
…or an office | Image Provided by Ori
HL: Precisely. And that’s what I mean. Like the challenge is that if you don’t bring technology and multiplication to the space, then you end up compromising on functionalities, which is exactly what you described — the idea that now the bed becomes the bedroom, which is a hotel room, and now your office is a little corner with a small desk, when the reality is that for half of the day, your bed is totally unused. So what if that bed could completely disappear at the press of a button, and now you had this amazing kind of meeting space? And no more awkward meetings or interviews in hotel rooms, which I’m sure many readers have gone through in the past. What if this could be a perfect office space that truly feels like that?
JR: That’s wonderful. Cool. And then I think I just had one more question, which I guess we’ve touched on a bit already. But other than this recent hotel development, can you tell us anything else about any big 2022 plans or trends or anything like that, that is something you can talk about right now?
HL: Yeah, I mean, first of all, we’re going to be doubling down on implementations. Today, we are in hundreds of apartments, but by the end of this year, we should already be crossing that 1,000. Deployed in more than 25 cities already, we expect to add quite a few cities, as you saw on the list. So for us, that’s coming to maturity as a company and really being deployed in so many apartments with so many users. Then we’re going to see — always as we already have innovation in our hearts — so you will see more products and more solutions, especially as we think about products like Cloud Bed, which is one of our newest products.
The Cloud Bed | Image Provided by Ori
We’re going to be looking at how we can embrace some of the input we’ve gotten about things that people want, and definitely you’re going to be seeing new variations, new designs. And then of course last but not least, I think you know, new verticals and hospitality being an example of that, of how these technologies are changing the lives of people in residential apartments. How can they also change the lives of people in other spaces? And hospitality is going to be the first one that you’re going to see.