RIAOC Interview on Industrial Trends

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I was honored to be interviewed during the recent RIAOC meeting. My thanks to Lew Elliott, Mel Wagstaff, and Nick Lieberman for the kind invitation. All are avid readers of this column, BTW. If you’re unfamiliar with the organization - here’s a brief history:
 
“In 1968, a small group of investment specialists led by Art Turner and Woody Johnson formed the Investment Division of the East Orange County Board of Realtors to share ideas and cooperate in marketing investment properties. Today, RIAOC members come from several Southern California counties where our motto is "Success Through Cooperation". The Association provides for the dissemination of information regarding investment real estate and business opportunities. We also provide education through financial, legal, legislative, and technological updates, courses, and seminars on investment real estate and related subjects. We promote cooperation among real estate agents, maintain high standards of conduct and professionalism, and protect individual rights of real estate investment and property ownership.”
 
If you’re so inclined - you can consume the entire interview by clicking the link below.
 
Link to the interview:
https://drive.google.com/drive/folders/1vm61kSzNi0dKISuE3Es_8OkUNAJTVcnA?usp=sharing
 
If you’d prefer the Clif Notes…here goes.
How will the Green movement affect industrial real estate? Industrial real estate comes in two main flavors - manufacturing and logistics spaces. The former is used to make and ship things - the latter to stage, store, and ship. In both genres, raw materials or finished goods must arrive and finished merchandise must leave. Trucks do this. Anything that causes a disruption in trucking creates a kink. Regulations such as the Bus and Truck law, AB-5, or all electric vehicles by 2030…yeah, you get the idea.
 
Has the Pandemic caused an increase or decrease in activity? We hit pause for 60 days and then the turbo-charge button was pressed. Already experienced - pre 2020 - were record low vacancy rates. With the pop in demand because folks are buying items - there is very little vacant inventory.
 
What’s happened to cap rates? They’re the lowest I’ve ever seen - in some cases below 3%.
 
Where does occupancy stand? True vacancy - empty buildings - stand at less than 1%. Yep. 99 of every 100 are occupied.
 
Critical amenities with logistics buildings. Warehouse clearance - minimum 30 feet, hefty sprinkler systems to stop a fire in the warehouse and ample area for arriving, staging, and unloading trucks.
 
What data sources are used to gather market information? We use anecdotal, proprietary, and third party sources. But data these days is a commodity - everyone has access. The “story” is what every owner and occupant seeks.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Commercial Real Estate Deals Abound

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Much of my time is filled counseling family owned and operated manufacturing and logistics companies. Some lease the buildings from which they operate and some own. These closely held entities are typical of our Southern California economy and employ hundreds of thousands of people. Generally a transition is happening - a death, a merger, an acquisition, selling the company, a move out of state - all of which create a commercial real estate requirement. I witnessed many of these transitions in my formative years - which I believed was column worthy. So indulge me as I weave the story. For those readers who own their business, I’m sure the tale is relatable. 
 
My passion for helping small business was rooted in my youth. You see, my family owned a soft drink bottling and distributing plant in Arkansas. Planned was my stewardship as the third generation of ownership. However, my wife and I moved to SoCal and a career in commercial real estate soon followed. Our family business was sold and my father, his mother and two brothers profited nicely. A year later, the enterprise was bankrupt. I guess my Dad’s sale timing was prescient. 
 
I didn’t realize at the time - but a roadmap for my career was was forged. Witnessed were the transitions which occurred during the life of an operation. First, a huge risk was taken by my Grandad in 1930. Yeah. There was a bit of a wrinkle that occurred in that year - the Great Depression. Yet, he moved his wife, three young boys and his dream to Texarkana, Texas to open a Dr Pepper bottling company. During the thirties - Dr Pepper was an unknown soft drink. Schlepping it proved challenging. But the family prevailed. Grandad had to find a property owner willing to take an equal risk - leasing to a start-up. 
 
As the business prospered - Grandad realized he was writing a sizable check each month to his landlord. Sure. The owner risked everything when leasing to a “maybe” but once the company proved viable - where was the uncertainty? Options for Buchanan Bottling Company - whose desire was to own the real estate - were to move and build a new facility or convince the owner to sell. The latter occurred and the era of commercial real estate ownership began. Now, in addition to the enterprise appreciating - the land and buildings also became more valuable. 
 
My Dad and his brothers were now working in the business. One loved it - my Dad - and the other two hated it. You bet. They enjoyed what the lifestyle business afforded them but hated the back breaking toil of delivering heavy cases of soda to retailers. Because of their efforts - the operation was in need of a bigger footprint from which to thrive. But, alas - the manufacturing location - which they owned - was landlocked. In order to gain a bigger swatch of land, they had to convince their neighbor - an A & W Root Beer stand - to sell. They had amazing burgers, BTW, but I digress. A deal was struck allowing the hamburger stand to lease for a period until our company could get city approval and bank funding for the expansion. 
 
My Grandad, as you might appreciate, was a larger than life entrepreneur who had a difficult time allowing the next gen to succeed his tutelage. My dad nearly moved us out-of state just to “show him”. Fortunately, the patriarch settled into retirement and allowed the second generation to assume the reins. During my dad’s years - competitors were purchased, product lines added, and exponential growth occurred. I recall the “growing pains” experienced as dad managed the expansion. 
 
Once my Grandfather died in 1975, an open road appeared for my dad, his mom, and two brothers. The scrutiny under which dad operated was gone and he had a field day! Climaxing in a sale of Buchanan Enterprises in 1986 - the life of our family business ended. A strategic competitor was the buyer of the real estate and operation it housed. 56 years was a great run. The old buildings still stand on State Line Avenue but the vitality of family operation was lost decades ago.  

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.

Five Love Languages - Readeaux

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If ever you doubt the power of digital reach - please consider this brief recap. Flash back eleven years. My bride of 31 years - at that time - suggested I “work out loud” while transacting commercial real estate. Yeah. Me too. What the heck does that mean? Simply, put in digital form those tasks you accomplish daily lest someone searching for “how to” accomplish said task will find you. Boom. Brilliant. 
 
Started was my Location Advice blog which provides the columns you read here. Well. Here’s where the reach comes in. Hiding in my inbox last week was a note from Chad Massaker - CRE Strategist with The Pisaneschi Group at Compass Commercial - Palm Beach Florida! Wow. You see, Chad read a column from two years ago on the Love Languages of Commercial Real Estate. He found it on-line. If you missed it, you can quickly catch up here. http://allencbuchanan.blogspot.com/search?q=Five+love+languages
 
I found Chad’s comments column worthy. So from my new digital connection in Florida - here goes. 
 
“I feel that there is a little bit of each type in each agent, but I am only 2 years in as a CRE agent. Here's what do I know:
 
I've traditionally been the Relationships and Network archetype all of my life in business. I'm not sure how the relationship part plays out once I sell a building to an owner-operator and then they have no need for me for years, if ever again. It's not like my IT company in Atlanta, where conversations we're ongoing. 
 
Def hate the Legalities & Drama archetypes. Talk about people who can't get out of their own way. Probably the arch-villains The Deal types. 
 
Here are a few more I would add to your list: 
 
Good Enoughs: Incredibly lazy agents who post only the bare minimum information on a listing, making you call them for the info, which 1/2 the time they don't have. "What do you mean you don't know the clear height of the Warehouse you have listed?" They also take advantage of the owner's ignorance of how real estate is marketed - not just listed, but marketed. 
 
Ignorers: Agents, who with a high degree of certainty, never answer their phones and only rarely (if ever) answer their texts or emails. These also tend to be the same people that leave For Lease signs up on their building and listings live on CoStar despite being at 100% capacity. I love these types. they give us a lot of business.
 
Lifetime Realtors: Instantly recognizable when speaking with Entrepreneurs, Owner-Operators, etc. on the buyer/tenant side because they have never run a business before. Their knowledge drops off of a cliff outside of real-estate. Real Estate was probably their first career and it is all they've known. Also, these people tend to be Relationship and Network types in my experience.”
 
Well done, Chad! I’d say there’s a news organization in South Florida that would publish your writing. 
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 

Takeaways from CRE Conference Season

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Every year, about this time, the commercial real estate industry congregates for conference season - a time to gather, learn, and network. 2020 found us attempting to accomplish this virtually. I’ve embraced virtual meetings in a big way but conferences just don’t work. Sure. The learning sessions are ok but the real fun of a convention is passing someone in the hall on the way to dinner and inviting them to come along or grabbing a quick cup of Joe with an acquaintance from another market. Lost when conducted virtually are these chance encounters. 

Annually, two or three of these decorate my docket - the Lee & Associates Summit, Society of Industrial and Office Realtors (SIOR) and another. The “another” this year was the Commercial Real Estate Influencers (CREi) Summit. But others such as NAIOP, CCIM, Crew Network, ICSC abound. If so inclined - one could bounce from one to another for the entire month. But two - this year - were enough! 

What’s in store for our industry in the years to come is the subject of this column.
 
Diversity. Commercial real estate brokerage has been a male dominated industry for decades - and once was tightly held among families such as the Daums, Dunns, Cushmans, Beitlers, Klabins, and others. Akin to an apprentice program within trades - our craft was passed to the next generation - primarily males. But that is changing! I say, Bravo! It can’t happen soon enough. Half the participants in the CREi Summit were women and minorities. Slotted among the leadership team for this event were several women who have made themselves quite famous through social medial marketing. Commercial Real Estate Women (CREW) Network incoming president, Barbi Rueter from Tucson, Arizona along with Casey Flannery from Memphis, Tennessee presented at the SIOR conference. SIOR Global CEO, Robert Thornburgh has signed a pledge for our organization which can be found here. https://www.crewnetwork.org/crepledge-for-action. I look forward to the days ahead when our business reflects the world.
 
Futurists. There were speakers galore in both of the gatherings I attended. Generally, these are folks who have taken down Bin Laden, scaled Everest without the aid of oxygen, or a similar super human feat. Motivation is the theme. Gained from their experiences are applications to our business. Certainly, some of my deals this year have been tantamount to a K-2 summit attempt - but I digress. This year, however, found our attention peaked - sorry - toward the future. David Nour has written a new book, entitled Curve Benders. I found the story of Amazon’s rise to prominence especially intriguing. You see, we all plateau in our careers. Finding a way to bend our “curve” upward is the challenge. Southern California’s own Mick Ebeling of NotImpossible Labs. “Commit and then figure it out” is Mick’s mantra. Please look into some of the “impossibles Mick has made possible”. Truly mind blowing!
 
Story Telling. Everything is so much better when a story is told. I suspect many of you are like I am when I say - stories are memorable when they inform, educate, or entertain - oh yeah, and they’re not too long. Sure, I can tell you I closed a tough deal similar to the assignment we are discussing. But, if a story is weaved into the fabric - the experience is forever with you. Bolstered by a beautiful baritone voice and riveting stories - Phil Darius Wallace ranks within my top three of BEST speakers I’ve ever enjoyed. Still within my psyche are his descriptions of the lovely eagle and the chicken who didn’t realize her potential. You see, the chicken had been told her entire life she was a chicken - when in fact she was an eagle. My, what soaring goals she missed laboring under someone’s opinion of her.
 
Wow! What an incredible two weeks. But, I’m happy to be home and invigorated for the months ahead.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.