Why is there an opportunity for online lead generation within commercial real estate? What are some areas that you can be investing in an industrial that are showing very good solid returns and low vacancy rates? Max Fisher, an industrial broker with BRD Realty, shares his knowledge.
Tell us a little bit about you.
My area of expertise is industrial real estate in Tucson, Arizona. So, the bulk of my work is leasing and sales of business parks, industrial land, industrial user buildings, distribution, and manufacturing type of space, and then I also invest on the side as well.
Why do you think there's an opportunity for online lead generation within commercial real estate? I think there is a discrepancy right now with the people who have been in real estate for a while, and I don't know if discrepancy is the proper word, but there are the old-school people who've never used social media, and newer people are doing that and some people are doing TikTok, Instagram videos, etc.
When I got into commercial real estate, I noticed that most of the brokers are boomers or over the age of 40 or 50 and they are using kind of the classic lead generation models of cold calling, networking, and door knocking, and while those methods do work, and can be very successful, I thought there's a lot of opportunity with online lead gen, as well. So, what I did is I built a website called industrial Tucson.com, and I started promoting that website on Google the whole idea was people are going online to search for industrial real estate or commercial real estate so I wanted to be the first site to pop up. Well, in 2019, that proved to be true. And I started generating a ton of leads, I earned my first six-figure commission from a Google lead, I've never spent more than 300 bucks a month on Google AdWords and then my website shows up organically through SEO, which means search engine optimization. So, it's basically just taking a model that's used in every other type of industry, including residential, but applying it to commercial real estate, where no one else is doing it.
I know that it takes time to get the proper ads going for the proper ROI, did it take you a minute? Did you educate yourself on online ads? How did it go?
For the first, I would say a year or two. I was just doing it organically. I wasn't even paying for ads because I was starting commercial real estate and I didn't have any money. So, it was just showing up organically. And then I started paying for ads in 2019. And I wish I would have done that sooner because you kind of just fast-forward my lead generation.
How were you showing up organically? Were you writing blog posts?
First of all, there's not much competition in commercial real estate for SEO. So, the bar has already been set pretty low but then writing blog posts and then taking those posts, and posting them on to LinkedIn or Facebook or Instagram would drive traffic to my site, and then Google started ranking me higher because I had more traffic on my website.
Where do you think there is an opportunity for investing in the industrial market right now?
It's a tough time to invest in commercial real estate right now mostly because interest rates and the banking world are completely different and seller expectations are different today from one that where they were three years or two ago, but two deals that I've recently invested in, they're both land deals, and they're both infill sites. These are sites that are zoned industrial, but they also have the ability to build some retail. The first one was split up into four parcels to industrial and then to retail pads for drive-throughs or any other type of retail uses. So, one of those pads is in escrow now and the buyer has gone hard, that's done well. The other one, we bought for pretty cheap, because we bought it when the seller has it in escrow with the Self-Storage developer, and then the Self-Storage developer backed out. And then that was also during a time when the Fed kept raising rates in the economy seemed like it was going pretty well. So, I think like infill industrial land, and I'm also just a big believer in a Flex business park, small to medium bay, class B, class C type of industrial.
When you can build retail, does that mean that you're buying industrial much closer to the city because that retail will have to be leased if you have to get retail tenants there? How do you approach that?
Part of the appeal to me is we're buying basically at an industrial price, and then selling part of that property at a retail price, which is higher. So, these are in areas where there's a lot of upcoming industrial development. In both of these areas where we bought these two parcels of land, there's a lot of industrial development either they're tilting walls right now, or there are proposed projects that are coming up, or spec projects that have already been leased. So, I feel like we're ahead of the curve, just enough to buy it at a good price, but also where there's enough activity, employment, and traffic to drive retailers to these sites within the next couple of years.
Is industrial, being overbuilt right now? Where do you see the lease rates going? Let's elaborate a bit on that for the people that want to focus on industrial because it is also a very popular asset class right now.
When I think of industrial being overdeveloped, there are two different types of industrial products: there's small to medium bay and then there's the bigger stuff. The small to medium base stuff really hasn't been built so, I don't think it's being overbuilt. I think that there's a supply issue and even in some instances, these business parks are being demolished and redeveloped for mixed use or other types of uses. But I do think in the bigger base, maybe in some other markets, some bigger markets, where there's a lot of lands, and there's a lot of spec development, possibly being overbuilt, but I'm very confident in business parks, and I don't think they're being overbuilt, and that's fine, like Class B, Class C, industrial business parts.
Can you share how one would approach if they have a vacant space? And of course, I know it depends on the market and demand and everything else. But have you seen people lose properties? Because a tenant has left and it took a few years to get another tenant? How would you make sure as much as you can, that does not happen with your property?
I haven't seen an industrial or vacancy here is less than 2%. So, I really don't see that happening too much now. Maybe in the bigger stuff, like I touched on earlier, but I just don't see that happening in small to medium big industrial.
You touched a bit on how the banking turmoil is affecting industrial. Let's dive a little bit deeper on that subject.
Transaction volumes for industrial sales right now are maybe a fraction of what they were a couple of years ago. So, part of it is the banking turmoil, banks are tightening but also, the other aspect of it is interest rates. So, to buy a property that you were buying two years ago, your debt is much more expensive, today, that's making it more challenging to buy lease investments and that's part of the reason I bought those two land sites.
What is happening to the people that have these 3, 5, 7-year loans that were fixed, and they're coming up right now?
I don't know that it'll affect industrial too badly because rents have gone up and there's no vacancy. So, I think that'll hit the office and there'll be some pain in the office market. Retail is a mixed bag, you may see some pain in your bigger box spaces. But generally speaking, retail is strong, and industrial is strong so, there may be some pain with those who are very leveraged in industrial but we haven't seen it yet and until that day comes, I don't think there'll be too much pain.
What are some of the things that we should keep in mind as property owners to make sure that we put on the lease and some things that are really non-negotiable with regards to industrial?
Having space already clean and marketable for those prospects is most important. One of the things that we actually do is we know who that tenant wants more warehouse than an office. So, sometimes when a space comes available, and there's more office build-out, just demo it out before you even take it out to market. Another key thing for industrial is if there's some way that you can build some type of yar or industrial outdoor storage to complement that building, that's a great value add to a property, you can even get higher rates and take some unused land and just create some more income that way. Overall, just creating a space that's clean and marketable to your prospect with a mostly warehouse-less office is key.
Is there anything within the actual lease that you think is important for property owners to keep in mind with regard to leasing to the tenants?
Every tenant is different. We have a general lease form. If a tenant pushes back on some things be flexible or maybe CPI increases in this environment.
Max Fisher
twitter.com/maxfisherRE
www.industrialtucson.com
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