Expert Advice: Navigating the Industrial Real Estate Market with Chad Griffiths

[00:00:00] as a result of numerous things, geopolitical tension, supply chain bottlenecks when we

[00:00:05] went through the pandemic and all the things that we had to deal with on manufacturing

[00:00:09] snarls and then getting across the ocean. That's prompted a lot of companies to now

[00:00:14] look to reshore onshore manufacturing back to North America. So there's a lot coming

[00:00:21] to the US, there's a lot of manufacturing going to China or straight to Mexico for

[00:00:26] that that friend shoring or near shoring. Canada is going to get manufacturing, but the bulk

[00:00:33] of it is coming back to the US and this is leading to and a lot of its incentive to the

[00:00:40] US is not foolish. They know that they need to protect that supply chain and make sure

[00:00:46] that they have goods. So the CHIPS Act, the Inflation Reduction Act, there's a

[00:00:52] third one as well that contributed a considerable amount of incentives and you see that TSCM,

[00:01:00] the big semiconductor manufacturer in Taiwan, they're spending $40 billion in Arizona to

[00:01:08] bring CHIPS on there. If you add in all the EVs and the battery tech and then even just

[00:01:14] traditional manufacturing, the amount that's happening right now in the US is staggering

[00:01:21] and I think it's so exciting from the standpoint that that's a lot of investment that's going

[00:01:26] to be made in North America, which we should all benefit from.

[00:01:32] Welcome to the Brick and Mortar Money Show. The podcast dedicated to helping business

[00:01:37] owners and professionals achieve wealth, autonomy and control through commercial property

[00:01:44] ownership. Join us as we unlock the power of real estate to transform your business

[00:01:49] and investment strategies. Whether you're seeking to expand, invest or gain more freedom

[00:01:54] in your entrepreneurial journey, this is your destination for insightful stories,

[00:02:00] expert advice and actionable strategies. Welcome.

[00:02:05] Hey, welcome listeners today. I have the distinct honor and privilege of having Chad

[00:02:11] Griffiths today on the show. Chad is a commercial real estate expert, but he

[00:02:17] specializes in the area of industrial, the industrial asset class. And I'm excited to

[00:02:23] really learn from Chad and pick his brain because we spend so much time talking about

[00:02:28] multifamily and syndications and buying your own building. We spend very little

[00:02:33] time on that whole class of real estate and it's a huge sector. So Chad, welcome

[00:02:38] to the show today, man.

[00:02:40] Yeah, thanks Paul. Excited to be here and look forward to talking anything about

[00:02:44] industrial real estate.

[00:02:46] Yeah, yeah. Well you shared before we hit the record button that you live, sleep

[00:02:51] and breathe it. So I want to find out how you got to this point in your life.

[00:02:55] I know you're really successful. You've done a ton of transaction over the last

[00:03:00] like 20 years almost. So you're really dialed in, but how does one fall into

[00:03:04] industrial real estate? I mean, that's kind of like a very niche place to end

[00:03:08] up, right?

[00:03:09] Yeah, falling into it is a great way of describing it because it was purely

[00:03:13] accidental. I bought and sold a few houses out of university and I wanted to

[00:03:19] do real estate. So in 2004, I actually started in residential real estate as an

[00:03:25] agent and I did that for a year and didn't see a long term path on it. So

[00:03:29] in 2005, I made the switch over to commercial and I thought I'd be in

[00:03:34] office towers or shopping malls or selling investments. I didn't even think

[00:03:39] of industrial as an opportunity at the time. It just so happened that our office

[00:03:44] was heavily focused in industrial. So by sheer luck and it turned out to be an

[00:03:50] awesome accident because it's shaped my entire career in life. But that's why

[00:03:57] it's because everybody was focused on industrial. It just seemed natural that

[00:04:01] if I was going to learn that industry, it'd be from people that are

[00:04:04] doing it. So that was almost 20 years ago. And fast forward now, I'm partnering the

[00:04:11] firm, done a considerable amount of transactions and then I also started

[00:04:15] investing in property industrial properties myself back in 2014. So with

[00:04:20] a small group of partners, we've been trying to add a property every year.

[00:04:24] And our portfolio right now is about 165,000 square feet worth of industrial

[00:04:29] property. So I, like I said, I work in it every day still as an active broker,

[00:04:34] but I have my own portfolio. And then I have a YouTube channel where I talk

[00:04:38] about industrial real estate all the time. I'm always reading from morning

[00:04:43] until night. I'm reading about industrial real estate on trends or

[00:04:46] what's happening in the industry. So it's not an understatement to say

[00:04:49] that I do live, breathe and sleep industrial real estate.

[00:04:54] Oh, that's awesome, man. So we cut you open and you're going to bleed

[00:04:57] industrial. That's cool. It's really interesting though, as you're talking,

[00:05:02] I'm just reflective about how you say it was kind of an accidental journey.

[00:05:06] So many successful business owners and entrepreneurs that I have interviewed

[00:05:11] and just know in my own personal life have gone the accidental route.

[00:05:15] You think you're going to go one way and you got this plan and this vision

[00:05:19] and you're doing everything you know to do. And then all of a sudden

[00:05:23] you hit a fork in the road. Sometimes you get knocked, you know,

[00:05:27] you get blindsided by the truck or whatever and it knocks you in a

[00:05:30] completely different direction. You're like, what am I doing here?

[00:05:32] And then all of a sudden it turns out to be such a serendipity,

[00:05:35] right? And such a blessing. So it's kind of cool to hear that,

[00:05:38] you know, your story too.

[00:05:40] I've said serendipitously numerous times actually describing that journey.

[00:05:44] It was complete lock in accident, but it's partly it was being

[00:05:49] in the right place at the right time. It was I wanted to make a switch and

[00:05:55] industrial has a lot of parallels to other subcategories of commercial

[00:06:00] like office and retail, but on the other hand, it's completely different as well.

[00:06:03] So yeah, it's been very exciting.

[00:06:06] I'm very glad that I made the decision that I did to do it because

[00:06:11] like I said, it's shaped my entire life.

[00:06:14] Well, that's fascinating. So let's dial it back a little bit and educate a lot

[00:06:19] of our listeners on what is the industrial asset class?

[00:06:22] I mean, when you say industrial, what does that mean?

[00:06:26] That's a great question. And the answer to that question has actually

[00:06:30] changed and evolved over the 20 years that I've been doing it now

[00:06:34] from when I got into the business, I knew very little about industrial,

[00:06:38] but if I had to picture it, I would have thought heavy industrial,

[00:06:44] like a mechanic shop or a welding shop. When I was younger,

[00:06:48] I worked in a steel factory. So it's just massive steel factory with

[00:06:52] welding and cranes, and it was dirty. That's probably what I would have

[00:06:56] thought about 20 years ago. But now let's evolve to,

[00:07:00] and this is largely because of e commerce, it's evolved to when

[00:07:03] people think of industrial real estate, they tend to think of large

[00:07:06] warehouses now. So it could be a big Amazon fulfillment center

[00:07:10] that probably went up in everybody's backyard.

[00:07:14] If you're in a major city listening to this, you probably have an

[00:07:17] Amazon building that just went up, probably outside of an airport

[00:07:21] or close to a major highway. But you can actually see that building

[00:07:24] now. Whereas historically, a lot of these buildings were deliberately

[00:07:28] tucked away in industrial parks out of the public purview.

[00:07:32] So it wasn't front and center. So people really had to think

[00:07:35] what an industrial building was 20 years ago. But now with warehouses

[00:07:40] everywhere, like in my market, if I'm driving from my office to

[00:07:43] the airport, all I see is warehouses. So like that it's changed

[00:07:48] quite a bit. What I like to how I usually describe industrial

[00:07:52] because even though industrial is a subcategory of commercial

[00:07:56] industrial also can be broken down further and there are

[00:07:59] differences. So I still think manufacturing is one of the

[00:08:02] major categories that's and I describe a manufacturing

[00:08:06] building as anything where things are made. So that can be

[00:08:11] a little widget shop. It can be the Boeing factory in Everett, just

[00:08:16] north of Seattle and everything in between anything where

[00:08:19] something is made assembled, manufactured. I'd call that a

[00:08:22] manufacturing property and a warehouse would be anything

[00:08:26] where things are stored. And Amazon buildings a good example

[00:08:29] of that. Things come in in one truck, thousands of trucks,

[00:08:33] really they get sorted, they get repackaged. They might sit

[00:08:37] in the warehouse for an hour, they might sit in the warehouse

[00:08:40] for several weeks. But at some point, they're just used to be

[00:08:44] stored and then they get shipped out to the end user or

[00:08:47] to me if I'm having an Amazon package delivered to my house.

[00:08:50] So that's the warehousing side. And that's the one

[00:08:53] that's become very prevalent over the last few years just

[00:08:56] as a result of that e commerce. And then the third one that

[00:08:59] I also think is a very big sector of the market is flex

[00:09:03] space. And for flex, I would say that that's any industrial

[00:09:09] building that's zoned industrial, it's an industrial

[00:09:13] building, but it's used for purposes other than

[00:09:15] manufacturing or warehousing and good example. I own a

[00:09:19] flex building, which is this is a perfect example for it.

[00:09:22] It's an industrial building. It's right on a main road,

[00:09:25] but it's still in an industrial park. And our

[00:09:28] tenants in there, we have an office user, a hot tub

[00:09:31] retailer, a flower shop, a cabinet shop, and an equestrian

[00:09:37] store. So none of those uses are actually industrial by

[00:09:41] nature, but they're in an industrial building. So flex is

[00:09:46] also very common. There's there's all sorts of buildings

[00:09:49] that you wouldn't think would actually be zoned

[00:09:51] industrial, but that also makes up a big section of the

[00:09:53] market. Do you think the the rise and you talk about

[00:09:57] Amazon in the last 20 years? So you've seen you've seen

[00:10:00] all these massive changes in how consumers shop, right?

[00:10:04] Where we used to go to the shopping mall, which is a

[00:10:09] it's an industrial commercial. It's a commercial

[00:10:11] building. You would probably wouldn't classify this

[00:10:12] industrial, but commercial space. And we've since

[00:10:17] changed our habits to your point going to Amazon or

[00:10:21] going online and having something delivered to us for

[00:10:24] at least at least the things that are sort of the

[00:10:27] day-to-day things that we need where there's no experience

[00:10:31] involved in it, right? Right now back in the day, we used

[00:10:34] to go to the mall for the experience. And now generally

[00:10:38] most experiences you get at malls aren't very good

[00:10:41] anymore. No one wants to go there right in the old

[00:10:43] traditional mall. So has that is that resulted in a

[00:10:48] major shift in in industrial moving towards

[00:10:52] industrial and how does how is that impacting like these

[00:10:58] malls and things? Is there a use for those in industrial?

[00:11:01] What are you seeing there? I know I'm kind of a little

[00:11:02] out around the map here on the question, but I'm kind of

[00:11:04] trying to find my find my question. But we've just

[00:11:07] changed the way we've we've done business as a

[00:11:10] consumer and as a nation right as a world where it's

[00:11:14] brought to us instead of we're going to that. And so

[00:11:16] that's that's got to reflect massively in the in the

[00:11:18] commercial real estate world. Yeah. And I don't see that

[00:11:22] trend reversing or even slowing down anytime soon.

[00:11:27] Speaking anecdotally, I order almost everything online now.

[00:11:31] I don't for the reasons that you mentioned, I just

[00:11:32] don't want to go to a shopping mall and have to

[00:11:35] find parking and the parking lots are always stressful

[00:11:38] and then you've got to weave through all the

[00:11:40] traffic and stand in line and then do that all in

[00:11:42] reverse getting out. That's not there's nothing about

[00:11:45] that that's appealing to me when I can go online,

[00:11:48] click a couple buttons and it gets shipped to me a

[00:11:50] day or two later without any of that hassle. It's

[00:11:54] speaking just as a consumer myself, and I understand

[00:11:57] that there are a lot of people that still like the

[00:12:00] actual art or act of shopping in a shopping mall

[00:12:05] or retail center. I get it. I think that there's

[00:12:07] still some things that they're always going to be

[00:12:10] in need for retail buildings. The shopping mall

[00:12:14] is going to be interesting because you're right,

[00:12:15] there's a lot of abandoned or really underperforming

[00:12:18] shopping malls. That's a topic in itself because

[00:12:22] there's no easy answer on those. In theory, they

[00:12:26] might be able to be redeveloped into a distribution

[00:12:30] center but you run into all sorts of challenges

[00:12:32] on the building wasn't engineered to have that

[00:12:35] much traffic so the parking lot, the entrances,

[00:12:41] nothing was designed to have that much industrial

[00:12:43] traffic coming to it and probably the even larger

[00:12:47] issue that people have to get around is the

[00:12:50] shopping malls are usually in dense neighborhoods

[00:12:52] so there's a lot of community pushback that

[00:12:55] comes when a shopping mall gets converted into

[00:13:00] a distribution center and you have all the

[00:13:01] truck traffic and everything backing up. It

[00:13:04] causes a lot of concerns.

[00:13:06] Okay, yeah well that does make sense. I mean

[00:13:09] everything always seems to go back to the basic

[00:13:11] laws of economics, right? Supply and demand,

[00:13:14] you have an oversupply of something then price is

[00:13:17] going to come down and you have demand out of

[00:13:20] balance, it goes the other way and in a free

[00:13:24] market where those things can flow, the price

[00:13:26] and the terms and things like that, then you

[00:13:28] create options until you get a balance. Imagine

[00:13:32] it's pretty difficult for developers to gauge

[00:13:36] the market though, right? Because they're making

[00:13:37] decisions. You have to find if you're building

[00:13:40] a large industrial facility, you need a decent

[00:13:45] size piece of land, right? I mean depending on

[00:13:48] obviously the size of the building. If you're

[00:13:49] building a giant Amazon warehouse, it's huge.

[00:13:52] If you're building maybe a very small in your

[00:13:55] world probably 10, 12,000 square feet, 20,000

[00:13:58] square feet is probably very small. We have a

[00:14:01] lot of people that are buying and building

[00:14:03] these flex type warehouse buildings for their

[00:14:06] business and then to lease out part of the

[00:14:08] space to other businesses and that sort of

[00:14:11] thing, which is in great demand. But you have

[00:14:14] to as a developer, you have to acquire the

[00:14:17] land, you have to make sure you have the

[00:14:19] zoning, you have the planning and all that.

[00:14:21] This is years in advance of actually taking

[00:14:24] the first shovel to the dirt, right? To even

[00:14:27] start this construction process. So it's not

[00:14:30] the easiest thing to navigate, right? As a

[00:14:32] developer to try to imagine what's going on

[00:14:34] in the market and the economy. So it's not

[00:14:39] surprising that you see it go back and forth

[00:14:41] until you get to the point in a cycle where

[00:14:43] we have a little oversupply and then you

[00:14:44] get to the point where there's an undersupply

[00:14:47] because you've got to make those decisions.

[00:14:51] Tell me this, just to scale it down a

[00:14:54] little bit from thinking about like a lot of

[00:14:57] our investors are business owners. Some of

[00:14:59] them have small manufacturing businesses,

[00:15:01] some of them are in different segments. You

[00:15:04] mentioned the port, we have a client who has

[00:15:07] a small trucking business and he bought some

[00:15:08] warehouse space by the port because he

[00:15:11] wanted to get in the flow of he was a

[00:15:14] short-term trucker basically would just he

[00:15:16] and his company would take when ships

[00:15:18] would come in in the Virginia Beach area

[00:15:20] of Virginia, he would offload the Norfolk,

[00:15:22] offload the ships, move it into temporary

[00:15:24] storage in his warehouse and then the

[00:15:26] long-term guys would pick it up and take

[00:15:27] it out. He didn't own the warehouse for a

[00:15:30] long time but it's all an opportunity and

[00:15:32] it got in that stream of cash flow in the

[00:15:36] supply chain I guess you would say.

[00:15:38] What about the investors that are

[00:15:41] thinking okay well I can't afford to

[00:15:42] invest in a 500,000 square foot

[00:15:46] warehouse. How do I get involved in

[00:15:49] that? You mentioned you do a lot of it

[00:15:51] yourself and you guys have about at

[00:15:53] this stage about 165,000 square foot so

[00:15:56] it's a lot of space you have but how

[00:15:58] did you get started in it and how do

[00:16:00] other people get start to maybe

[00:16:02] diversify? They love real estate, they've

[00:16:04] got some residential, they've got some

[00:16:05] multi-family, they're done with the

[00:16:07] toilet thing and they want to get out

[00:16:08] there and then get you know some of

[00:16:10] these tenants that never call in sick.

[00:16:14] Yeah and I'm also not in that camp

[00:16:17] of buying a large distribution center

[00:16:18] either that's way out of my wheelhouse

[00:16:21] that's big institutional groups that

[00:16:23] are playing in that space. The first

[00:16:25] property I ever bought was a 2000

[00:16:27] square foot industrial condo so very

[00:16:30] similar to like a residential building

[00:16:33] that has individually titled units in

[00:16:36] there sometimes they're like strata

[00:16:37] units or condo units they're called

[00:16:39] but this was very similar it was a

[00:16:41] 40,000 square foot industrial building

[00:16:43] but it was

[00:16:45] separated into individual titles and the

[00:16:48] first one I bought was 2000 square

[00:16:49] feet it was 400 grand and so it

[00:16:52] looked really the same price as a

[00:16:54] house but that's what got me in

[00:16:56] the door actually I still own that unit

[00:17:00] which is everything else that we've

[00:17:02] bought since has been

[00:17:04] larger not large like a distribution

[00:17:06] center large but

[00:17:08] like 20 30,000 square feet at a time

[00:17:10] has been like our average transaction

[00:17:12] recently but that 2000 square foot

[00:17:14] one we still have it

[00:17:16] and I've only had two tenants in

[00:17:18] that building the entire time that

[00:17:20] I've had it so we had one company

[00:17:22] as like a kitchen equipment repair

[00:17:24] company in there for

[00:17:26] six years or so and then we had the

[00:17:28] newest one we have and there's like a

[00:17:30] a small machine shop and I go buy that

[00:17:33] building maybe once a year

[00:17:34] that's that's all that I go buy that

[00:17:36] building it's very

[00:17:38] easy to manage that and some people

[00:17:40] say don't chase small deals because

[00:17:42] it's just as hard to do as small

[00:17:44] deal as it is to do a large deal

[00:17:46] and I can I can appreciate that

[00:17:48] sentiment but

[00:17:49] I don't regret buying that unit one

[00:17:52] little bit and it hasn't been a lot of

[00:17:54] work

[00:17:55] it was it was work getting it started

[00:17:57] and doing that first one because

[00:17:59] we had to show that we're capable of

[00:18:01] of managing

[00:18:03] an industrial property that wasn't

[00:18:04] residential and that

[00:18:06] you've got to prove to banks you've

[00:18:07] got to prove to lenders

[00:18:08] so I think starting small is

[00:18:11] is a great way to get into it and

[00:18:14] you're also mitigating your risk

[00:18:16] you know on that first one that one

[00:18:17] that one was just one partner and I

[00:18:19] bought that one

[00:18:20] and we each put in 50 grand or something

[00:18:23] I think is what we each put in for that

[00:18:24] one

[00:18:25] and our exposure on that was

[00:18:29] pretty limited like we had a three

[00:18:30] hundred thousand dollar mortgage

[00:18:32] and and some condo fees like even if

[00:18:34] that space went vacant

[00:18:36] it's not it would hurt because you

[00:18:38] lose all that cash flow and then

[00:18:40] you've got debt service and other

[00:18:42] expenses but that wouldn't have

[00:18:43] destroyed either one of us we could

[00:18:45] have just kept that going

[00:18:46] as long as we needed to until we

[00:18:48] found another tenant

[00:18:49] so I think starting small and

[00:18:51] industrial is actually a great way to

[00:18:53] to get into it understand it

[00:18:57] and not put too much exposure into it

[00:19:00] because this might be a little

[00:19:02] controversial to say as well as that

[00:19:05] I don't think most people should get

[00:19:07] into industrial

[00:19:08] I would actually say that and I've

[00:19:10] said this numerous times too is that

[00:19:12] industrial should actually scare the

[00:19:14] average investor

[00:19:15] because there are mistakes that you

[00:19:17] can make that get

[00:19:18] heavily magnified and where like let's

[00:19:21] say that property

[00:19:22] was times 10 of four million dollar

[00:19:24] property and that went vacant

[00:19:26] we only had one tenant in there all

[00:19:28] of a sudden that burn rate would have

[00:19:30] been

[00:19:30] more than we could have sustained so

[00:19:32] that that would have crushed us had

[00:19:35] that been our first property we

[00:19:36] hadn't built up our reserves

[00:19:38] just put all of our investment from

[00:19:39] that one property that could have

[00:19:42] crushed us so I think having a

[00:19:45] healthy amount of fear is actually

[00:19:46] a good thing in terms of

[00:19:48] understanding that there is a lot of

[00:19:50] risk that can come in an industrial

[00:19:52] and any investing for that matter

[00:19:54] like no matter what you're investing

[00:19:55] in there's risk

[00:19:56] but industrial isn't necessarily common

[00:19:59] risk it's not what someone might

[00:20:01] think of as being like oh yeah I

[00:20:03] know that interest rates could go

[00:20:04] up that's a risk

[00:20:05] it's more more risk of what happens

[00:20:07] if you can't find another tenant

[00:20:09] what happens if that building was

[00:20:10] built specifically for that tenant

[00:20:12] that's in there right now

[00:20:13] and when they leave you can't find

[00:20:15] another tenant for it

[00:20:16] like that that's non-systemic risk so

[00:20:19] like that's that's a really big issue

[00:20:21] that I think people need to be aware

[00:20:23] of but if you're prepared to spend the

[00:20:27] time and effort and energy and

[00:20:28] really get to understand everything

[00:20:30] and you're prepared to start small I

[00:20:33] think that that's just the best way

[00:20:34] to do it myself and that's

[00:20:36] interesting what I did the other way

[00:20:38] to do it is look to

[00:20:40] partner with somebody partner with

[00:20:41] somebody that's done a project like

[00:20:43] that in your market perhaps they're

[00:20:45] looking for an equity partner

[00:20:47] perhaps it's just you pay them a small

[00:20:49] management fee and you guys go in

[00:20:51] equally there's all different types of

[00:20:52] ways to set up a system like that

[00:20:55] but I would be very reticent and I

[00:20:57] would certainly not recommend to

[00:20:59] anybody to just go and

[00:21:01] and say okay well I've I've bought

[00:21:03] my multifamily I've bought some

[00:21:05] houses I'm just going to go and buy a

[00:21:07] warehouse I would be I'd caution

[00:21:10] people to think twice before doing that

[00:21:14] and if that's what you do want to do

[00:21:17] make sure you've got some really good

[00:21:19] guidance along the way

[00:21:20] like have a have a really good broker

[00:21:22] working with you have a contractor

[00:21:24] that can give you pricing on things

[00:21:26] that might need to change

[00:21:27] have a broker that specializes in

[00:21:29] the area like really

[00:21:32] have a full team around you even if

[00:21:34] it is a small property

[00:21:35] and you once you get to a level where

[00:21:38] you know the market intimately I

[00:21:40] think of it as is you have knowledge

[00:21:42] that the average person doesn't have

[00:21:44] they give you a competitive edge but

[00:21:47] if when you have that competitive edge

[00:21:49] that's smart money in my mind

[00:21:51] dumb money is not knowing what you're

[00:21:53] doing and that's the risk

[00:21:55] that a new investor runs into when

[00:21:58] they if they're not prepared to

[00:21:59] spend that time learning it up front

[00:22:01] that makes total sense I mean you

[00:22:04] know the idea

[00:22:05] of like residential real estate

[00:22:08] investment

[00:22:09] you know if for some reason you

[00:22:12] don't like plunging toilets or your

[00:22:14] management company

[00:22:15] you just don't want to deal with that

[00:22:17] and you're having a hard time finding

[00:22:18] tenants or you just whatever you can

[00:22:20] sell the property pretty easily in

[00:22:22] most markets

[00:22:23] you know and if the market happens to

[00:22:24] be down you might take a little bit

[00:22:25] of a haircut but it's not like

[00:22:27] the end of the world but when you're

[00:22:29] talking industrial space like for

[00:22:31] instance your 2,000 square foot when

[00:22:33] you have one tenant if that one

[00:22:34] tenant

[00:22:35] again doesn't stay for whatever reason

[00:22:39] maybe they become insolvent

[00:22:41] maybe who knows or they just finish the

[00:22:44] term leave the end of the lease and

[00:22:45] leave now you've got this potential

[00:22:48] gap that what do you do and it

[00:22:50] could sit vacant for quite some time

[00:22:52] and it's not like

[00:22:53] you know people are lining up people

[00:22:55] don't have to live

[00:22:56] in a an industrial space right and

[00:22:58] by definition they won't

[00:23:00] and so it's not like there's sort of

[00:23:01] already made market for it so it is

[00:23:03] it is riskier but what you're saying

[00:23:04] is you can mitigate the risk with

[00:23:06] intelligence and knowledge and

[00:23:07] understanding and you made a point too

[00:23:09] that

[00:23:10] I echo this a lot a lot of people

[00:23:14] when people start investing in real

[00:23:16] estate

[00:23:17] everyone knows a residential real estate

[00:23:19] agent right i mean they're

[00:23:21] you know and there's a lot of them

[00:23:22] out there and there's many really

[00:23:23] really good residential real estate

[00:23:25] agents

[00:23:26] but there's just a lot of

[00:23:27] residential real estate agents that

[00:23:28] know

[00:23:29] they know homes but they don't

[00:23:31] necessarily know

[00:23:33] commercial space and it's a different

[00:23:35] world

[00:23:36] and i know that commercial realtors

[00:23:38] generally if the universe in an area

[00:23:40] is maybe a couple thousand

[00:23:42] residential real estate agents there

[00:23:43] might be a hundred

[00:23:44] or maybe a couple hundred of the

[00:23:46] commercial side and then to your

[00:23:48] point even

[00:23:49] narrowed down even more in one

[00:23:50] sub-sector of an asset class

[00:23:53] who know each other and understand

[00:23:55] the market and can help you

[00:23:57] understand the risks that are

[00:23:58] involved and contract negotiation and

[00:24:00] the fact that

[00:24:01] okay well if you buy it then you're

[00:24:04] going to want to lease it to somebody

[00:24:05] but you've got to vet the tenants and

[00:24:07] it's different than vetting a

[00:24:08] residential tenant

[00:24:10] and you know and what comes with that

[00:24:12] and so

[00:24:12] i just want to underscore the

[00:24:14] importance of working with somebody

[00:24:16] who is

[00:24:16] in the commercial world who knows

[00:24:18] what they're doing

[00:24:20] because there are a lot of holes in

[00:24:22] the

[00:24:23] you know mines in the minefield that

[00:24:24] you could step into right if you

[00:24:25] don't know

[00:24:26] but on the other side if it's done

[00:24:28] right with proper guidance and

[00:24:31] eyes wide open and done in a measured

[00:24:33] way it can be a really nice addition to

[00:24:35] your portfolio right

[00:24:36] i think so i've got all of my

[00:24:39] uh all my real estate is an industrial

[00:24:42] right now

[00:24:42] and there so there's there's reasons to

[00:24:45] be afraid of it

[00:24:46] because of the mistakes the downside

[00:24:48] risk but the reasons that i

[00:24:50] that i love it and why i do think

[00:24:51] there's so much opportunity is

[00:24:53] going back to that amazon example

[00:24:55] but that's an extreme because i don't

[00:24:57] have a single tenant that has their

[00:24:58] credit worthiness around a 15

[00:25:00] year lease but generally speaking you're

[00:25:02] dealing with corporations

[00:25:04] so you've you get to understand their

[00:25:05] financial situation by reading their

[00:25:07] financial statements

[00:25:08] what's their revenue what's their

[00:25:10] expenses are they keeping any retained

[00:25:12] earnings

[00:25:13] do they have an expense line item

[00:25:14] for rent and does this

[00:25:16] match up like have they been able to

[00:25:17] pay that rent will they be able to

[00:25:19] afford this

[00:25:19] like you can start doing some

[00:25:20] analysis to give yourself comfort that

[00:25:22] that tenant

[00:25:23] is a going concern and that they're

[00:25:25] going to be able to pay their rent

[00:25:27] and then typically you are getting

[00:25:28] longer-term leases

[00:25:29] so five years is pretty common sometimes

[00:25:32] they're shorter like i have a couple

[00:25:34] tenants are month-to-month

[00:25:36] but those are very those aren't common

[00:25:38] most of them are on term leases

[00:25:40] you're not dealing with issues

[00:25:42] past after five o'clock if it is

[00:25:44] something minor the tenants just take

[00:25:46] care of it themselves

[00:25:48] and it's just much easier to scale

[00:25:50] from a management standpoint

[00:25:52] i've owned some residential a

[00:25:55] number of years ago and you're just

[00:25:57] you're always dealing with issues

[00:25:58] it's just non-stop maintenance that

[00:26:00] you're having to deal with that

[00:26:02] on the industrial side is not that

[00:26:04] there aren't issues because of course

[00:26:05] things happen but it's

[00:26:06] it's much easier to navigate through

[00:26:09] those than dealing with residential

[00:26:11] tenants

[00:26:11] and then one one other thing on the

[00:26:13] tenant profile as well is that

[00:26:15] if you have to kick out a company

[00:26:18] it's business to some extent i mean

[00:26:20] it can be difficult if

[00:26:22] if it's a one-man company and that's

[00:26:25] his livelihood and he's not paying

[00:26:27] rent that

[00:26:28] but that's even rare whereas on the

[00:26:30] residential side

[00:26:32] you have a tenant that's not paying

[00:26:33] their rent first of all like what

[00:26:35] what's the the laws in your area does

[00:26:37] it even prohibit you from

[00:26:39] kicking them out right away or do you

[00:26:40] have to go through a long arduous

[00:26:42] court battle and then if it's at

[00:26:44] christmas they're probably going to

[00:26:46] get it deferred until the next

[00:26:48] next year and it's the there's usually

[00:26:51] some residentially favored laws in

[00:26:54] in the residential side that heavily

[00:26:56] favor the tenant for the most part in

[00:26:59] commercial industrial it's contract law

[00:27:01] so whatever two parties agree to so

[00:27:04] providing it's not illegal that's the

[00:27:07] contract

[00:27:08] so it's there's provisions in there

[00:27:10] that just make it a lot easier to be

[00:27:12] an industrial landlord

[00:27:13] and the process of actually managing

[00:27:16] the tenants and collecting the rent

[00:27:18] and having the

[00:27:20] ability to foresee how long you're

[00:27:22] going to have them as tenants in

[00:27:24] there for and sometimes they're pretty

[00:27:26] sticky so they don't move so you might

[00:27:27] have a tenant for 20 years

[00:27:30] there are a lot of reasons that that i

[00:27:32] really like industrial but i always

[00:27:34] temper that by saying there's there's

[00:27:36] downside risk too so it's it's not

[00:27:39] all perfect it's it's great if you

[00:27:42] have that competitive edge it's

[00:27:45] dangerous if you don't yeah well i

[00:27:48] mean i don't think that you know

[00:27:49] anyone who is you know will

[00:27:51] acknowledge reality will say there's

[00:27:54] there's a risk-free investment right i

[00:27:56] mean it's almost counter and you know

[00:27:59] counter to the term investment right

[00:28:02] you know it's an oxymoron you're going

[00:28:04] to have risk and there are different

[00:28:05] levels of risk and ignorance is always

[00:28:07] probably the biggest risk no matter

[00:28:08] what investment class you're in right

[00:28:10] i mean just walk right in and as you

[00:28:12] said dumb money just throw dumb money

[00:28:14] at something

[00:28:15] that's you always laugh at the you

[00:28:17] don't laugh it's kind of sad people

[00:28:18] that win the when the lotteries and

[00:28:20] things like that and you know they go

[00:28:21] from zero to hero overnight and and

[00:28:24] then you look a few years later and so

[00:28:25] many of them are worse off than they

[00:28:27] were before they won the lottery right

[00:28:29] because it's dumb money there's no

[00:28:31] intelligence behind it they don't know

[00:28:33] how to use it they don't have to

[00:28:34] deploy it they don't do their

[00:28:35] homework and so they get taken

[00:28:38] advantage of it not to say that

[00:28:40] people get taken advantage of per se in

[00:28:42] the industrial space but you know at

[00:28:45] the end of the day is let the

[00:28:47] buyer beware right it's it's up to

[00:28:50] us to do our own due diligence one of

[00:28:52] the things i like about commercial much

[00:28:54] more than residential

[00:28:56] i started my real estate finance

[00:28:57] business in residential many years ago

[00:28:59] is the fact that um to your point

[00:29:02] it's it's more contract law we're

[00:29:04] not you know where there's more

[00:29:07] more options and opportunities and

[00:29:09] variation than you know traditional

[00:29:11] residential financing where

[00:29:13] you have a couple of agencies

[00:29:14] basically writing the rule book for

[00:29:16] everybody and we're all going to do

[00:29:17] the same thing you know which kind of

[00:29:20] strips the creativity out of that

[00:29:22] market i guess makes it very

[00:29:25] efficient but um but i like the

[00:29:28] commercial side where it can be

[00:29:29] inefficient and there could be some

[00:29:30] opportunity that you know the smart

[00:29:32] money can go after so very fast it's

[00:29:35] fascinating i could tell you're

[00:29:36] passionate about this and you know

[00:29:39] you just you do you live it you

[00:29:40] sleep it you you breathe it

[00:29:42] i do and and i actually it's funny i

[00:29:44] actually read more about industrial

[00:29:47] real estate now than what i did 20

[00:29:49] years ago and knew nothing and had

[00:29:50] everything to learn i actually read

[00:29:52] more about it today no kidding

[00:29:55] okay wow well that's that's amazing

[00:29:57] so chad is there anything that we

[00:29:59] didn't cover that you're like wow we

[00:30:01] just i gotta mention this about

[00:30:02] about industrial yes so the the

[00:30:05] manufacturing side so on the on the

[00:30:08] warehousing side i do think that

[00:30:11] we are plateauing right now

[00:30:14] there's reasons to actually be

[00:30:15] optimistic though that a couple years

[00:30:18] out we could be an entry in a hot

[00:30:20] market again because of interest rates

[00:30:22] interest rates have caused a lot of

[00:30:24] developers to just hold tight all the

[00:30:27] things that were already underway it's

[00:30:28] very difficult to stop a project mid

[00:30:32] mid projects so those ones have all

[00:30:34] been done or in progress but a lot

[00:30:36] of new developments have been halted

[00:30:38] so if that's the case if the

[00:30:39] market starts picking up again in a

[00:30:41] year or two we might be in that

[00:30:42] scenario where we didn't add enough

[00:30:44] inventory and that goes to your point

[00:30:46] is it's how do you as a developer how

[00:30:48] do you make sense of the tea leaves

[00:30:50] from what you do on any given day with

[00:30:53] all these things

[00:30:54] coming at you you're like i'm with you

[00:30:56] i don't have the i don't have the

[00:30:57] stomach to do that on on take on

[00:30:59] that kind of risk but uh yeah so i

[00:31:01] think that that is going to be an

[00:31:03] interesting market to watch but on the

[00:31:04] manufacturing side this is where i

[00:31:07] see a tremendous amount of opportunity

[00:31:10] and it all stems if we could

[00:31:12] actually go back like the 80s

[00:31:13] that's when we started outsourcing a

[00:31:15] lot of our manufacturing to china

[00:31:18] whole bunch of things led up to like

[00:31:19] almost the perfect storm for china to

[00:31:21] take advantage of of the situation and

[00:31:24] attract so much capital and so much

[00:31:26] manufacturing

[00:31:27] and that continued for a good 40

[00:31:30] years but now

[00:31:31] as a result of numerous things

[00:31:33] geopolitical tension

[00:31:34] supply chain bottlenecks when we

[00:31:37] went through the pandemic and all the

[00:31:38] things that we

[00:31:39] we had to deal with on

[00:31:40] manufacturing snarls and then getting

[00:31:42] across the ocean

[00:31:44] that's prompted a lot of companies to

[00:31:46] now look to reshore

[00:31:48] onshore manufacturing back to north

[00:31:50] america

[00:31:51] so there's a lot coming to the u.s

[00:31:54] there's a lot of manufacturing going

[00:31:56] to china or straight to mexico for

[00:31:58] that

[00:31:58] that french shoring or nearshoring

[00:32:01] canada is going to get

[00:32:02] manufacturing but the bulk of it is

[00:32:05] coming back to the u.s

[00:32:07] and this is leading to and a lot of

[00:32:10] its uh

[00:32:11] incentive to the u.s is is not foolish

[00:32:14] they know that they need to protect

[00:32:15] that

[00:32:16] that supply chain and make sure that

[00:32:18] they have goods

[00:32:19] so the chips act the inflation reduction

[00:32:23] act there's a

[00:32:24] there's a third one as well that

[00:32:25] contributed a considerable amount of

[00:32:28] incentives

[00:32:28] and you see that uh uh tscm

[00:32:32] the big uh semi uh conductor

[00:32:34] manufacturer at taiwan

[00:32:36] they're spending 40 billion dollars

[00:32:38] in arizona

[00:32:39] to bring chips on there if you add in

[00:32:42] all the evs and the battery tech and

[00:32:45] then even just traditional

[00:32:47] manufacturing the amount that's

[00:32:49] happening right now in the u.s

[00:32:51] is staggering and i think it's so

[00:32:53] exciting from the standpoint that

[00:32:56] that's a lot of investment that's

[00:32:57] going to be made

[00:32:58] in north america which we should

[00:33:00] all benefit from

[00:33:02] there'll be a ton of jobs that that

[00:33:04] gets

[00:33:05] added and you look at some of the

[00:33:06] areas like the rust belt as an

[00:33:08] example which is

[00:33:09] has had a difficult 40 years

[00:33:11] essentially as

[00:33:12] we started uh off-shoring everything and

[00:33:15] steel went and

[00:33:16] all the manufacturing the rust belt

[00:33:18] that went with it they've

[00:33:19] they've had a more difficult than

[00:33:21] other areas

[00:33:22] anyways i think there's a lot of

[00:33:25] skilled labor in that market that

[00:33:26] that is eager to work and i think

[00:33:28] that there's gonna be a lot of

[00:33:29] manufacturing that comes up in that

[00:33:30] area

[00:33:31] so i'm i'm very optimistic on on how

[00:33:34] the industrial sector looks

[00:33:37] for the foreseeable future really i

[00:33:39] don't we're gonna we continue to have

[00:33:41] population growth

[00:33:42] across north america that's not slowing

[00:33:44] down for better or for worse or

[00:33:46] whether

[00:33:46] the type of people that are coming in

[00:33:48] are that's that's a

[00:33:50] decision that people small far

[00:33:52] smarter than me need to

[00:33:53] to make but we are having a lot of

[00:33:55] population growth

[00:33:56] that that's going to drive

[00:33:57] discretionary spending which is going

[00:33:59] to drive demand for more

[00:34:00] warehousing

[00:34:01] e-commerce and then we have this

[00:34:03] manufacturing boom that we're going

[00:34:04] to go through

[00:34:05] which is just is going to add so

[00:34:07] much activity and then all the

[00:34:08] spin-off activity if if that

[00:34:11] tscm has that big 40 billion dollar

[00:34:14] project

[00:34:15] think of all the other built

[00:34:16] businesses that need to service that

[00:34:19] and service the jobs and

[00:34:20] hvac companies and electrical

[00:34:22] companies and plumbers and

[00:34:23] everything that just goes with it

[00:34:25] it'll just have a tremendous trickle

[00:34:27] down

[00:34:28] impact so that's that's what gets me

[00:34:30] actually pretty excited for the long

[00:34:32] term

[00:34:32] of industrial is that i just think that

[00:34:35] there's so much runway ahead and

[00:34:37] there's so many reasons to be

[00:34:38] optimistic for

[00:34:39] for the foreseeable future really

[00:34:41] well that is that is exciting um

[00:34:43] just kind of vision that you've you've

[00:34:45] put out there and it's

[00:34:46] and i agree i think you're

[00:34:47] absolutely right

[00:34:48] you know it's interesting i've i've

[00:34:50] often had this conversation with

[00:34:52] people about

[00:34:54] this idea that you know the

[00:34:55] offshoring

[00:34:57] you know primarily the reason we did

[00:34:59] it was you know inexpensive labor

[00:35:00] right i mean end of the day

[00:35:02] and now though that you look at

[00:35:04] where we are

[00:35:05] technology wise and with robotics and

[00:35:08] things like that

[00:35:09] you may have a capital investment up

[00:35:11] front but your your labor

[00:35:14] needs are different right it's more

[00:35:16] skilled labor to to manage the

[00:35:17] machines and you know and deploy that

[00:35:19] it's not

[00:35:20] putting nuts on bolts like it used

[00:35:22] to be back in you know the

[00:35:24] the original

[00:35:25] um henry ford days of of the

[00:35:29] of the uh the old assembly line

[00:35:32] and what was interesting about is

[00:35:34] about 10 years ago now i took a tour

[00:35:36] of a new core steel plant down in

[00:35:39] north carolina was part of a business

[00:35:40] group went down and toured them

[00:35:42] and it was fascinating because they

[00:35:44] had taken an early approach

[00:35:45] on modernizing the the the plant

[00:35:48] and using you know

[00:35:49] more technology that was kind of

[00:35:53] in fashion for that day and i was

[00:35:55] talking to the plant manager and he

[00:35:56] told me his plant

[00:35:58] in north carolina was producing and

[00:36:00] now i'm paraphrased been a while but

[00:36:02] a significant

[00:36:04] larger amount of steel with

[00:36:07] like one third or one quarter of the

[00:36:09] workforce that he used to have to

[00:36:11] manage

[00:36:11] at a steel mill up in the northeast

[00:36:13] in the old traditional way to do it

[00:36:16] and it was really cool brad because

[00:36:17] you walk around

[00:36:18] jad and they um you walk around and

[00:36:21] they um they would have these

[00:36:23] at every like station they would have

[00:36:25] these monitors

[00:36:26] and they would have numbers on it

[00:36:28] you're like what is that all about

[00:36:30] and um and and they told us that

[00:36:32] those are the the team incentives so

[00:36:34] they could see in real time

[00:36:36] how their team was producing compared

[00:36:38] to the other shifts

[00:36:40] that were producing and and so they

[00:36:42] were using feedback they were using

[00:36:44] technology

[00:36:45] and they were bonusing the the

[00:36:47] employees were

[00:36:49] were involved in this profit stream

[00:36:51] right and so

[00:36:53] everyone was benefiting from the

[00:36:55] technology and the local

[00:36:57] manufacturing and the you know

[00:36:59] and and and the advancements it was

[00:37:02] just went across the board and then

[00:37:03] you don't have to ship

[00:37:04] the steel all the way across the ocean

[00:37:06] and the things you were talking about

[00:37:07] supply chain issues and disruptions

[00:37:09] and

[00:37:09] you know having to get through the

[00:37:10] Suez Canal which can be problematic

[00:37:12] these days right

[00:37:14] and the Panama and Panama right

[00:37:16] yeah yeah since we

[00:37:17] gave that back so um anyway

[00:37:20] that's exciting so we have a we have

[00:37:23] a bright future in industrial

[00:37:25] specifically manufacturing and maybe

[00:37:26] warehouse as you to your point as the

[00:37:28] market turns

[00:37:30] I think we'll see some interest rate

[00:37:31] improvement hopefully the next year or

[00:37:33] two

[00:37:34] we've been saying that for a little

[00:37:35] while so we're open

[00:37:39] but anyway so this has been great so

[00:37:42] how can

[00:37:43] I know you've got a great YouTube

[00:37:44] channel with so much information and

[00:37:45] education because I know you're not

[00:37:47] just reading

[00:37:48] but you're also taking it to the

[00:37:49] street and educating right you're

[00:37:51] processing it and synthesizing it

[00:37:53] and delivering it

[00:37:54] how can people get get to your

[00:37:56] YouTube channel where else that you

[00:37:58] have some uh some of your insights

[00:38:00] yeah the the handle is just at

[00:38:03] industrialize

[00:38:04] and if you just search anything

[00:38:06] industrial estate on YouTube

[00:38:08] I've been one of the few people that

[00:38:10] talk about it extensively so you'll

[00:38:12] you'll see me pop up

[00:38:13] uh and then I also have a website

[00:38:15] industrialized.com

[00:38:17] where I've I put a fair amount of

[00:38:19] content on there as well for

[00:38:21] completely for free

[00:38:23] industrialized.com

[00:38:25] or I know just industrialize

[00:38:28] oh industrialize no d okay very good

[00:38:30] I'm glad I got that

[00:38:31] okay perfect industrialized.com

[00:38:34] well Chad this has been awesome

[00:38:37] yeah this was fantastic I I great

[00:38:39] questions

[00:38:40] I thoroughly enjoyed the conversation

[00:38:42] getting to chat with you about this

[00:38:43] stuff

[00:38:44] yeah yeah and thanks for putting up

[00:38:46] a little technology glitches here along

[00:38:47] the way so uh that was

[00:38:49] that was a bit of a challenge but I

[00:38:51] think we made it through so

[00:38:52] man I appreciate it thanks for your

[00:38:54] time and um I'll look forward to chatting

[00:38:58] again in the future

[00:39:00] likewise thanks again for having me on

[00:39:02] hey gang just winding down here today

[00:39:03] thanks for listening to the show

[00:39:05] and as always if you need capital

[00:39:07] to grow your business

[00:39:09] you're looking to purchase

[00:39:12] commercial real estate or build

[00:39:14] build a building or invest in

[00:39:15] commercial real estate or looking to

[00:39:17] to acquire a business or a

[00:39:18] competitor or just need growth capital

[00:39:21] we'd love to talk to you we fund

[00:39:22] businesses all day long our mission

[00:39:24] is to help entrepreneurs win and to

[00:39:26] fund their businesses and fund their

[00:39:28] dreams

[00:39:29] so that they can make an impact in

[00:39:30] their community reach out to me today

[00:39:32] go to our website click the button

[00:39:34] to schedule a 20 minute conversation

[00:39:36] discovery call

[00:39:37] we'll have a quick conversation see if

[00:39:39] there's a need see if there's a fit

[00:39:40] and uh we can take it from there the

[00:39:42] website is

[00:39:43] vpc victor paul charlie dot capital

[00:39:49] that's vpc dot capital

[00:39:52] all right there's no dot com on that

[00:39:54] it's vpc dot capital

[00:39:56] as always keep crushing it and hope to

[00:39:59] see you soon around here

[00:40:00] take care