June 12, 2024 • 31 mins
Matt McLennan, an executive vice president and shareholder at Kidder Matthews, specializes in industrial leasing and sales in the South King and Pierce counties. In this episode, he discusses his background in the wine industry and how he transitioned into a career in real estate. He explains the different types of industrial real estate, such as distribution centers, manufacturing facilities, and industrial outside storage. Matt also shares insights into market trends, including the increasing focus on efficiency and sustainability in industrial buildings. He emphasizes the importance of technology, particularly social media, in the real estate industry.
Takeaways
- Industrial real estate includes various types of properties, such as distribution centers, manufacturing facilities, and industrial outside storage.
- Market trends in industrial real estate include a focus on efficiency and sustainability, as well as the increasing demand for industrial outside storage.
- Technology, particularly social media, plays a significant role in the real estate industry, allowing for better marketing and communication with clients.
- Investors should consider factors such as the going-in price, cash flow, and potential for future growth when investing in industrial real estate.
- The industrial real estate market in the Pacific Northwest is expected to continue to perform well, driven by factors such as e-commerce and the need for greener and more efficient buildings.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:02):
All right, welcome back to the WashingtonState Real Estate Investing Podcast.
So excited today to be joined with my co-host, Julia.
Julia, how are you today?
Awesome.
This is great.
We've got Matt here.
Matt specializes in industrial leasing andsales in the South King and Pierce
(00:24):
counties.
So we're excited to have you here today,Matt, as our guest.
Welcome to the show.
And let's jump right in, Matt.
Tell us as you kind of introduce yourselfhere, we did a little background on you
and you started your journey in the wineand spirit industry and then became the,
now you're the executive vice presidentand shareholder at Kidder Matthews that
(00:45):
does investing in real estate transactionsin the industrial space.
So I'm excited to jump into this topic.
Tell us a little bit about your backgroundand how'd you get into this career in real
estate?
Yeah, great question.
Thank you for having me on.
By the way, I'm excited to be here.
And it was really by happenstance.
I had been working in this wine industryand it was sales management, mostly at the
(01:08):
retail level for a local wine distributorand great job.
Cool industry.
Really enjoyed it and everything was goingwell.
I had friends that, you know, I'm hangingout with on the weekends that were in the
commercial real estate industry and justhaving those conversations, I became very
intrigued by it.
And.
it got to a point where I kind of boiledit down to a fundamental sense of, okay, I
(01:31):
feel like I'm really good at selling $10bottles of wine.
Why not sell million dollar buildingsinstead?
And since I had friends in the industry,one of them happened to work at Kidder
Matthews.
I got introduced to management at KidderMatthews, kind of started going down the
path and then just really never lookedback, took the leap of faith, got into
brokerage.
Anyone who's been in brokerage or knowsbrokerage at those first few years are
(01:52):
brutal.
So just, just.
Grinding my way through that and then herewe are many years later still doing the
same thing.
Awesome.
So how many years now have you been in?
I've been in brokerage for eight years,all with Kidder Matthews, all commercial
and really all industrial propertyfocused.
For me, being an industrial broker and Iwork the greater Seattle, Tacoma area, so
(02:14):
called the Puget Sound region, WesternWashington.
But for me, I do limit myself to the, callit industrial property type, but within
that, I mean, there's leasing, sales,development, investment.
Just about anything that touchesindustrial oriented real estate, I will do
that.
Landlords, tenants, buyers, sellers, I doit all.
(02:35):
Awesome.
Can you give us some examples?
Like when you say industrial real estate,are we, we're talking warehouse buildings.
Yeah, there's there's to your point,there's several types.
Most people think, I mean, at its mostfundamental sense for people that don't
know it think Amazon, right, where theyhave their big warehouse building and they
have racks of boxes of products andeverything that you're ordering.
And it gets picked from the racking andpackaged up and shipped to your door.
(02:59):
Right.
But it's really that's that's a reallybasic way to look at it.
There's obviously manufacturing facilitiesfor, you know, Boeing's a big employer in
Seattle.
There's a lot of aerospace parts that arebuilt, assembled and shipped out of here.
Another component of industrial realestate is like industrial outside storage
or iOS, as we call it, which is think,because we're a port driven market.
(03:20):
We have the Port of Seattle and the Portof Tacoma.
So we have a lot of containers coming fromoverseas on those big container ships.
They get picked up at the port, put ontrucks and driven out.
But a lot of those trucks, those truckchassis, those containers have to live
somewhere when they're not being used.
So think like a big, you know, three acregravel lot where just all these trucks and
containers and everything are
(03:41):
I mean, you've probably seen pictures ofthat kind of use in the port, but it's
really those are the big three.
It's distribution centers, distributionwarehouses, manufacturing warehouses,
outside storage yards.
I mean, you can go in a lot of differentdirections from there, but that at its
most fundamental sense, that covers mostof it.
(04:04):
for Julia.
I'm curious, going from the restaurantindustry, the wine industry, into this,
how would you recommend someone elsegetting into an industry like this?
Because I think a lot of people in thereal estate business come from a place of
service.
I know I worked in restaurants for five tosix years.
(04:25):
A lot of the people I worked with workalongside also came from restaurants or
doing some type of service industry.
So how do you think that correlates?
And what would you say to someoneinterested in jumping into wine?
Jeff.
Yeah.
Did I break up?
Yeah, you're breaking up pretty bad.
(04:45):
Yeah.
Okay, should I repeat my question?
again.
Try answering your question again.
We'll try it one more time.
Okay, so I know being a realtor myself, Icame from...
she starts talking it's brutal.
Shoot.
(05:07):
Do you want to just keep going?
Yeah.
Okay.
all right.
Well, I'll ask the question.
I'll ask the questions then.
So Matt, with your specialization in theindustry leasing and sales, what are some
unique market trends that you are seeingright now in the region?
(05:27):
Are there things specifically that you areseeing leasing?
Is there a need right now that you'reseeing in this area?
It's been really interesting that the bigshift in call it the greater global
commercial real estate market, but locallyhere too is when interest rates started
rising two years ago.
We've seen it affect real estate, bothcommercial and residential across the
(05:49):
board.
And while that has a big effect on valuesand rents and the economics associated
with commercial real estate, it hasn'tnecessarily had the biggest impact on how
industrial real estate specifically isused.
Mm.
So it's been interesting because I thinkthat's put a downward progression on the
market compared to where things were twoyears ago and even five years before that.
(06:13):
We were kind of following this upwardtrajectory and then the curve really
started to inflect.
And then 22 when the rates started going,it just kind of started getting bumpy.
And but to your question and kind of whatam I seeing out there?
What are the trends?
What's coming?
I think tenants, particularly operators inthese industrial buildings are getting
really sensitive to their.
(06:34):
costs because I think costs have gone upfor just about everything across the
board.
So they're being much more mindful of howmuch space are we using?
How much space are we paying for?
What is that cost on our bottom line ofall of our costs associated with doing
business?
And similarly, landlords are experiencinga lot of the same thing.
(06:56):
Insurance rates and premiums have beenskyrocketing.
Property taxes keep going up.
for the landlords that need to build newindustrial buildings, cost of construction
is still at arguably record highs.
And then meanwhile, to go get financing tobuild buildings or finance new equipment
purchases, if you're an operator, I mean,pick whatever it is.
(07:16):
If you have to go get financing, obviouslyyour financing is much more expensive than
it used to be and generally less availabletoo.
So I think the trend that is going forwardis everyone's having to get a lot more
creative with how they're going aboutrunning their business.
And ultimately that takes more time.
So people are making decisions much slowerthan they were previously and call it, you
know, the past several years leading up tothis.
(07:38):
And I think the trend moving forward isgoing to be a lot more of that of
everybody being slower and more deliberatein their decision making and being more
efficient with their costs, which probablyultimately means less space being used by
tenants and operators.
Mm.
means more availability of existing spacein the market.
Now that could change as more people enterthe market, tenants shift.
(08:02):
There's always other outside factorsthere, but I think the general trend is
tenants are getting more efficient withthe space they're currently using.
I like that.
So this, this podcast is for real estateinvestors.
So from the investment side of things,where do you see some places right now
that if, if you were an investor lookingto invest in some industrial spaces, you
(08:25):
know, in the greater Puget Sound area herebetween the ports and such, where are some
places that you think there's some realvalue right now that is a place that I
might be considering.
thinking about investing in.
I'd say, so I invest in real estate myselfand I'm a big believer in the industrial
(08:46):
sector for investing, probably because Iknow it well and I touch it every day.
And for me, so like what am I looking foron a day -to -day basis?
A lot of it is, I firmly subscribe to themake your money on the buy.
So I'm really sensitive to what the goingin is versus kind of.
what you pro forma and what you expect inthe future.
(09:07):
I'm usually not really betting on massiveappreciation and hoping that that bails me
out on the investment side.
So I really want to go in and a lot of ourreal estate is measured on a price per
square foot basis.
So I want to know exactly how much I'mpaying for that building and is that price
per square foot on par below market,right?
Value add in industrial real estate is ahuge way to be successful in your
(09:32):
investments.
So.
Looking at something like a building thatmight be functionally obsolete has issues
with it.
It could be reconfigured.
It has a long term tenant that hasn't beenpaying rent on time or appropriate market
rent, something that you could go in.
You buy it today.
You need to be patient, spend some time,spend some money, work with your existing
(09:53):
tenant.
And ultimately, but your going in pricewas dictated on the current situation.
You fix those things.
I mean, think like a rehab of aresidential house and a flip.
And then your valuation of that propertyis significantly higher.
You can go get financing based on that newvaluation.
Your cash on cash returns tend to improvequite a bit.
So that's kind of the baseline, I guess,thesis on how I go into it.
(10:16):
But like one thing in particular that Ithink is really interesting is this
industrial outside storage sector, thesubsector of real estate that I mentioned.
We keep calling it iOS.
iOS has been around forever.
The ports of
The Port of Seattle and Port of Tacoma arenothing new.
We've been storing containers outside anddoing all this work forever.
But it's now become an investment class,which is really interesting because and
(10:41):
the reason being is they're not makingmore land.
We all know that.
And as more buildings get built, zoningchanges, cities are getting stricter with
how industrial real estate is beingutilized.
The sector of IOS lands available has beenshrinking.
Meanwhile, the demand for it has arguablybeen increasing.
because even though container volumes andthe ports may be up and down on any given
(11:04):
day of the week, more contain, we'reordering more stuff online.
The consumer is consuming more, right?
Which means more goods are coming fromoverseas, more containers, more trucks,
more chassis, they need more places to bestored.
And so I see the thesis of iOS and thefuture of it only continuing to improve.
Meanwhile, a lot of people don't even,they don't understand it or they don't
(11:24):
even know about it.
So getting in, it's like the definition ofkind of like getting in early.
So that's what I've been trying to focus alot of my investments on.
I think I'm involved in about fourdifferent iOS investment properties at
this point.
And so far they've panned out exactly howI'd hoped they would.
One of them, I'll be the first to admit,one of them didn't go quite as planned,
but still doing okay.
That's how you learn in investing.
(11:45):
You gotta make a couple mistakes along theway.
But yeah.
And I mean, the upkeep on these, I'mthinking it's got to be pretty minimal
because I I'm just picturing like gravel,gravel parking lots with a barbed wire
fence for security or some kind ofsecurity perimeter with some kind of
automatic gate, the front or how whateverthe gating system is that a client would
(12:06):
need.
But after that, the upkeep has got to bepretty minimal.
You're spot on.
That's arguably probably the mostattractive point about it is you could
kind of buy it day one and day two.
Maybe you spend a little bit money fixingbroken fence, laying some new gravel down.
Some of these a perfect site would havelike a small building on it that has like
(12:27):
a little office and a little shop thatsomebody could like pull a truck into and
do some maintenance or store tools in orwhatever.
Right.
So if you do have a building, obviouslythen you have building maintenance that
goes along with that.
But to your point.
the upkeep and the capital improvementcosts are much more minimal than other
sectors of investment class real estate.
(12:47):
And the thing I like about it too is a lotof these properties can be single tenant
properties too.
So while on one side you can look at theinvestment as more risky because if your
one tenant goes away, there goes yourcashflow.
But when you have one tenant on yourproperty, one source of rent, one point of
contact, and it's a property that reallydoesn't require maintenance,
I mean, I have one of my properties thatwe put a tenant in two years ago and I
(13:13):
haven't had to talk to him once in twoyears and he pays his rent on time every
month.
There's been no problems with theproperty.
I mean, it's like we joke about passiveinvestments.
Everybody in the world is like, I wantpassive real estate investments, passive
income.
There's no such thing as passive income inreal estate.
Like it's very, it's active.
I mean, it can be passive, but it doeshave active components to it.
(13:33):
I would say though that example I justused is arguably the most passive
investment I've been able to find to date.
A lot of work up front to get it to thatpoint, but now that I've started the
clock, it's just kind of running, which isgreat, right?
I mean, what more can you ask for?
yeah.
When you're running numbers, are yourunning based on cash flow?
Is that kind of your thing?
You're looking that you need to get a, areyou looking on cash, cash on cash return
(13:56):
for these properties?
Because as you mentioned, you're notlooking at so much appreciation.
I mean, we know, especially around here, Ithink appreciation is going to be really
slow, you know, in these, in these largermarkets and on, I mean, almost, almost, I
mean, that kind of a scenario, your land'salmost not developed other than some
fencing, right?
So are you looking at cash on cash return?
(14:16):
Are you looking to cashflow a certainamount like, okay, I've got this, I need
to cashflow a thousand bucks a month or$15 ,000 a month or whatever your number
happens to be.
How are you running your numbers going into know what this looks like going out for
somebody who might be trying to get intothis?
great question, my first basis is what amI paying for the physical real estate,
(14:36):
right?
Do I think the land price or the buildingprice is appropriate and in line with what
I'm comfortable paying for property?
Okay, that's kind of like box one that hasto get checked.
Box two then really being cash flow.
So being on the brokerage side, obviouslyI have a really good pulse on what's going
on in the market, what are correct prices,what are correct rental rates.
(14:57):
how long do I think it'll take me to finda tenant and what is that tenant willing
to pay?
So now if I've already made it past stepone, which is that I fundamentally agree
that the value of the real estate iscorrect and something that I'm willing to
do, okay, I know what I'm paying now, whatdo I think I can get in rent and how much,
how long and how much is it gonna cost meto get that rent?
And then what's my rate of return on thatrent?
(15:17):
For me, my goal is usually double digits.
I want 10 % or more if I can on my return.
And sometimes you might have to achievethat over time and I'm okay with that.
Yeah.
lot of the other boxes get checked.
But if box one of fundamental value andbox two of rate of return aren't there,
then it's usually a pass at that point.
(15:38):
I like that.
I like that.
And from a year to year increase, are youable to increase your, your rents based
based like on, on inflation on like, doyou use like an inflation number in
industrial real estate around?
Okay.
We know that inflation is up or we knowthat, you know, property taxes just went
up by 3%.
We're going to have to raise our rentalrate by 3%.
(16:01):
How do you kind of factor that in?
interesting question and it's changedreally as of late, although not
dramatically.
The longest time we hear in the PugetSound region, it's just 3 % annual
increases.
Now, pick your lease, pick your building,pick your location.
The rent just goes up by 3 % every year.
There were historically a lot more leasesthat were tied to CPI, but people got away
(16:23):
from CPI because that kind of becomes aheadache of trying to calculate and
recalibrate every year and I think tenantsand landlords both.
just got comfortable with, we're justgonna increase it at 3 % annually, right?
So we rode this 3 % wave for arguablydecades.
And then go back to probably starting,really coming out of the pandemic where
everything started to, especiallyinflation in particular, started to go up
(16:46):
at such a rapid clip and industrial rentshere in our region started going up at 8%,
12%, 15 % a year.
And so all these landlords are like, whoa,rent went up.
12 % in one year and I'm only getting a 3% bump, like this isn't fair.
And the tenants, while they, the reasonthey sign longer term leases is to lock in
(17:07):
and understand what their costs are gonnabe over a period of time and increases.
At the same time, it's not exactly a hardconversation to go, hey, in your five year
lease, rents went up 50%.
So what does that change to?
Pretty much all of them now have bumped to4%.
So it's still a pretty marginal increase.
Now the argument against, of course, isthat in a down market, rents might be
(17:28):
going
you flatter down, but you're still payinga 4 % increase over time.
So I still think the tenants win in mymind at a 4 % increase.
If you're doing a five year lease, moreoften than not, even at 4 % increases, the
tenant probably still comes out on top atthe end of the day.
But for the landlords still at the end ofthe day, they've got security, they've got
their cash flow, and it's increasing everyyear.
(17:49):
So it's in my mind, it's still a win -win.
% return.
You know, if that's my number, if that'smy number, we're trying to set up win -win
situations here, right?
I need my number, my number's 10 to 12 %returns.
You need your number and you feel likeyou're winning on your end because over
time you're gonna be saving some money.
Game over, man.
We're both, we're playing.
We're playing ball now.
I like that.
(18:10):
And I love that.
I love that.
That's a great way to look at it.
Talk a little bit about how technology ismaybe changing the sector a bit.
with things like finding real estate orfinding tenants.
Is technology playing a role in any ofthis and disrupting some of the ways that
industrial real estate is found andtenants are finding these spaces?
(18:34):
The answer is yes.
Commercial real estate as an industry.
I always poke fun at it because we're we Iswear as an industry we're still in the
archaic dinosaur age.
got to know somebody who knows somebodywho has a piece of property for sale.
Well, to a certain degree, right?
But also there's just there's there's beena significant resistance over time to
embrace technology.
(18:54):
I look at residential, for example, andresidential brokers seem to be much more
on it, especially from a personal selfmarketing standpoint.
I think residential brokers schoolcommercial real estate agents.
And I saw that, you know, and I wasrecognizing that.
And for my own personal business, I sawthat as a huge opportunity because it's
like no one else is doing this.
And it's like the definition of lowhanging fruit.
(19:14):
So there's the personal marketing sidewhere I think there are so many other
digital components to self market yourselfas a real estate professional.
But then beyond that, as far as like weoften call it prop tech, property tech,
right?
There's more and more software is comingout every day.
CRMs have been around forever.
There's a lot of software based inunderstanding financing associated with
(19:36):
commercial real estate, when our loans do,what are those loan amounts.
understanding when an owner has a notecoming due, which means they need to make
a decision, which usually when you need tomake a decision in commercial real estate,
that's an opportunity for an agent to getinvolved, whether it's on a brokerage
transaction or maybe an investor trying toacquire a piece of property.
So the answer to your question is yes.
Obviously, AI is a huge buzzword rightnow.
(19:59):
I do use AI a little bit in my business.
I haven't quite figured out exactly how Iwant to integrate it into all my
processes.
I use a software called Monday.
It's monday .com, it's awesome.
Yeah, there we go.
So you know Monday, it's a task -orientedsoftware.
For all of my transactions that I do, Irun them all through Monday.
So when it's all said and done, I mighthave one transaction that has 97 steps
(20:22):
along the way.
Because a commercial transaction doeshave, I'd say compared to residential,
where it's tour, write offer, 30 days, getyour financing, close.
And I'm dumbing it down, but.
In comparison, a lot of these commercialtransactions have so many more nuances
that I think brokers who aren't organizedand don't have a system like that, they
(20:44):
miss things.
And missing things on a $5 $10 millioncommercial transaction can be significant
dollars.
So having a system like that in place, Imean, it's paid huge dividends for me.
I think my clients recognize and know itbecause I'm more on top of it than my
competition.
So I mean, there's a lot out there.
technology wise that you can utilize.
(21:04):
It's just figuring out how to integrate itinto your business.
Well, and it's interesting because Juliahere is really into the technology and the
social medias as well.
In fact, she just was before we startedrecording, was meeting with a buyer that
reached out to her via Instagram, just asa way that you know, you're doing this.
And I know Matt, you're all over thesocials too.
(21:25):
You've got TikTok, you've got Instagram,you've got it all.
We'll make sure that there are links toeverything in the show notes.
Is that, do you think that that does thathelp set you apart?
Because like you said, there just isn't awhole lot out there.
Do you have clients reach out to youthrough those different avenues as well?
The answer is yes.
I don't know if I could sit here and say Icould measure what my true ROI is from the
(21:48):
social media participation in terms ofdollars, but it gets seen.
Whether you like social media or not, Iwill literally say this all the time and I
joke about it, but I'm dead serious.
I don't have any social media from apersonal standpoint.
I think at my most, at my fundamentalsense, I'm almost kind of anti -social
media if I'm being honest for what it'sdoing to the world.
(22:09):
But for my business, it really works andit's really important.
You can reach a broad audience with acouple keystrokes, which is huge.
You can convey useful and importantinformation.
You get seen, right?
And so I make a point of trying to sharereally good content with my audience.
And then what do I do?
I go to industry events.
I go see my clients and they're like, hey,I saw this that you posted on LinkedIn the
(22:33):
other day and that was awesome.
Thanks for sharing.
And then they have follow up questions,interests, right?
And then I have clients or potentialclients who are lurking in the background
who then reach out to me and they're like,hey, I've been following you for years,
right?
And here I am finally surfacing because Ihave a need.
So it's those kind of moments where yourealize that, yeah, I mean, it pays its
(22:54):
dividends.
It's worth the time.
It is a lot of time.
It's effort.
It takes away from being able to do yourbrokerage business, which that is at the
end of the day where you make your money,but worth it.
Important.
And again, we'll make sure all those linksare in the show notes.
If anybody wants to go down a great videoswhere you even explain, you give tips, you
give tricks, or specifically aroundindustrial real estate.
(23:17):
So if you are interested in this sector,Matt's a great guy to follow on all of the
socials, get those tips and tricks, be alittle bit of a stalker.
So social media stocking is not a badthing in the real estate market.
that's how we, that's how we find people.
Yep.
look out to people.
Last question here for you, looking ahead,if you could forecast the future and look
(23:41):
down the road for the industrial realestate market here in the Pacific
Northwest, are there any emerging trendsin particular that are really excited to
you that you think that, you know what, ifyou were thinking right now like, okay,
I'm ready to invest maybe three to fiveyears from now, what are some places that
maybe...
I might wanna just keep on my radar.
(24:02):
Not that they will emerge, but maybe justthinking about, okay, this is something I
wanna keep my ear to the ground about as Istart to maybe gather my funds and figure
out how to do this for myself.
What would, anything?
question.
The OK, at its most baseline level, Ithink the fundamentals for industrial real
estate are still very strong.
I mean, I think our general market is in alittle bit of a roller coaster ride at the
(24:26):
moment up and down.
But I think looking forward, industrialreal estate is poised to do really well.
So I say that in the interest ofsuggesting that really, if you look at
kind of what I talked about before inthese different asset classes, there's
reasons to suggest that you could invest.
today or in the next three to five yearsand do well in just about any of them if
you go into it with the right right thesisand do it correctly.
(24:48):
But but what's what's the big trend right.
I mean especially here in WesternWashington it's how do we get greener and
more efficient and try to take advantageof building efficiencies that that attract
tenants and attract tenants that payhigher rents because those things are
being achieved.
So I think these more modern advancedbuildings.
(25:10):
are gonna do poised well.
If it were me, I'd be trying to looking atbuildings and how do I future proof them
today so that I can be the shining starbuilding available in the future.
That's a big one.
I think beyond, yeah, there's like LEEDcertifications and all these other terms
that are used.
(25:31):
A lot of companies are putting solarpanels on their roof to generate cleaner
energy.
Washington State.
passed a new law in their energy code thatyou can't heat warehouse buildings anymore
with gas.
You have to use electric, very expensive.
There's obviously a huge push towards EVsand electric vehicles and trucks.
(25:52):
So how do you, you know, looking aheadtowards properties that offer charging
capabilities, because whether you believeor like it or not, it seems like that
trend is only going to continue to rampup.
And then really the big thing too is,let's be honest, e -commerce has been the
number one
driver of industrial real estate for manyyears now.
And it's only in my opinion, it's onlygonna, in most professional opinions, is
(26:15):
that's only gonna continue to increase.
People love ordering things online.
They love the convenience of it showing upto your doorstep, whether it's goods,
food, I mean, you name it, right?
I mean, these days it feels like you canget just about anything delivered to your
doorstep, right?
And those things need to be storedsomewhere, right?
And usually the cheapest way to store themis four walls and a roof.
(26:37):
an industrial warehouse building.
So anything that's poised well to supporta tenant that occupies in that business
space seems to probably gonna stand thetest of time.
And on investment basis, assuming liketypical real estate that usually goes up,
it just is how fast does it go up or howslow does it go up?
If you invest in real estate that supportsthat kind of model, two, three, 10, 20
(27:01):
years down the road, I mean, I you'regonna do pretty well.
Yeah, I love that.
And the thing I love about thisconversation is it goes, there's some
other things that I've been reading in ourstate and then the other conversations
we've had around industrial real estateand commercial spaces.
we've had a couple of guests on out of theTri -City area, but I was just talking to,
I've got some friends in the wine industryand down in the Walla Walla area.
(27:25):
This just the other day we were talkingand the big problem down in the Walla
Walla area is cold storage for wineries.
And there's just not enough large coldstorage areas for all these wineries,
right?
Make their wine and you've got to keepyour wine around 56 degrees and there
isn't enough warehouses for so everybody'sfighting over space, which then, excuse
(27:48):
me, as a warehouse owner, you can now upyour rates because you've got, and I don't
know if any, I don't know if you saw thisin the news, but one of them just burnt
down in the Tri -Cities, a big one in theTri -Cities caught on fire and burnt.
So now there's one massive warehousethat's gone.
Anyways, I just find,
You know, it's like everything else, nomatter if we're talking residential real
estate or commercial or industrial realestate, there's a place depending on where
(28:11):
you are in the state and where you mightwant to invest.
Know what that is, you know, outdoorspaces here because we're a port city in
Seattle Tacoma area might be a greatinvestment opportunity.
If you want to be in the food wineindustry, cold storage down in the Tri
-Cities Yakima Valley area could be a goodinvestment, you know.
Apple storage up in the Wenatchee area.
(28:34):
There's cold storage all over up there forapples and cherries.
And you know, our state is very diverse.
And I think that allows you to be diversein the way that you invest if you want to
have a diversity across differentcommercial, you know, and residential real
estate.
So I love spending this time with you tothink because I, you know, as you start
(28:54):
talking, I'm like, my gosh, just a gravellot, like a gravel lot.
That's all I need is a gravel lot.
I can
I can rent out a gravel lot.
This is crazy.
Right.
I just, it's so cool to think about allthe opportunities we have with us.
Yeah.
Cold Storage is a big one too for therecord.
That's a huge one.
Very big.
Yeah.
capital cost to it.
(29:15):
But I think there's also there's a prettygood return on investment if you can do it
right.
And get good thinking about.
Awesome.
Well, Matt, thank you so much for spendingtime for us today.
If you will have all the links in the inthe show notes to the podcast.
But if there was one link that you wouldsay is probably where people should reach
out to you or learn more about you, what'sthe one that you would like to promote?
(29:39):
I think you're gonna get the biggest rangeof what I do and what I talk about on
LinkedIn.
That's kind of my primary platform that Ispend the most time on and can distribute
the widest range of content.
Other than that, I'm an email guy.
Shoot me an email.
My email's all over the internet, so it'svery public and I love answering
(29:59):
questions.
I mean, if I'm being fully transparent, Ireally enjoy.
the education component and theconversations I have with people, even
from people out of state who have no basisfor doing anything out here, but are just
curious about these conversations andtopics.
I love it.
So by all means, I'd encourage anybody toreach out to me again through the socials,
through email, whatever it may be.
(30:20):
Always happy to engage.
Awesome.
And that's good to know because I mean, weare a Washington state focused real estate
podcast, but our second largest state thatlistens to us is California.
And we've actually had investors inCalifornia who are investing up here,
reach out to, to people.
So, so know that Matt is open to that too.
So, we'll make sure that LinkedIn is overthere, but, LinkedIn is Matt McLennan, all
(30:43):
one word, A T T C L E N N A N.
and you can find that on LinkedIn.
And again, that'll be in the show notesand all over social as well.
Matt, thank you so much for taking timeout of your busy schedule to be with us
here today on the podcast and learn allabout industrial real estate here in the
greater Puget Sound region.
Yeah, Jeff, Julia, thank you.
(31:04):
This was awesome.
Glad we could do it.
All right, welcome back to the WashingtonState Real Estate Investing Podcast.
So excited today to be joined with my co-host, Julia.
Julia, how are you today?
Awesome.
This is great.
We've got Matt here.
Matt specializes in industrial leasing andsales in the South King and Pierce
(00:24):
counties.
So we're excited to have you here today,Matt, as our guest.
Welcome to the show.
And let's jump right in, Matt.
Tell us as you kind of introduce yourselfhere, we did a little background on you
and you started your journey in the wineand spirit industry and then became the,
now you're the executive vice presidentand shareholder at Kidder Matthews that
(00:45):
does investing in real estate transactionsin the industrial space.
So I'm excited to jump into this topic.
Tell us a little bit about your backgroundand how'd you get into this career in real
estate?
Yeah, great question.
Thank you for having me on.
By the way, I'm excited to be here.
And it was really by happenstance.
I had been working in this wine industryand it was sales management, mostly at the
(01:08):
retail level for a local wine distributorand great job.
Cool industry.
Really enjoyed it and everything was goingwell.
I had friends that, you know, I'm hangingout with on the weekends that were in the
commercial real estate industry and justhaving those conversations, I became very
intrigued by it.
And.
it got to a point where I kind of boiledit down to a fundamental sense of, okay, I
(01:31):
feel like I'm really good at selling $10bottles of wine.
Why not sell million dollar buildingsinstead?
And since I had friends in the industry,one of them happened to work at Kidder
Matthews.
I got introduced to management at KidderMatthews, kind of started going down the
path and then just really never lookedback, took the leap of faith, got into
brokerage.
Anyone who's been in brokerage or knowsbrokerage at those first few years are
(01:52):
brutal.
So just, just.
Grinding my way through that and then herewe are many years later still doing the
same thing.
Awesome.
So how many years now have you been in?
I've been in brokerage for eight years,all with Kidder Matthews, all commercial
and really all industrial propertyfocused.
For me, being an industrial broker and Iwork the greater Seattle, Tacoma area, so
(02:14):
called the Puget Sound region, WesternWashington.
But for me, I do limit myself to the, callit industrial property type, but within
that, I mean, there's leasing, sales,development, investment.
Just about anything that touchesindustrial oriented real estate, I will do
that.
Landlords, tenants, buyers, sellers, I doit all.
(02:35):
Awesome.
Can you give us some examples?
Like when you say industrial real estate,are we, we're talking warehouse buildings.
Yeah, there's there's to your point,there's several types.
Most people think, I mean, at its mostfundamental sense for people that don't
know it think Amazon, right, where theyhave their big warehouse building and they
have racks of boxes of products andeverything that you're ordering.
And it gets picked from the racking andpackaged up and shipped to your door.
(02:59):
Right.
But it's really that's that's a reallybasic way to look at it.
There's obviously manufacturing facilitiesfor, you know, Boeing's a big employer in
Seattle.
There's a lot of aerospace parts that arebuilt, assembled and shipped out of here.
Another component of industrial realestate is like industrial outside storage
or iOS, as we call it, which is think,because we're a port driven market.
(03:20):
We have the Port of Seattle and the Portof Tacoma.
So we have a lot of containers coming fromoverseas on those big container ships.
They get picked up at the port, put ontrucks and driven out.
But a lot of those trucks, those truckchassis, those containers have to live
somewhere when they're not being used.
So think like a big, you know, three acregravel lot where just all these trucks and
containers and everything are
(03:41):
I mean, you've probably seen pictures ofthat kind of use in the port, but it's
really those are the big three.
It's distribution centers, distributionwarehouses, manufacturing warehouses,
outside storage yards.
I mean, you can go in a lot of differentdirections from there, but that at its
most fundamental sense, that covers mostof it.
(04:04):
for Julia.
I'm curious, going from the restaurantindustry, the wine industry, into this,
how would you recommend someone elsegetting into an industry like this?
Because I think a lot of people in thereal estate business come from a place of
service.
I know I worked in restaurants for five tosix years.
(04:25):
A lot of the people I worked with workalongside also came from restaurants or
doing some type of service industry.
So how do you think that correlates?
And what would you say to someoneinterested in jumping into wine?
Jeff.
Yeah.
Did I break up?
Yeah, you're breaking up pretty bad.
(04:45):
Yeah.
Okay, should I repeat my question?
again.
Try answering your question again.
We'll try it one more time.
Okay, so I know being a realtor myself, Icame from...
she starts talking it's brutal.
Shoot.
(05:07):
Do you want to just keep going?
Yeah.
Okay.
all right.
Well, I'll ask the question.
I'll ask the questions then.
So Matt, with your specialization in theindustry leasing and sales, what are some
unique market trends that you are seeingright now in the region?
(05:27):
Are there things specifically that you areseeing leasing?
Is there a need right now that you'reseeing in this area?
It's been really interesting that the bigshift in call it the greater global
commercial real estate market, but locallyhere too is when interest rates started
rising two years ago.
We've seen it affect real estate, bothcommercial and residential across the
(05:49):
board.
And while that has a big effect on valuesand rents and the economics associated
with commercial real estate, it hasn'tnecessarily had the biggest impact on how
industrial real estate specifically isused.
Mm.
So it's been interesting because I thinkthat's put a downward progression on the
market compared to where things were twoyears ago and even five years before that.
(06:13):
We were kind of following this upwardtrajectory and then the curve really
started to inflect.
And then 22 when the rates started going,it just kind of started getting bumpy.
And but to your question and kind of whatam I seeing out there?
What are the trends?
What's coming?
I think tenants, particularly operators inthese industrial buildings are getting
really sensitive to their.
(06:34):
costs because I think costs have gone upfor just about everything across the
board.
So they're being much more mindful of howmuch space are we using?
How much space are we paying for?
What is that cost on our bottom line ofall of our costs associated with doing
business?
And similarly, landlords are experiencinga lot of the same thing.
(06:56):
Insurance rates and premiums have beenskyrocketing.
Property taxes keep going up.
for the landlords that need to build newindustrial buildings, cost of construction
is still at arguably record highs.
And then meanwhile, to go get financing tobuild buildings or finance new equipment
purchases, if you're an operator, I mean,pick whatever it is.
(07:16):
If you have to go get financing, obviouslyyour financing is much more expensive than
it used to be and generally less availabletoo.
So I think the trend that is going forwardis everyone's having to get a lot more
creative with how they're going aboutrunning their business.
And ultimately that takes more time.
So people are making decisions much slowerthan they were previously and call it, you
know, the past several years leading up tothis.
(07:38):
And I think the trend moving forward isgoing to be a lot more of that of
everybody being slower and more deliberatein their decision making and being more
efficient with their costs, which probablyultimately means less space being used by
tenants and operators.
Mm.
means more availability of existing spacein the market.
Now that could change as more people enterthe market, tenants shift.
(08:02):
There's always other outside factorsthere, but I think the general trend is
tenants are getting more efficient withthe space they're currently using.
I like that.
So this, this podcast is for real estateinvestors.
So from the investment side of things,where do you see some places right now
that if, if you were an investor lookingto invest in some industrial spaces, you
(08:25):
know, in the greater Puget Sound area herebetween the ports and such, where are some
places that you think there's some realvalue right now that is a place that I
might be considering.
thinking about investing in.
I'd say, so I invest in real estate myselfand I'm a big believer in the industrial
(08:46):
sector for investing, probably because Iknow it well and I touch it every day.
And for me, so like what am I looking foron a day -to -day basis?
A lot of it is, I firmly subscribe to themake your money on the buy.
So I'm really sensitive to what the goingin is versus kind of.
what you pro forma and what you expect inthe future.
(09:07):
I'm usually not really betting on massiveappreciation and hoping that that bails me
out on the investment side.
So I really want to go in and a lot of ourreal estate is measured on a price per
square foot basis.
So I want to know exactly how much I'mpaying for that building and is that price
per square foot on par below market,right?
Value add in industrial real estate is ahuge way to be successful in your
(09:32):
investments.
So.
Looking at something like a building thatmight be functionally obsolete has issues
with it.
It could be reconfigured.
It has a long term tenant that hasn't beenpaying rent on time or appropriate market
rent, something that you could go in.
You buy it today.
You need to be patient, spend some time,spend some money, work with your existing
(09:53):
tenant.
And ultimately, but your going in pricewas dictated on the current situation.
You fix those things.
I mean, think like a rehab of aresidential house and a flip.
And then your valuation of that propertyis significantly higher.
You can go get financing based on that newvaluation.
Your cash on cash returns tend to improvequite a bit.
So that's kind of the baseline, I guess,thesis on how I go into it.
(10:16):
But like one thing in particular that Ithink is really interesting is this
industrial outside storage sector, thesubsector of real estate that I mentioned.
We keep calling it iOS.
iOS has been around forever.
The ports of
The Port of Seattle and Port of Tacoma arenothing new.
We've been storing containers outside anddoing all this work forever.
But it's now become an investment class,which is really interesting because and
(10:41):
the reason being is they're not makingmore land.
We all know that.
And as more buildings get built, zoningchanges, cities are getting stricter with
how industrial real estate is beingutilized.
The sector of IOS lands available has beenshrinking.
Meanwhile, the demand for it has arguablybeen increasing.
because even though container volumes andthe ports may be up and down on any given
(11:04):
day of the week, more contain, we'reordering more stuff online.
The consumer is consuming more, right?
Which means more goods are coming fromoverseas, more containers, more trucks,
more chassis, they need more places to bestored.
And so I see the thesis of iOS and thefuture of it only continuing to improve.
Meanwhile, a lot of people don't even,they don't understand it or they don't
(11:24):
even know about it.
So getting in, it's like the definition ofkind of like getting in early.
So that's what I've been trying to focus alot of my investments on.
I think I'm involved in about fourdifferent iOS investment properties at
this point.
And so far they've panned out exactly howI'd hoped they would.
One of them, I'll be the first to admit,one of them didn't go quite as planned,
but still doing okay.
That's how you learn in investing.
(11:45):
You gotta make a couple mistakes along theway.
But yeah.
And I mean, the upkeep on these, I'mthinking it's got to be pretty minimal
because I I'm just picturing like gravel,gravel parking lots with a barbed wire
fence for security or some kind ofsecurity perimeter with some kind of
automatic gate, the front or how whateverthe gating system is that a client would
(12:06):
need.
But after that, the upkeep has got to bepretty minimal.
You're spot on.
That's arguably probably the mostattractive point about it is you could
kind of buy it day one and day two.
Maybe you spend a little bit money fixingbroken fence, laying some new gravel down.
Some of these a perfect site would havelike a small building on it that has like
(12:27):
a little office and a little shop thatsomebody could like pull a truck into and
do some maintenance or store tools in orwhatever.
Right.
So if you do have a building, obviouslythen you have building maintenance that
goes along with that.
But to your point.
the upkeep and the capital improvementcosts are much more minimal than other
sectors of investment class real estate.
(12:47):
And the thing I like about it too is a lotof these properties can be single tenant
properties too.
So while on one side you can look at theinvestment as more risky because if your
one tenant goes away, there goes yourcashflow.
But when you have one tenant on yourproperty, one source of rent, one point of
contact, and it's a property that reallydoesn't require maintenance,
I mean, I have one of my properties thatwe put a tenant in two years ago and I
(13:13):
haven't had to talk to him once in twoyears and he pays his rent on time every
month.
There's been no problems with theproperty.
I mean, it's like we joke about passiveinvestments.
Everybody in the world is like, I wantpassive real estate investments, passive
income.
There's no such thing as passive income inreal estate.
Like it's very, it's active.
I mean, it can be passive, but it doeshave active components to it.
(13:33):
I would say though that example I justused is arguably the most passive
investment I've been able to find to date.
A lot of work up front to get it to thatpoint, but now that I've started the
clock, it's just kind of running, which isgreat, right?
I mean, what more can you ask for?
yeah.
When you're running numbers, are yourunning based on cash flow?
Is that kind of your thing?
You're looking that you need to get a, areyou looking on cash, cash on cash return
(13:56):
for these properties?
Because as you mentioned, you're notlooking at so much appreciation.
I mean, we know, especially around here, Ithink appreciation is going to be really
slow, you know, in these, in these largermarkets and on, I mean, almost, almost, I
mean, that kind of a scenario, your land'salmost not developed other than some
fencing, right?
So are you looking at cash on cash return?
(14:16):
Are you looking to cashflow a certainamount like, okay, I've got this, I need
to cashflow a thousand bucks a month or$15 ,000 a month or whatever your number
happens to be.
How are you running your numbers going into know what this looks like going out for
somebody who might be trying to get intothis?
great question, my first basis is what amI paying for the physical real estate,
(14:36):
right?
Do I think the land price or the buildingprice is appropriate and in line with what
I'm comfortable paying for property?
Okay, that's kind of like box one that hasto get checked.
Box two then really being cash flow.
So being on the brokerage side, obviouslyI have a really good pulse on what's going
on in the market, what are correct prices,what are correct rental rates.
(14:57):
how long do I think it'll take me to finda tenant and what is that tenant willing
to pay?
So now if I've already made it past stepone, which is that I fundamentally agree
that the value of the real estate iscorrect and something that I'm willing to
do, okay, I know what I'm paying now, whatdo I think I can get in rent and how much,
how long and how much is it gonna cost meto get that rent?
And then what's my rate of return on thatrent?
(15:17):
For me, my goal is usually double digits.
I want 10 % or more if I can on my return.
And sometimes you might have to achievethat over time and I'm okay with that.
Yeah.
lot of the other boxes get checked.
But if box one of fundamental value andbox two of rate of return aren't there,
then it's usually a pass at that point.
(15:38):
I like that.
I like that.
And from a year to year increase, are youable to increase your, your rents based
based like on, on inflation on like, doyou use like an inflation number in
industrial real estate around?
Okay.
We know that inflation is up or we knowthat, you know, property taxes just went
up by 3%.
We're going to have to raise our rentalrate by 3%.
(16:01):
How do you kind of factor that in?
interesting question and it's changedreally as of late, although not
dramatically.
The longest time we hear in the PugetSound region, it's just 3 % annual
increases.
Now, pick your lease, pick your building,pick your location.
The rent just goes up by 3 % every year.
There were historically a lot more leasesthat were tied to CPI, but people got away
(16:23):
from CPI because that kind of becomes aheadache of trying to calculate and
recalibrate every year and I think tenantsand landlords both.
just got comfortable with, we're justgonna increase it at 3 % annually, right?
So we rode this 3 % wave for arguablydecades.
And then go back to probably starting,really coming out of the pandemic where
everything started to, especiallyinflation in particular, started to go up
(16:46):
at such a rapid clip and industrial rentshere in our region started going up at 8%,
12%, 15 % a year.
And so all these landlords are like, whoa,rent went up.
12 % in one year and I'm only getting a 3% bump, like this isn't fair.
And the tenants, while they, the reasonthey sign longer term leases is to lock in
(17:07):
and understand what their costs are gonnabe over a period of time and increases.
At the same time, it's not exactly a hardconversation to go, hey, in your five year
lease, rents went up 50%.
So what does that change to?
Pretty much all of them now have bumped to4%.
So it's still a pretty marginal increase.
Now the argument against, of course, isthat in a down market, rents might be
(17:28):
going
you flatter down, but you're still payinga 4 % increase over time.
So I still think the tenants win in mymind at a 4 % increase.
If you're doing a five year lease, moreoften than not, even at 4 % increases, the
tenant probably still comes out on top atthe end of the day.
But for the landlords still at the end ofthe day, they've got security, they've got
their cash flow, and it's increasing everyyear.
(17:49):
So it's in my mind, it's still a win -win.
% return.
You know, if that's my number, if that'smy number, we're trying to set up win -win
situations here, right?
I need my number, my number's 10 to 12 %returns.
You need your number and you feel likeyou're winning on your end because over
time you're gonna be saving some money.
Game over, man.
We're both, we're playing.
We're playing ball now.
I like that.
(18:10):
And I love that.
I love that.
That's a great way to look at it.
Talk a little bit about how technology ismaybe changing the sector a bit.
with things like finding real estate orfinding tenants.
Is technology playing a role in any ofthis and disrupting some of the ways that
industrial real estate is found andtenants are finding these spaces?
(18:34):
The answer is yes.
Commercial real estate as an industry.
I always poke fun at it because we're we Iswear as an industry we're still in the
archaic dinosaur age.
got to know somebody who knows somebodywho has a piece of property for sale.
Well, to a certain degree, right?
But also there's just there's there's beena significant resistance over time to
embrace technology.
(18:54):
I look at residential, for example, andresidential brokers seem to be much more
on it, especially from a personal selfmarketing standpoint.
I think residential brokers schoolcommercial real estate agents.
And I saw that, you know, and I wasrecognizing that.
And for my own personal business, I sawthat as a huge opportunity because it's
like no one else is doing this.
And it's like the definition of lowhanging fruit.
(19:14):
So there's the personal marketing sidewhere I think there are so many other
digital components to self market yourselfas a real estate professional.
But then beyond that, as far as like weoften call it prop tech, property tech,
right?
There's more and more software is comingout every day.
CRMs have been around forever.
There's a lot of software based inunderstanding financing associated with
(19:36):
commercial real estate, when our loans do,what are those loan amounts.
understanding when an owner has a notecoming due, which means they need to make
a decision, which usually when you need tomake a decision in commercial real estate,
that's an opportunity for an agent to getinvolved, whether it's on a brokerage
transaction or maybe an investor trying toacquire a piece of property.
So the answer to your question is yes.
Obviously, AI is a huge buzzword rightnow.
(19:59):
I do use AI a little bit in my business.
I haven't quite figured out exactly how Iwant to integrate it into all my
processes.
I use a software called Monday.
It's monday .com, it's awesome.
Yeah, there we go.
So you know Monday, it's a task -orientedsoftware.
For all of my transactions that I do, Irun them all through Monday.
So when it's all said and done, I mighthave one transaction that has 97 steps
(20:22):
along the way.
Because a commercial transaction doeshave, I'd say compared to residential,
where it's tour, write offer, 30 days, getyour financing, close.
And I'm dumbing it down, but.
In comparison, a lot of these commercialtransactions have so many more nuances
that I think brokers who aren't organizedand don't have a system like that, they
(20:44):
miss things.
And missing things on a $5 $10 millioncommercial transaction can be significant
dollars.
So having a system like that in place, Imean, it's paid huge dividends for me.
I think my clients recognize and know itbecause I'm more on top of it than my
competition.
So I mean, there's a lot out there.
technology wise that you can utilize.
(21:04):
It's just figuring out how to integrate itinto your business.
Well, and it's interesting because Juliahere is really into the technology and the
social medias as well.
In fact, she just was before we startedrecording, was meeting with a buyer that
reached out to her via Instagram, just asa way that you know, you're doing this.
And I know Matt, you're all over thesocials too.
(21:25):
You've got TikTok, you've got Instagram,you've got it all.
We'll make sure that there are links toeverything in the show notes.
Is that, do you think that that does thathelp set you apart?
Because like you said, there just isn't awhole lot out there.
Do you have clients reach out to youthrough those different avenues as well?
The answer is yes.
I don't know if I could sit here and say Icould measure what my true ROI is from the
(21:48):
social media participation in terms ofdollars, but it gets seen.
Whether you like social media or not, Iwill literally say this all the time and I
joke about it, but I'm dead serious.
I don't have any social media from apersonal standpoint.
I think at my most, at my fundamentalsense, I'm almost kind of anti -social
media if I'm being honest for what it'sdoing to the world.
(22:09):
But for my business, it really works andit's really important.
You can reach a broad audience with acouple keystrokes, which is huge.
You can convey useful and importantinformation.
You get seen, right?
And so I make a point of trying to sharereally good content with my audience.
And then what do I do?
I go to industry events.
I go see my clients and they're like, hey,I saw this that you posted on LinkedIn the
(22:33):
other day and that was awesome.
Thanks for sharing.
And then they have follow up questions,interests, right?
And then I have clients or potentialclients who are lurking in the background
who then reach out to me and they're like,hey, I've been following you for years,
right?
And here I am finally surfacing because Ihave a need.
So it's those kind of moments where yourealize that, yeah, I mean, it pays its
(22:54):
dividends.
It's worth the time.
It is a lot of time.
It's effort.
It takes away from being able to do yourbrokerage business, which that is at the
end of the day where you make your money,but worth it.
Important.
And again, we'll make sure all those linksare in the show notes.
If anybody wants to go down a great videoswhere you even explain, you give tips, you
give tricks, or specifically aroundindustrial real estate.
(23:17):
So if you are interested in this sector,Matt's a great guy to follow on all of the
socials, get those tips and tricks, be alittle bit of a stalker.
So social media stocking is not a badthing in the real estate market.
that's how we, that's how we find people.
Yep.
look out to people.
Last question here for you, looking ahead,if you could forecast the future and look
(23:41):
down the road for the industrial realestate market here in the Pacific
Northwest, are there any emerging trendsin particular that are really excited to
you that you think that, you know what, ifyou were thinking right now like, okay,
I'm ready to invest maybe three to fiveyears from now, what are some places that
maybe...
I might wanna just keep on my radar.
(24:02):
Not that they will emerge, but maybe justthinking about, okay, this is something I
wanna keep my ear to the ground about as Istart to maybe gather my funds and figure
out how to do this for myself.
What would, anything?
question.
The OK, at its most baseline level, Ithink the fundamentals for industrial real
estate are still very strong.
I mean, I think our general market is in alittle bit of a roller coaster ride at the
(24:26):
moment up and down.
But I think looking forward, industrialreal estate is poised to do really well.
So I say that in the interest ofsuggesting that really, if you look at
kind of what I talked about before inthese different asset classes, there's
reasons to suggest that you could invest.
today or in the next three to five yearsand do well in just about any of them if
you go into it with the right right thesisand do it correctly.
(24:48):
But but what's what's the big trend right.
I mean especially here in WesternWashington it's how do we get greener and
more efficient and try to take advantageof building efficiencies that that attract
tenants and attract tenants that payhigher rents because those things are
being achieved.
So I think these more modern advancedbuildings.
(25:10):
are gonna do poised well.
If it were me, I'd be trying to looking atbuildings and how do I future proof them
today so that I can be the shining starbuilding available in the future.
That's a big one.
I think beyond, yeah, there's like LEEDcertifications and all these other terms
that are used.
(25:31):
A lot of companies are putting solarpanels on their roof to generate cleaner
energy.
Washington State.
passed a new law in their energy code thatyou can't heat warehouse buildings anymore
with gas.
You have to use electric, very expensive.
There's obviously a huge push towards EVsand electric vehicles and trucks.
(25:52):
So how do you, you know, looking aheadtowards properties that offer charging
capabilities, because whether you believeor like it or not, it seems like that
trend is only going to continue to rampup.
And then really the big thing too is,let's be honest, e -commerce has been the
number one
driver of industrial real estate for manyyears now.
And it's only in my opinion, it's onlygonna, in most professional opinions, is
(26:15):
that's only gonna continue to increase.
People love ordering things online.
They love the convenience of it showing upto your doorstep, whether it's goods,
food, I mean, you name it, right?
I mean, these days it feels like you canget just about anything delivered to your
doorstep, right?
And those things need to be storedsomewhere, right?
And usually the cheapest way to store themis four walls and a roof.
(26:37):
an industrial warehouse building.
So anything that's poised well to supporta tenant that occupies in that business
space seems to probably gonna stand thetest of time.
And on investment basis, assuming liketypical real estate that usually goes up,
it just is how fast does it go up or howslow does it go up?
If you invest in real estate that supportsthat kind of model, two, three, 10, 20
(27:01):
years down the road, I mean, I you'regonna do pretty well.
Yeah, I love that.
And the thing I love about thisconversation is it goes, there's some
other things that I've been reading in ourstate and then the other conversations
we've had around industrial real estateand commercial spaces.
we've had a couple of guests on out of theTri -City area, but I was just talking to,
I've got some friends in the wine industryand down in the Walla Walla area.
(27:25):
This just the other day we were talkingand the big problem down in the Walla
Walla area is cold storage for wineries.
And there's just not enough large coldstorage areas for all these wineries,
right?
Make their wine and you've got to keepyour wine around 56 degrees and there
isn't enough warehouses for so everybody'sfighting over space, which then, excuse
(27:48):
me, as a warehouse owner, you can now upyour rates because you've got, and I don't
know if any, I don't know if you saw thisin the news, but one of them just burnt
down in the Tri -Cities, a big one in theTri -Cities caught on fire and burnt.
So now there's one massive warehousethat's gone.
Anyways, I just find,
You know, it's like everything else, nomatter if we're talking residential real
estate or commercial or industrial realestate, there's a place depending on where
(28:11):
you are in the state and where you mightwant to invest.
Know what that is, you know, outdoorspaces here because we're a port city in
Seattle Tacoma area might be a greatinvestment opportunity.
If you want to be in the food wineindustry, cold storage down in the Tri
-Cities Yakima Valley area could be a goodinvestment, you know.
Apple storage up in the Wenatchee area.
(28:34):
There's cold storage all over up there forapples and cherries.
And you know, our state is very diverse.
And I think that allows you to be diversein the way that you invest if you want to
have a diversity across differentcommercial, you know, and residential real
estate.
So I love spending this time with you tothink because I, you know, as you start
(28:54):
talking, I'm like, my gosh, just a gravellot, like a gravel lot.
That's all I need is a gravel lot.
I can
I can rent out a gravel lot.
This is crazy.
Right.
I just, it's so cool to think about allthe opportunities we have with us.
Yeah.
Cold Storage is a big one too for therecord.
That's a huge one.
Very big.
Yeah.
capital cost to it.
(29:15):
But I think there's also there's a prettygood return on investment if you can do it
right.
And get good thinking about.
Awesome.
Well, Matt, thank you so much for spendingtime for us today.
If you will have all the links in the inthe show notes to the podcast.
But if there was one link that you wouldsay is probably where people should reach
out to you or learn more about you, what'sthe one that you would like to promote?
(29:39):
I think you're gonna get the biggest rangeof what I do and what I talk about on
LinkedIn.
That's kind of my primary platform that Ispend the most time on and can distribute
the widest range of content.
Other than that, I'm an email guy.
Shoot me an email.
My email's all over the internet, so it'svery public and I love answering
(29:59):
questions.
I mean, if I'm being fully transparent, Ireally enjoy.
the education component and theconversations I have with people, even
from people out of state who have no basisfor doing anything out here, but are just
curious about these conversations andtopics.
I love it.
So by all means, I'd encourage anybody toreach out to me again through the socials,
through email, whatever it may be.
(30:20):
Always happy to engage.
Awesome.
And that's good to know because I mean, weare a Washington state focused real estate
podcast, but our second largest state thatlistens to us is California.
And we've actually had investors inCalifornia who are investing up here,
reach out to, to people.
So, so know that Matt is open to that too.
So, we'll make sure that LinkedIn is overthere, but, LinkedIn is Matt McLennan, all
(30:43):
one word, A T T C L E N N A N.
and you can find that on LinkedIn.
And again, that'll be in the show notesand all over social as well.
Matt, thank you so much for taking timeout of your busy schedule to be with us
here today on the podcast and learn allabout industrial real estate here in the
greater Puget Sound region.
Yeah, Jeff, Julia, thank you.
(31:04):
This was awesome.
Glad we could do it.
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