Episode 184
Can Real Estate Really Predict the Economy? Insights from Property Expert Barry Williams
Episode 184 of The Business Development Podcast features Barry Williams, an assistant professor at MacEwan University and seasoned property management expert. In this episode, Kelly Kennedy and Barry discuss how real estate serves as an economic indicator, particularly through housing starts, which can predict economic trends up to a year in advance. Barry explains the nuances of property management and offers insights for entrepreneurs considering commercial real estate investments, emphasizing the importance of understanding the financial and operational responsibilities of property ownership. He also delves into the changes in the real estate landscape post-COVID, particularly the shift towards remote work, which has left much office space underutilized.
Throughout their conversation, Barry provides practical advice on topics such as market surveys, negotiating lease terms, and assessing the viability of purchasing versus leasing office spaces. He highlights the complexities involved in managing a building, from energy efficiency to handling potentially costly issues like asbestos. For business owners, Barry's insights offer valuable guidance on navigating the challenges of property investment and management in today’s dynamic economic environment.
Key Takeaways:
1. Real estate trends, especially housing starts, can be valuable economic indicators that forecast shifts up to a year in advance.
2. Property management involves more than ownership; managing a building includes maintenance, financial management, and HR skills.
3. Entrepreneurs should assess both short-term and long-term needs when deciding between leasing and purchasing real estate.
4. A market survey is essential when leasing or buying; understanding local rental rates and amenities helps ensure a fair deal.
5. Office space demand has shifted post-COVID, with many companies now favoring remote or hybrid work models, impacting vacancy rates.
6. Energy efficiency in buildings can significantly affect operational costs, making modern, eco-friendly properties a wise investment.
7. Common area costs in commercial buildings can be a substantial expense; be sure to account for them when budgeting.
8. Converting office buildings into residential spaces is costly and requires a clear financial recovery plan.
9. Specialized maintenance issues, such as asbestos or mold abatement, can dramatically increase building management costs.
10. The decision to buy or lease commercial property depends on financing costs, long-term plans, and the potential return on investment.
Companies mentioned in this episode:
- MacEwan University
- Epic Investment Services
- BGIS
- Aiyer and Oxford Inc.
- Bentall Kennedy
- Boardwalk REIT
- Widener
- Real Estate Institute of Canada
- BOMA
Links referenced in this episode:
Transcript
Welcome to episode 184 of the Business Development Podcast and today it is my absolute pleasure to bring you Barry Williams.
Kelly Kennedy:Barry is an Assistant professor with Grant McEwen University and today we are chatting all about real estate and how real estate can be an excellent economic indicator.
Kelly Kennedy:Stick with us, you are not going to want to miss today's episode.
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Podcast Host:Welcome to the Business Development Podcast and now your expert host, Kelly Kennedy.
Kelly Kennedy:Hello.
Kelly Kennedy:Welcome to episode 184 of the Business Development Podcast.
Kelly Kennedy:Today we're bringing you Barry Williams.
Kelly Kennedy:Barry is a seasoned property management professional with over 25 years of diverse experience in both residential and commercial real estate.
Kelly Kennedy:Currently serving as an Assistant professor at Grant McEwen University in the School of Business, he brings a wealth of practical knowledge to his role.
Kelly Kennedy: faculty member Since March of: Kelly Kennedy:His teaching portfolio includes courses such as Introduction to Property Management, where he combines his extensive industry experience with academic insights.
Kelly Kennedy:Barry's previous role includes managing office towers for Epic Investment Services, overseeing office research and lab facilities for BGIs, and serving as a senior Property manager for Aiyer and Oxford Inc.
Kelly Kennedy:His tenure at Bentall Kennedy saw him managing 2 million square feet of office, laboratory and research space, further solidifying his expertise in property management.
Kelly Kennedy:Barry's journey began with Boardwalk REIT where he honed his skills in residential property management.
Kelly Kennedy:Known for his skills in negotiation, budgeting, site management, and a unique knack for delivering bad dad jokes, Barry's approach to education is both engaging and comprehensive.
Kelly Kennedy:His academic background, featuring a Master of Science in Bionucleonics from the University of Alberta, adds a unique dimension to his teaching.
Kelly Kennedy:Barry's commitment to excellence and a passion for real estate development are evident in every aspect of his work.
Kelly Kennedy:With a career marked by leadership and innovation, Barry is not just teaching the next generation of property managers, he's inspiring them to redefine the industry.
Kelly Kennedy:Barry, it's an honor to have you join us Today.
Barry Williams:Well, it's an honor to be on your podcast.
Barry Williams:You're really good at doing introductions.
Kelly Kennedy:Well, everybody loves a good introduction and we all deserve one.
Barry Williams:It surprised me when we talked earlier that you said you didn't really have anybody from the property management field or actually professors either.
Kelly Kennedy:Not one.
Barry Williams:Because if you think about it, and this is what I talk about with my students in the introductory course, is everybody, if you look around, just wherever you are, like, are you in your home right now or.
Barry Williams:I am, yes.
Barry Williams:So if you own your home, then you're the property manager of your home, too.
Kelly Kennedy:Yes.
Barry Williams:Because you have to take care of everything, pay the bills, that kind of thing.
Barry Williams:But everybody has to have a place to live.
Barry Williams:As far as residential.
Barry Williams:Yeah.
Barry Williams:You either own your own house or if you live in an apartment building, then somebody has to run that and it has to be managed.
Barry Williams:If you just let it go, it wouldn't be long before it'd be falling apart.
Barry Williams:And then there's also.
Barry Williams:Or you could live in condos.
Barry Williams:There'd be a condo board and they usually would hire a property management company to take care of the condominiums, but it's at the discretion of the board.
Barry Williams:And then if you think about it, well, where do you work?
Barry Williams:If you're working in an office building or downtown or even if it's in the suburbs, those buildings have to be run by somebody.
Barry Williams:So that's another area of commercial property management.
Barry Williams:And then I know a lot of people are doing online shopping now, but people still go out to stores to buy things.
Barry Williams:West Edmonton mall or so going to retail spaces.
Barry Williams:So that's another area of property management.
Barry Williams:So those, those buildings, they need to be taken care of and somebody's got to run them.
Barry Williams:The when it's 40 below outside and you come into, say a shopping center, you expect it to be nice and warm in there and not 40 below in there, too.
Kelly Kennedy:Yes, absolutely.
Kelly Kennedy:And you know, that was why I really wanted to spend some time chatting with you today.
Kelly Kennedy:Because actually what really intrigued me, we connected on LinkedIn and I know I'd kind of just message you.
Kelly Kennedy:And we started chatting and I just kind of said, you know what?
Kelly Kennedy:Like, we actually haven't had a university professor come on our show yet, especially not one from a faculty of business.
Kelly Kennedy:And so that would be a really unique.
Kelly Kennedy:A unique conversation.
Kelly Kennedy:And then I kind of mentioned once we started chatting and you told me your property management background, I was like, holy cow.
Kelly Kennedy:Like, business owners all over are buying property and they may or may not even know what they're getting themselves into and we might be able to give them some tips today on kind of how to better handle that.
Kelly Kennedy:And then we got into property and real estate as an economic indicator, which I was like, whoa, yeah, okay, now we really have to chat because any type of indication that we can have as a business is going to give us an edge.
Kelly Kennedy:It's going to give us an opportunity to make choices maybe ahead of a point where we don't have options anymore.
Kelly Kennedy:And so I feel like there's a lot I want to chat about with you today and this is really fun and I'm really looking forward to it.
Kelly Kennedy:But before we do, take us back to the beginning.
Kelly Kennedy:How did you end up on your path?
Barry Williams:Well, actually I started off in residential with Boardwalk and while working there I got my cpm, that's a certified property management designation which I'll get into a little later as far as what it's worth for you and why someone would want it.
Barry Williams:And then, then I switched over to.
Barry Williams:Most of my commercial career has been with Bent All.
Barry Williams:They're a commercial property management company, one of the largest in the country.
Barry Williams:And when I started working there they were Bent all.
Barry Williams:And then, then they bought out a company that was mainly based in the states called Kennedy, that had some residential properties to it.
Barry Williams:And then, then they teamed up again with a European company, Green Oak.
Barry Williams:So now they're Bent All Oak.
Barry Williams:So I had to keep changing my nomenclature on my emails.
Barry Williams:So I managed well, I was a property manager with them and then a general manager and the main contract I had when I was with them was the Alberta infrastructure contract that we had with them.
Barry Williams:So I was managing properties, Alberta Infrastructure properties here in Edmonton.
Barry Williams:Quite a diverse selection of them too.
Barry Williams:There's some office component to it but also a laboratory like.
Barry Williams:I don't know if you're familiar with Neil Crawford Center.
Kelly Kennedy:No.
Barry Williams:Yeah.
Barry Williams:So there's seven buildings there but one of them is the Alberta Infrastructure building which is all the offices for Alberta Infrastructure that where they run the province from.
Barry Williams:And then JGO which has to do with agriculture and then OS Longman building which has all the provincial.
Barry Williams:Has provincial labs so they do testing there.
Barry Williams:Things like if you're.
Barry Williams:They'll you've heard about some diseases going around to different like a muscle wasting disease in deer or things like that.
Kelly Kennedy:Sure.
Barry Williams:So they do the autopsies in there to monitor what's going on as far as disease being spread in an agricultural sense but also in the wild too.
Barry Williams:So that that was my main experience.
Barry Williams: in Edmonton, off and on since: Barry Williams:So it's been a long time and doing that.
Barry Williams:When my second last term as President, Grant McEwen was looking to start up a property management program, they had funding from a company called Widener.
Barry Williams:Quite a generous donation.
Barry Williams:So the dean at that time, a lady by the name of Dr.
Barry Williams:Elsie Alford, she actually got a hold of a friend of mine, he's president of Midwest, and she asked him, who do you think would be good to maybe give a presentation to us?
Barry Williams:So he suggested myself.
Barry Williams:So I gave a presentation to a group of people that were going to be involved in setting up the property management.
Barry Williams:And I guess it went well because they offered me a position to teach sessional.
Kelly Kennedy:Wow.
Barry Williams:So I started teaching sessional in 16, and when I started it, I thought, you know, if I was a student taking this course, where does it get me?
Barry Williams:Like, is it just some credits, some easy credits, maybe hard credits?
Barry Williams:I think I've been known to be fairly easy, though, and I thought, it's got to get you somewhere.
Barry Williams:So then gradually we developed more courses, and I worked under a chair by the name of Mike Annette, and with another professor, Chris Hancock, and we ended up developing five property management courses.
Barry Williams:And that's enough to get a minor in your bachelor's degree.
Barry Williams:But at the same time, I was still thinking, okay, what good does that do you?
Barry Williams:Where does it get you?
Barry Williams:So being that I've been involved with Real Estate Institute of Canada for years, I tried to marry the two, the Grant McEwen University.
Barry Williams:And gradually it took about seven years to reach an agreement.
Barry Williams:And I'm happy to say just in the last month, we've signed an agreement between Grant McEwen and REIC to give the students that the property management courses I'm teaching, to give them credit for those courses towards some of the courses needed to get your certified property manager certification.
Barry Williams:So.
Kelly Kennedy:Oh, wow.
Barry Williams:That'll save my students a lot of money in the long run, because if you're paying for all the courses and getting your experience for the CPM, I think it run total, it would run around 12 or $14,000 somewhere in there.
Barry Williams:So that hopefully will save them some money.
Barry Williams:They've already paid for the courses at Grant McEwen.
Kelly Kennedy:No kidding?
Kelly Kennedy:No kidding.
Kelly Kennedy:Wow.
Kelly Kennedy:You know, you've spent an incredibly long time in property management.
Kelly Kennedy:And one of the things that I kind of wanted to chat with you about, first off, because, you know, we may Have a lot of entrepreneurs listening who are like, yeah, property management, like, what does that even mean?
Kelly Kennedy:So can we maybe just explain?
Kelly Kennedy:Like, obviously you can go out and you can buy a building, but that's really just the beginning.
Barry Williams:Yeah.
Barry Williams:Owning a building and running it are two different things.
Barry Williams:In fact, usually the people that own the buildings, especially really big expensive ones, they might have on site staff to run it, but they usually hire a property management company to do it.
Barry Williams:Just like the infrastructure buildings that we were running, they were ones that the Alberta government used to run themselves, but then they contracted it out to.
Barry Williams:Well, at the time it was bent all.
Barry Williams:Yeah.
Barry Williams:If you think about how to run a building, there's a lot of things involved in that.
Barry Williams:First of all, there's all of your physical systems, like your heating, your chillers.
Barry Williams:You have to make sure all of those things are maintained and run properly.
Barry Williams:Then you have to.
Barry Williams:So as a property manager, you're going to have staff that are going to be doing it.
Barry Williams:So you have to be able to manage people.
Barry Williams:So there's a human resources component to it too.
Barry Williams:And believe me, there are times when I would spend the majority of my time dealing with people and not the building.
Kelly Kennedy:Yeah.
Barry Williams:And then of course, you have to have some accounting skills because you'd be doing reports to like, say you have someone that owns the building and they want to know what's going on.
Barry Williams:So once a month you'd be giving them a report of revenues, expenses, what your net operating income is.
Barry Williams:So all of the financials.
Barry Williams:So you'd have to do that.
Barry Williams:Normally you do it once a month and then at the end of the year you would do a year end statement.
Barry Williams:And actually that depending how big your operation is, usually it's audited.
Barry Williams:So it would be audited by a third party.
Barry Williams:You know, unless it's just your own house.
Kelly Kennedy:Yeah, well, that's still audited by a third party.
Kelly Kennedy:It's just called your wife.
Barry Williams:Yeah, absolutely.
Barry Williams:And monitored closely.
Barry Williams:Yeah, yeah.
Barry Williams:So, yeah, you have to have, you have to have some knowledge of how buildings run you.
Barry Williams:You need to.
Barry Williams:Like I said, you have to have some HR skills and you have to have financial skills and you have to be able to communicate well.
Barry Williams:I also teach some, just some management courses.
Barry Williams:Not, not just property management.
Barry Williams:And in that course I try to emphasize, I make them do group projects and do presentations because as a manager, you're going to have to be able to get up and talk in front of people, to run meetings, to chair meetings, to learn how to move them along.
Kelly Kennedy:Yeah, no, for sure, for sure.
Kelly Kennedy:And you know, like, that's such a.
Kelly Kennedy:That's such a challenge for most people.
Kelly Kennedy:It's so funny, you know, like on this show we do obviously these expert guest interviews, but we also do a lot of business development shows.
Kelly Kennedy:So I do one business development show a week where we touch on a wide range of topics.
Kelly Kennedy:But you know, what, like situations like performance anxiety, imposter syndrome, you know, fear of public speaking, things like that, they come up quite regularly because there's something that we all struggle with.
Kelly Kennedy:And so what I always try to do is just like normalize that with people and let you know that like, if these are things you struggle with, so do like 70% of the population.
Kelly Kennedy:So you're not alone.
Barry Williams:I was listening to your imposter syndrome podcast.
Barry Williams:When did you do that?
Barry Williams:Last week.
Kelly Kennedy:Literally Wednesday.
Kelly Kennedy:That came out on Wednesday.
Barry Williams:Okay.
Barry Williams:Yeah, well, I guess it was right on top of it.
Kelly Kennedy:You were right on top of it.
Barry Williams:But I know my.
Barry Williams:The management course that I teach is first year students.
Barry Williams:And yeah, I think they have a lot of anxiety in having to give presentations, but at least them getting some experience in it in school, then it won't be so hard once they get out and realize, you know what, that's part of the job.
Barry Williams:You have to be able to do that.
Kelly Kennedy:Yeah, yeah.
Kelly Kennedy:Well, you know, I don't know.
Kelly Kennedy:It's like I've struggled with it my entire career and like, I still get nervous sometimes, right?
Kelly Kennedy:Like, there are still interviews I do that make me nervous.
Kelly Kennedy:There are still public speaking things I gotta do that make me nervous.
Kelly Kennedy:There's a lot of things in life that make you nervous, but what I find is the more that I face those things, the more that I just challenge it.
Kelly Kennedy:Usually the nerves go away fairly quickly.
Kelly Kennedy:Like I would say within the first two to five minutes, your nerves are usually completely dissipated.
Kelly Kennedy:Like, people seem to think they'll feel like that forever, but that's not the case.
Kelly Kennedy:You only feel that way, typically for a short period of time.
Kelly Kennedy:And I always like to think if I'm feeling nervous, it's really just because it just shows I care.
Barry Williams:Yeah, well, true.
Barry Williams:I mean, if you don't get nervous at all, then do you really care about what you're doing?
Kelly Kennedy:That's right.
Barry Williams:Because even this morning before the podcast, I was thinking, well, I wonder what this is going to be like.
Barry Williams:But it's just like a zoom call.
Kelly Kennedy:That's right.
Kelly Kennedy:Yeah, it's like a zoom call for the most part.
Kelly Kennedy:The nice thing about this zoom call, though, is that we edit it and make it sound really, really good before it comes out.
Kelly Kennedy:So whenever we make a jumble, we can always fix it.
Kelly Kennedy:That's the best thing about a podcast.
Barry Williams:Well, you mentioned in your introduction about bad dad jokes.
Barry Williams:When I've been doing public speaking, especially when I was president of reic, we would have luncheons once a month and I would be the master of ceremonies for it.
Barry Williams:And I.
Barry Williams:Somebody told me that you should always start off with a joke and you know, that gets people involved.
Barry Williams:But apparently there were times when I told some off color jokes that weren't appreciated, so I got asked to stop doing that.
Kelly Kennedy:Oh no.
Kelly Kennedy:Oh goodness.
Kelly Kennedy:That's okay.
Kelly Kennedy:A good.
Kelly Kennedy:You know what?
Kelly Kennedy:I feel like I give bad dad jokes a lot of the time, but it's just my kids who get it, so they just tell me I'm being corny and let me move on with my day.
Kelly Kennedy:But I get it from my dad, so I feel like it's a badge of honor.
Barry Williams:Yeah, it's hereditary.
Kelly Kennedy:Absolutely.
Kelly Kennedy:Absolutely.
Kelly Kennedy:Barry, you know, you are working like, you know, right on the ground level of all the newest business students.
Kelly Kennedy:And I really kind of wanted to pick your brain a little bit because I think there's a lot of fear in the business community with, with the latest generation, the Gen Z's of the world of, you know, what can we expect from them?
Kelly Kennedy:Are they going to be able to, to be able to have, you know, interactions with other people and not struggle with those things because it's such a digital world now.
Kelly Kennedy:What is your, what has been your experience in working?
Barry Williams:You know, I was concerned about that too, because I was, I was teaching before COVID and after, and when Covid was, was going on for about a year and a half, I didn't have any in class teaching.
Barry Williams:It was all like we're doing right now.
Barry Williams:And I found that not very effective.
Barry Williams:You need the personal interaction between people and when you have like you and I right now is one on one, so that's fine.
Barry Williams:But when you're giving a lecture and it's 35 students and they're all supposed to be logged in, there's.
Barry Williams:There's no personal interaction there.
Barry Williams:But so that's one of the things that I was worried about once we got back to teaching in class was how interactive are the students going to be.
Barry Williams:And actually I've seen them coming along.
Barry Williams:I was worried that, well, maybe they'll forget how to interact with people face to face, which I think is really important, especially in business, in doing Some of these assignments, they gradually come out of their shells.
Barry Williams:They get to know people in the class because they divide them into groups so they have to.
Barry Williams:They have to interact with the other people in the group.
Barry Williams:And I give them a chance to do that in class.
Barry Williams:And then gradually they put together their assignments and most of them do a pretty good job.
Barry Williams:So I think we'll be okay in the future.
Barry Williams:Okay.
Barry Williams:Yeah, they're actually more.
Barry Williams:When I think back to when I was in my late teens going to university, they're a lot more diligent than I was.
Barry Williams:I was a troublemaker sometimes.
Kelly Kennedy:Well, we were all troublemakers at one point.
Kelly Kennedy:You know, I look back at it though, and I do see a very different world.
Kelly Kennedy:Right.
Kelly Kennedy:Like, you know, my boys are pretty young.
Kelly Kennedy:Our oldest is 10, my youngest is 6 months old.
Kelly Kennedy:So it's a pretty big, wide range.
Kelly Kennedy:But I look at the world that they're growing up in.
Kelly Kennedy:Like, even hanging out at friends houses is happening less and less and less.
Kelly Kennedy:It's not something that they're typically asking to do.
Kelly Kennedy:And I look at myself.
Kelly Kennedy:It's like when I was 10 years old, all I wanted to do was go and hang out at my friend's house or have my friends over and we'd go ride bikes and, you know, play Sega.
Podcast Host:Right.
Kelly Kennedy:Different.
Kelly Kennedy:Different world, different video games.
Kelly Kennedy:But, you know, they are living a lot of their life online.
Kelly Kennedy:They're interacting with their friends online from school in video games that they're playing or whatever else that they're doing.
Kelly Kennedy:You know, we have, our boys have brothers, so like, they can kind of hang out and have that brotherly interaction in person.
Kelly Kennedy:So.
Kelly Kennedy:But I feel like for some of the kids that maybe are.
Kelly Kennedy:Are, you know, are single kids, like, they don't have brothers and sisters, they're an only child.
Kelly Kennedy:It might, it might affect the way that they are able to interact with the rest of the world.
Kelly Kennedy:And so I kind of think, like, as we move forward, it is going to be the responsibility of the next generation to really help them to establish those interpersonal connections and to communicate one on one with other people.
Kelly Kennedy:And I think the onus is more on us than it ever has been.
Barry Williams:Yeah, I believe so too.
Barry Williams:And part of, part of the job that I'm doing now is there are certain organizations, I don't know if you've heard of bulma, that's Building Owners and Managers association, but there's different professional organizations than the reic, which is Real Estate Institute of Canada.
Barry Williams:And what I try to do is get my students Involved with them.
Barry Williams:Like BOMA has lunches once a month and with different professionals.
Barry Williams:Like they might have contractors at one lunch.
Barry Williams:Just think people in the industry.
Barry Williams:And so we will buy a table.
Barry Williams:I'll take 10 or 11 students and have them interact with people that are already in the business.
Barry Williams:And the same with reic.
Barry Williams:I bring them to luncheons that REIC is putting on, but we also set them up with like short term work, integrated learning.
Barry Williams:And what that is, is I have several companies that I have developed relationships with and I asked them, okay, do you need a student for say, three months?
Barry Williams:Give me a job description, I'll put it out to my students, they can apply for it.
Barry Williams:And then you do your normal hiring process.
Barry Williams:Interview them, decide who you want to hire and hire them for.
Barry Williams:Usually it's a term.
Barry Williams:So that would be, say if it was in January, it'd be January to April.
Barry Williams:If it's in fall, it would be September to December.
Barry Williams:And right now we have a program where, yeah, those employers pay them, but at the end of the term, then they invoice us the school of business and we pay the employer back.
Barry Williams:So it's a win, win situation.
Kelly Kennedy:Oh, wow.
Kelly Kennedy:Wow, that's a really great program.
Barry Williams:Yeah, it gives them experience at.
Kelly Kennedy:Yeah.
Barry Williams:Right in the field.
Barry Williams:And at the same time they get paid for it.
Barry Williams:So that's good.
Barry Williams:And the whatever company they're working for has the benefit of having someone work for them for three or four months and then get paid back for it.
Kelly Kennedy:Wow.
Kelly Kennedy:Yeah, no, that's a.
Kelly Kennedy:I can see a lot of companies listening right now thinking, hmm, that sounds like a great plan.
Kelly Kennedy:Oh, my goodness.
Kelly Kennedy:Speaking to that though, we are talking to, like I said, a lot of entrepreneurs, whether they're new entrepreneurs or long time entrepreneurs or business development people or executives of all levels are listening right now.
Kelly Kennedy:And one of the things that I really wanted to talk about that really intrigued me, Barry, when we started chatting was you spent a lot of time in commercial real estate.
Kelly Kennedy:And one of the things that you had said to me was, you guys can use real estate as an economic indicator.
Kelly Kennedy:Can we spend some time on that?
Barry Williams:Oh, yeah.
Barry Williams:And actually that a lot of that is residential.
Barry Williams:Also, like one of the, you know, we always hear about, okay, the interest rates, unemployment.
Barry Williams:Now there's several things that the indicators that you can look at to see how the economy is going, but one of the biggest indicators is housing starts.
Barry Williams:So what you look at is the permits applied for and issued in a certain year because there's a time gap between when there's.
Barry Williams:When people apply for permits and when they can finally do the construction.
Barry Williams:And that'll give you an idea about a year ahead of time what the economy is going to be like.
Barry Williams:Because the biggest economic driver is housing and because everything revolves around that.
Barry Williams:You have the labor to build the houses.
Barry Williams:You have the suppliers of, say, lumber and all the things that you're going to use to build the house.
Barry Williams:Then there's also.
Barry Williams:Well, when someone moves into a house, they have to have a fridge and a stove and, you know, so it's.
Barry Williams:That industry benefits from it too, and the transportation industry because they have to get these goods to the places where you're going to use them.
Barry Williams:So housing starts, to me, I think is the biggest indicator of how the economy is going to be in the next year.
Barry Williams:And right now, unfortunately, government programs and maybe the cost of money has slowed down.
Barry Williams:Housing starts and we have a housing shortage right now.
Barry Williams:Wow.
Kelly Kennedy:Okay.
Kelly Kennedy:I.
Kelly Kennedy:I never really looked at it that way.
Kelly Kennedy:You're absolutely right, though.
Kelly Kennedy:It really does all tie around how many homes are out there that need all of these services, isn't it?
Barry Williams:Yeah.
Barry Williams:And all of your jobs depend on supplying those services.
Barry Williams:So it's.
Barry Williams:Yeah.
Barry Williams:To me, that's the biggest economic indicator is housing starts.
Kelly Kennedy:Wow.
Kelly Kennedy:And how can people, how can people find out how many housing starts there are?
Kelly Kennedy:Is there an easy way to find this information?
Barry Williams:Yeah, with CMHC they track that kind of data and it's not, It's.
Barry Williams:It's not secret.
Kelly Kennedy:Wow.
Kelly Kennedy:Well, you know, it's not secret, but I bet you there's a lot of people right now thinking I'm going to go back and check that correlated data just to see.
Kelly Kennedy:But that sounds like it's like a full year ahead indication.
Barry Williams:Yeah.
Barry Williams:And right now, just the way the market is right now, and it's fairly unique throughout my career, I haven't quite seen the scenario that we have right now and that is that really short on how on residential.
Barry Williams:But commercial real estate is suffering.
Barry Williams:And in Edmonton in particular, as far as office space, we kind of overbuilt and it takes a long time to plan those sorts of projects because they're huge, they're hundreds of millions of dollars.
Barry Williams:And the ICE district was lucky.
Barry Williams:They were planning it when the economy was running really, really well.
Barry Williams:But by the time they finished building it, there wasn't the requirement for office space.
Barry Williams:And.
Kelly Kennedy:Yeah.
Barry Williams:So the combination of us having too much office space and then Covid hitting.
Barry Williams:What happened when Covid hit.
Kelly Kennedy:Yeah.
Barry Williams:Everybody had to work from home right.
Kelly Kennedy:Yeah.
Barry Williams:And people got used to that and they found out, you know what, there are a lot of jobs you can do from home.
Barry Williams:So not as much office space was needed for a lot of companies.
Barry Williams:So it changed the way businesses were run.
Barry Williams:There's still, I mean, there's still, you know, where you have to come into the office, but it's not like it used to be.
Barry Williams:And so Edmonton and Calgary both have, still have a fair amount of vacancy in the commercial spaces.
Barry Williams:So I wouldn't recommend buying an office building at the moment.
Kelly Kennedy:Well, I guess that was my next question is like, what do you think is going to happen to all this space?
Kelly Kennedy:Like if we just have a whole bunch of empty offices because everybody's working from home.
Kelly Kennedy:Do you think that this, this work from home shift is going to be a permanent shift or do you think that over time we're going to start all slowly migrating back to that office life we once came from?
Barry Williams:Yeah, I think gradually there will be a migration back to the office, but not everything.
Barry Williams:I mean, there are probably a certain percentage will be working from home.
Barry Williams:They just found that, you know what, it works, works for the person, it works for the business saves us money.
Barry Williams:So let's just keep going that way.
Barry Williams:But yeah, there will be.
Barry Williams:There already has been a certain shift back to working in office spaces.
Barry Williams:But it's, it's not, it's, it's not pre Covid.
Barry Williams:We still haven't got the people back to the degree that we were before.
Kelly Kennedy:COVID Yeah, no, no.
Kelly Kennedy:And I'm not sure that that's a bad thing.
Kelly Kennedy:Like, you know, I've worked from home since COVID and I've enjoyed it.
Kelly Kennedy:Like we do office days at client offices and some of the clients that I work with actually only have employees come to the office a couple days a week.
Kelly Kennedy:So that was kind of the compromise that they ended up going with.
Kelly Kennedy:And I think that that's a really nice mix because you get that time at the office to work directly, be able to get that thing done.
Kelly Kennedy:But we also recognize we really don't need to be there, you know, five days a week either.
Kelly Kennedy:And so I think, I think the answer is somewhere in the middle.
Kelly Kennedy:Although I can also see the other side of it for a company, right.
Kelly Kennedy:Like, like, you know, commercial office space, it's expensive.
Kelly Kennedy:Maybe not as expensive right now with it with.
Kelly Kennedy:But it does, it gets very, very expensive, especially when it's in high demand.
Kelly Kennedy:I can see a lot of companies just saying, do we really need that office for whatever, you know, 30, $40,000 a month we're paying on that lease.
Barry Williams:Well, yeah, and, Kelly, it's.
Barry Williams:It's a balancing act.
Barry Williams:I mean, there will.
Barry Williams:There's.
Barry Williams:I imagine some kind of equilibrium will be reached at some point, and unless there's another pandemic or something like that.
Barry Williams:But, you know, there's.
Barry Williams:This is one of those shifts that is semi permanent, because if you think about.
Barry Williams:Yeah.
Barry Williams:People going back or the way that people have learned to do the job in a different way, and probably one of the big ones is shopping.
Barry Williams:Before the pandemic, I would never have shopped online.
Barry Williams:I didn't trust it.
Barry Williams:I felt like if I put my credit card out there, I'd get.
Barry Williams:I'd get robbed.
Barry Williams:But in our family, probably do.
Barry Williams:At least 50% of the shopping is done online because you ordered, and the next day, it's on your doorstep.
Kelly Kennedy:It's.
Kelly Kennedy:It's crazy.
Kelly Kennedy:It's like.
Kelly Kennedy:It's almost a little bit hard to believe, actually.
Kelly Kennedy:Although I went with my boys to Best Buy the other day, and we walked around, around, and, like, honest to God, they'd never really had that, like, store experience before.
Kelly Kennedy:And they're like, we need to do that more often.
Barry Williams:Yeah.
Kelly Kennedy:And I just kind of laughed.
Kelly Kennedy:I was like, man, like, it's kind of like the video store, right?
Kelly Kennedy:Like, nobody in this generation will ever understand the joy of going to a video store like a Blockbuster on a Friday night.
Kelly Kennedy:You know, it's.
Kelly Kennedy:It's just a.
Kelly Kennedy:It's just a dead thing.
Kelly Kennedy:And I do wonder at some point if that's literally the store shopping experience.
Barry Williams:Oh, yeah.
Barry Williams:We used to take my kids into the video store, and we.
Barry Williams:We'd probably spend a couple hours in there picking out movies for the weekend, and we'd usually come out with at least five or six movies, and then we'd watch them all weekend and then take them back and, you know, different time.
Kelly Kennedy:But honestly, there was something really special about that time.
Kelly Kennedy:Like, I do think there are certain things that they need to stay just because there's something magical about them, like the convenience.
Kelly Kennedy:It doesn't outweigh the joy of just being able to go and do that activity.
Barry Williams:Yeah.
Barry Williams:Yeah.
Barry Williams:Oh, for sure.
Barry Williams:Yeah.
Kelly Kennedy:But we're a convenient.
Kelly Kennedy:We're a convenient generation.
Kelly Kennedy:What do you do?
Kelly Kennedy:Yeah, Barry, I wanted to, you know, chat with you about purchasing or leasing real estate.
Kelly Kennedy:We are talking, like I said, to a lot of entrepreneurs who at some point will be either purchasing or leasing real estate or dabbling in it.
Kelly Kennedy:But what are some of the things, like what are some of the tips that you would give people if they're kind of going to go out and get their first office, whether they're going to be be buying a warehouse or buying office space or leasing office space?
Kelly Kennedy:You know, what, what should they consider and what should they watch out for?
Barry Williams:Well, first thing, you should be considering what your needs are going to be.
Barry Williams:If you're just starting out now, that's probably a good thing because you're not.
Barry Williams:If you were established, you probably rented more space than you needed, and now not everybody's coming back.
Barry Williams:So establish your needs first.
Barry Williams:And then what are you going to need to function in the space?
Barry Williams:For instance, if it's, say something like Amazon and they're going to put in a distribution center, so that would be an industrial space.
Barry Williams:But you not only need a big space to be sorting things, but you need to be able to have communication as far as trucking, air access, train access, and good road access.
Barry Williams:So all of those things, because you're, you're going to be getting stock in, sorting it, filling orders, sending them out in trucks.
Barry Williams:So you need access to all of those things.
Barry Williams:If you're thinking about, say, an office downtown, you'll want to think about, okay, how much space do I need?
Barry Williams:And then what you do is do a comparison of what you're going to get for how much you're going to pay per square foot.
Barry Williams:So basically what we call a market survey.
Barry Williams:So you do a market survey, you figure out, okay, how much are you, what is the normal rate?
Barry Williams:What's a good deal?
Barry Williams:And then what am I getting there?
Barry Williams:Do I have transportation for my people that are going to work in the office, like LRT or buses?
Barry Williams:Or if they want to drive a car in, do we have parking space for it, which, if it's downtown, isn't cheap?
Barry Williams:And then what sort of things are going to be offered to me by the landlord, like data drops.
Barry Williams:So is all of the upgrades that you need to run your office, you know, your audio, video components, all of the technical stuff, is that going to be supplied?
Barry Williams:A lot of places do.
Barry Williams:That's what they call data drops.
Barry Williams:So when they're setting up your office for you, they'll want to know what your requirements are.
Barry Williams:I, I'm not really technical, but I know that, you know, you need maybe optical, you know, electricity, phone lines, that kind of thing.
Barry Williams:So you'll, you'll want to know that you'll be able to get those in the space that you're going into.
Barry Williams:And like I said, then you do it.
Barry Williams:So part of the market survey, you'll compare the amenities.
Barry Williams:One of the ways that downtown offices are getting people there now is they're putting gyms, like exercise spaces in.
Barry Williams:And it's part of.
Barry Williams:Okay, because you work in this office, you can go down there anytime you want and work out.
Barry Williams:It's just one of the perks.
Barry Williams:They used to use swimming pools, but swimming pools are expensive to maintain and nobody ever uses them.
Kelly Kennedy:Oh, goodness.
Kelly Kennedy:Okay.
Kelly Kennedy:So it makes sense.
Kelly Kennedy:So what they're kind of trying to do is create spaces that have perks and benefits that people actually want to come to.
Kelly Kennedy:That actually makes a lot of sense when you are going into the negotiations.
Kelly Kennedy:I know that one of the things that you have a lot of experience in is negotiating the pricing on something like this.
Kelly Kennedy:Can you maybe give some tips on how to get the best price on either your lease or your property purchase?
Barry Williams:Well, like I said, you should come in informed.
Barry Williams:So with your market survey and know what other providers are charging and what they're supplying for it, if they're not in today's market, it's actually a renter's market.
Barry Williams:When it's a landlord's market, then there's not much space available and lots of people looking.
Barry Williams:That would be the opposite of what it is right now.
Barry Williams:So you'll want to know, any renovations that you want done, will they get your offices ready for you, or is it going to be your responsibility once you move in?
Barry Williams:So you'll want to compare all of those things with each person that you're looking at maybe renting from.
Barry Williams:And so it's not just the square footage.
Barry Williams:And also there's a thing called common area costs.
Barry Williams:So your two main expenses are your rent per square foot is usually how it's worked out, and then that pays for your space.
Barry Williams:However, most buildings have a lobby.
Barry Williams:The.
Barry Williams:You know all the other things that go with the building, and those are what are called common area costs.
Barry Williams:So that's usually divided up to each of the tenants, depending on their relative square footage to the rest of the building.
Barry Williams:So if.
Barry Williams:If it's an expensive building to run, maybe your.
Barry Williams:Maybe your square footage rent isn't that bad, but maybe the common area costs are pretty high.
Barry Williams:And for that you'd be looking at a building.
Barry Williams:You'll want to know how energy efficient it is.
Barry Williams:Like, you have different classes of office space.
Barry Williams:There's a, B and C, and the class A spaces are most of the newer buildings, and they're built to standards of really stringent controls on Energy usage, like heat recycling, like recovering heat, more efficient chillers, more efficient lighting systems, all of those things can save you a lot of money in the long run.
Barry Williams: uilding that was built in the: Kelly Kennedy:So there is actually a lot to consider on the age of the building that you choose to purchase.
Barry Williams:Yeah.
Barry Williams:Because up to things like the two scariest words in property management are asbestos and mold, because those remediations are really extensive and expensive, so you don't, you don't want to have to do that.
Barry Williams:And buildings built in the 80s, there's a possibility that there might be asbestos.
Barry Williams:So it's only a problem if you, if you make it what they call friable.
Barry Williams:That's where it gets into the air.
Barry Williams:If it, if it never, if you're, if you're not doing any work on it, it's unlikely that it'll be in the air.
Barry Williams:But if you have to do a repair on something that has asbestos in it, it, it could be dangerous.
Kelly Kennedy:Yeah.
Kelly Kennedy:It's so funny that you actually brought that up because not long before this episode is out, we'll have actually done a show with a guy named Craig Williams with AM abatement.
Kelly Kennedy:And he was literally giving us a 101 on all of those things, friable asbestos and stuff like that.
Kelly Kennedy:So it's.
Kelly Kennedy:And then what else is kind of funny is literally the show right before you, I was actually talking with a gentleman who's creating like essentially a marketing program for commercial real estate in the U.S.
Kelly Kennedy:so it's, it's funny how all of these things have kind of tied together.
Kelly Kennedy:Just completely random, but they definitely tied together.
Barry Williams:Oh yeah, they're all interrelated.
Barry Williams:Well, yeah, because, okay, asbestos or mold abatement, those are pretty specialized things.
Barry Williams:And there's, there's certain regulations you have to follow and safety things that you have to use.
Barry Williams:And because it's so specialized, it's not like you have somebody on staff that's going to do it.
Barry Williams:You hire a contractor for it, which is probably the guy that you're coming in to give you a presentation.
Kelly Kennedy:Yeah, yeah.
Kelly Kennedy:No, it, yeah.
Kelly Kennedy: k I want a house built before: Kelly Kennedy:Or a building for that matter is definitely one of those things that put some shock value in for sure.
Kelly Kennedy:But, you know, okay, let's Lead into that.
Kelly Kennedy:What I want to ask you now is that companies, I think, aren't sure whether or not they want to buy a building or lease a building.
Kelly Kennedy:You know, how does a company know whether to make the buy or the lease decision, in your opinion?
Kelly Kennedy:Like, obviously, you've worked in property management.
Kelly Kennedy:You know how high the costs of owning property can be.
Kelly Kennedy:When is it more valuable to own the property versus just lease the property?
Barry Williams:Well, you know, like when you're evaluating your business and seeing how well it's doing, you're looking at the biggest figure is the, what they call the net operating income.
Barry Williams:So you're taking your revenues and subtracting your expenses, just to put it simply.
Barry Williams:However, in that calculation is your financing isn't included in that.
Barry Williams:So you have to think about.
Barry Williams:You'll also have to think about financing costs.
Barry Williams:Now, whether you buy it or not, I guess.
Barry Williams:Are you going to be in the building long term?
Barry Williams:Is this something that you're, you know, you're going to be there for 30 years, or do you just want to open an office for a short period of time?
Barry Williams:And see, this is an important thing right now.
Barry Williams:I know that they decrease the interest rate, the primary, by 25 points.
Barry Williams:That's nothing.
Barry Williams:I mean, it's still got to go down a long way.
Barry Williams:If you're financing a building that's $100 million, that's a lot of interest.
Barry Williams:Yeah.
Barry Williams:So that's a big factor.
Barry Williams:And it depends on do you want to, are you going to make, are you going to rent out half the building and make money on those suites, and will it be enough to cover your financing costs and the expenses in the building, like your heating, electricity, water, that kind of thing?
Kelly Kennedy:It's a bit of a conundrum, but.
Barry Williams:You'D have to do a case by case comparison.
Barry Williams:There's no simple answer.
Kelly Kennedy:Well, like you were saying right now, with it essentially being a renter's market, it would also be a buyer's market, wouldn't it?
Kelly Kennedy:Assuming you could probably get the best price right now.
Kelly Kennedy:However, you'd have to finance it at a less than desirable interest rate.
Kelly Kennedy:But long term, if we think that everybody's going to end up coming back to offices, it means that the demand for offices will likely go back up.
Kelly Kennedy:So it's kind of a gamble.
Barry Williams:Well, yeah, because.
Barry Williams:No, because of the way the market is right now, building of commercial units is probably coming to a standstill for a few years anyway, until the spaces get filled up.
Barry Williams:I know that personally, you'd have to be a Fool to invest in building a huge new building with a lot of office space right now because you're not going to fill it.
Barry Williams:And the interest rates are pretty high.
Barry Williams:So unless you have a private investor or unless you're independently wealthy and you got $100 million lying around and you don't know what to do with it.
Kelly Kennedy:Yeah, I don't think there's too many of those people kicking around.
Kelly Kennedy:Oh, goodness, Barry, this has been awesome.
Kelly Kennedy:I think we've given a lot of insight.
Kelly Kennedy:Like I said, what I really wanted to deliver with this was just some insight for business owners who are looking to buy property, who are investing in property.
Kelly Kennedy:And I think you've given a lot of good insight in that.
Kelly Kennedy:We've actually had some people come on who actually own quite a large amount of commercial property and kind of were chatting about that, mind you, was sorry, not commercial property.
Kelly Kennedy:Residential properties.
Kelly Kennedy:And they're doing incredibly well right now.
Kelly Kennedy:It's apartment buildings and townhouses and things along those lines.
Kelly Kennedy:But I think it is just one of those spaces that until you're in it, it's very hard to know, you know, what challenges you're going to face or what you're going to end up in.
Kelly Kennedy:And I know for a fact, like, I work with a large maintenance company here in the city, so I know how fast the cost of maintenance can go up and by what dollar amount.
Kelly Kennedy:And it can be not cheap.
Kelly Kennedy:Owning a building can be a very, very costly endeavor.
Barry Williams:Yeah.
Barry Williams:Oh, for sure.
Barry Williams:And actually, so if you think about it now, you mentioned residential.
Barry Williams:Well, there were times when I was working for Boardwalk that vacancy rates would go up and up around 10 or 11% sometimes.
Barry Williams:And in residential real estate youth, you think anything 3% or below is almost zero vacancy.
Barry Williams:So you want to get down around there.
Barry Williams:So 10%.
Barry Williams:Yeah.
Barry Williams:You know, it's not a great investment, but the way it is right now, there's a shortage of housing and the vacancy rate in most areas right now is barely above zero.
Barry Williams:I mean, there's always somebody moving at some point, so you'll have a.
Kelly Kennedy:Sure.
Barry Williams:An availability.
Barry Williams:But it's.
Barry Williams:It's considered, you know what, there is no vacancy.
Barry Williams:So it's a good investment.
Barry Williams:If you're going to build the same building but build it as an office tower, you're not likely to make money that you would if you're going to make it a residential property.
Kelly Kennedy:I wonder how many of these large office towers are just going to convert into residential property.
Barry Williams:Yeah, it's funny that you bring that up because.
Barry Williams:Yeah, they're considering it.
Barry Williams:Some are.
Barry Williams:The only thing is there's, there is a lot of cost to doing that conversion.
Barry Williams:It's, it's not cheap.
Barry Williams:So there again, you would have to evaluate, okay, I make this capital investment, how is it going to affect my net operating income?
Barry Williams:As a general rule, if any change you're going to make, if it, if the capital investment on it isn't takes more than seven years to recover it, then it's don't do it.
Barry Williams:And actually even seven years is a little long.
Barry Williams:You want more of a return on your investment, maybe of three or four years.
Barry Williams:Years.
Barry Williams:And that applies for any renovations you're doing.
Barry Williams:If you, if you have an older building and you want to convert what they call re lamping.
Barry Williams:So going from, let's say it is really old and it's got incandescent lights, I don't even think they make them anymore.
Kelly Kennedy:But yeah, I don't know.
Kelly Kennedy:And you want to go, I remember the hum though.
Barry Williams:And you want to go to LED lights, how much is it going to cost me?
Barry Williams:How much will that save me each month on my electricity bill and how long is it going to take to pay back the amount of money I had to put in to convert it?
Barry Williams:So, I mean, that's just a minor example.
Barry Williams:If you're converting a whole office building into an apartment building, it's, there's a lot of considerations.
Barry Williams:It would be very expensive.
Kelly Kennedy:Yeah, no, I imagine, I imagine so.
Kelly Kennedy:You know, we're getting to the end of our show today, Barry and I really appreciated this time with you, but I do have, you know, just one final question for you because I think you're the right man to know if you were going to invest in a commercial property at the moment, or sorry, maybe a better way to phrase this would be, would you invest in any type of commercial property at the moment?
Barry Williams:Probably not.
Barry Williams:Not until the vacancy rates start to turn around.
Barry Williams:Only if the cap rates have gotten to a point where the purchase price of the building would be way down.
Barry Williams:Like let's take for example, a building that, that we had in one of the portfolios of a company that I worked for.
Barry Williams:They purchased it for $100 million.
Barry Williams:If today that same building was selling for, and it's a high B building, let's say if, if you could get it for 40 million now, then I'd probably do it, but I wouldn't pay the 100 million for it.
Barry Williams:So it depends how much you're going to pay for it and your financing.
Kelly Kennedy:Yeah, no, that makes sense.
Kelly Kennedy:That makes sense.
Kelly Kennedy:Like basically what you're saying is it has to be a damn good deal.
Kelly Kennedy:It doesn't make any sense.
Kelly Kennedy:Right.
Barry Williams:Yeah.
Kelly Kennedy:Barry, this has been amazing.
Kelly Kennedy:Thank you so much for joining us.
Kelly Kennedy:And thank you.
Kelly Kennedy:Thank you for your work with Grant McEwen.
Kelly Kennedy:You know, the future generations really do need leaders like you out there helping them.
Kelly Kennedy:And, you know, I'm doing my best and I'm happy that people like you are out there doing, doing your best as well.
Barry Williams:Oh, thanks, Kelly.
Barry Williams:I appreciate that.
Kelly Kennedy:Until next time, this has been the Business Development podcast and we will catch you on the flip side.
Podcast Host:This has been the Business Development Podcast with Kelly Kennedy.
Podcast Host: business development firm in: Podcast Host:His his passion and his specialization is in customer relationship generation and business development.
Podcast Host:The show is brought to you by Capital Business Development, your business development specialists.
Podcast Host:For more, we invite you to the website at www.capitalbd.ca.
Podcast Host:see you next time on the Business Development Podcast.
