Office Exodus: Tackling Double-Digit Vacancies and Negative Absorption

With double-digit vacancies that are the worst on record in many markets, commercial real estate investors are faced with the challenge of navigating negative absorption in the office sector. While the Mountain West region has acted as a buffer, avoiding some of the harsher realities facing first-tier markets, we remain in the thick of what real estate mogul Brandon Fugal dubs a "character-building cycle." In this episode, we sit down with the Chairman of Colliers International to explore the myriad of factors driving change in the sector—from technological advancements to broader economic shifts. Hear why Fugal believes the public is still in the dark about the true impact of remote work, how he aligns with Elon Musk’s controversial return-to-office mandates, and and which investors he predicts will see the greatest returns over the next five to ten years.

Transcript

Speaker 1 0:05

Welcome to Peaks and Portfolios presented by Peck Companies, your go-to podcast for all things commercial real estate investment. I'm Rachel oh, and together we're diving into current events, trends, issues and opportunities impacting the CRE investment space, from dissecting the latest market moves to sharing insights on today's commercial real estate landscape. It's time to maximize portfolios here in the peaks of the Mountain West and beyond. Okay, everybody, welcome back. We are here again from the peaks of the Mountain West. I'm actually thrilled to have today with us a true Utah local, born and raised and perhaps one of the most successful our state has turned out in recent years. He's a real estate icon, a philanthropist, a technology enthusiast and apparently a paranormal activity aficionado. I hope I said that right, but Brandon Fugel is joining us here in studio. Welcome, Brandon.

Speaker 2 1:03

Hey, it's a pleasure to be with you. I've been excited for this conversation, big fan of your podcast and of everything that Peg is doing to transform our communities and our skylines. I mean you really build community and are a key part of what is happening not just in Utah but the entire region. I mean you've branched out all over the entire Western region now with everything from hospitality to office, to retail, to residential communities.

Speaker 1 1:34

Yeah, no, thank you. We're in 27 states, which I don't think, cameron. You knew Cameron back in the early days. I don't think he ever thought that he would have that national reach. So thank you. You're so kind it's nice for someone to actually know who Peg is versus me, kind of like giving the background. So I appreciate that that's awesome.

Speaker 2 1:52

Peg is a force, it's a development force, a community building influence that is fairly unmatched is fairly unmatched. It is rare these days that you find a truly diversified approach to community development, a company that actually is equally focused on all product types, the full range of office, retail, hospitality, entertainment and residential. I mean hospitality entertainment and residential, I mean PEG is the ultimate live work play development company.

Speaker 1 2:29

Awesome. Well, make sure you get your commission check after that, yeah no, it's true, I've worked with Cameron since the beginning.

Speaker 2 2:35

We've worked on a lot of projects and it has been a thrill to see everything that you've done to transform communities and, like you said, now you're in 27 states. But just looking at the Utah skyline, alone from the southern end of Utah to the northern end, to downtown Salt Lake, across from the Delta Center. You've had a key role in really changing the skyline and elevating community. And anyways, I don't mean to go off on a tangent but it's been fun to be a part of that and to watch.

Speaker 1 3:11

Well, I appreciate that and thank you so much. You know you're kind to talk about PEG and its kind of outreach For those listeners we've. You know our demographics show that we're not just local, we've may have a little bit of a national outreach. So I do want to kind of you know, paint for our listeners who you are. It's for those of you who are local and then for those who aren't, it's impossible to hop in a car and be driving anywhere in the state without seeing your name plastered on almost every building. I have seen your name over the years before I joined PEG and you know almost every commercial real estate building. There's your name, along with maybe one of your partners.

Speaker 2 3:54

Only the good ones, only the good ones Okay. Only the most upscale, significant properties. Okay.

Speaker 1 4:01

And you know you are one of the biggest, if not the biggest name in commercial real estate. So I mean kudos to you for humble beginnings. I've done a little bit of stalking, and so I've heard that you were born and raised in Pleasant Grove.

Speaker 2 4:16

That's where I live, still to this day.

Speaker 1 4:17

fifth generation that's amazing, amazing, and so a little bit about Brandon. Brandon is the chairman of Collier's International Utah and in 2022, he was named the CCIM Utah Office Broker of the Year, which actually you've been recognized for pretty much the majority of the past decade, so that's not a new accolade, that's something that's been going on for years. Your list of commercial real estate transactions is extensive, like it covers. It represents millions and millions and millions of square feet.

Speaker 2 4:47

Over 20 million square feet of Class A office.

Speaker 2 4:49

There you go, I've been very, very fortunate and I had to account for this the other day for an interview but I've closed over 3,500 transactions personally. Yeah, that's crazy. And even though Class A office has been a focus, I've had the privilege of representing some retail industrial hospitality in RC Willey, which is a Berkshire Hathaway company and arguably one of the most high-profile retailers in Utah, but have worked on a lot of product types and, as you mentioned, the name recognition or at least my identity being out there. It's funny. I tell people, regardless of whether the economy is doing well or not, we know the sign company is staying busy and we're making them plenty of money, but it's a constantly changing landscape.

Speaker 1 5:52

It is. It is, in fact, we're going to dive into that a little bit today. So you know, as I mentioned, you've been involved in, I guess, 3,500 plus commercial real estate transactions. I should note that this very building that we're in today is one of yours as well, so our pet company's headquarters is here in downtown Provo, utah.

Speaker 2 6:14

Yeah, Freedom Commons which is the most significant redevelopment project here in Provo. It was the first high-rise, class A office project built in over 12 years in the downtown area and is part of a mixed-use dynamic center of gravity that has walking distance to the convention center. I mean you have the new Hyatt Hotel right next door, adjacent, and we have retail and service amenities on site which every office user is looking for. And we've been lucky. We have a couple of prominent tenants here that just recently moved in from.

Speaker 2 6:50

Merrill Lynch Bank of America to. Serenity Health which is one of the fastest growing healthcare companies that focuses on mental health and their headquarters comprises the entire top floor of this stunning building that was masterminded by your team at PEG.

Speaker 1 7:10

No, it has definitely been a game changer for us and it's also helped us in our recruiting efforts and, as we've been entertaining national large real estate investment firms, it's been great. So we are super fortunate and I wanted to segue a bit, because you've involved in so many transactions and over 20 million square feet in office. I mean, office is a buzzword today in commercial real estate. So according to the recent data and you may have better data office occupancy in at least 10 of the largest US cities was under 50% of pre-pandemic rates. So the new normal seems to hover around 55 to 60% office occupancy. Again, this is just the things I pulled. Hybrid work is impacting office workers coming into the office regularly. You have employers that can't make them come in anymore because of it. You know we still have a tight labor market. Interest rates have risen sharply over the last 18 months. This drop in occupancy, along with these higher interest rates, have had office building valuations go down dramatically.

Speaker 2 8:16

It's been challenging, to say the least. It's been super challenging. Some markets apocalyptic.

Speaker 1 8:21

Yes, some markets apocalyptic, yes, and so what I wanted to know from your vantage point and I know the Mountain West is always a little bit different than the rest of the US and the world but tell me how you see office today and where you see its future, because I think that is a I mean, that is a question.

Speaker 2 8:42

Those are chilling statistics that you just presented. Yeah, I mean that is a question. Those are chilling statistics that you just presented and it really it underscores how challenging the current environment is with office. There has been a secular shift in office utilization and the way that we work since the pandemic, and the shift to hybrid and remote working for a lot of businesses has had a direct impact, as well as just other economic shifts such as interest rates. Venture capital, m&a activity is not moving at the same velocity.

Speaker 2 9:21

And that has been key to the growth in the Intermountain West. We refer to our market often as Silicon Slopes because we are a very tech-centric market that is driven in large part by these growth companies in that sector.

Speaker 2 9:39

Well, it's more difficult than ever to raise money for new ventures and to fuel that growth and innovation and we're in the bit of a buffer. We've seen this play out over decades where Utah and the Intermountain West, to a large degree, has been fortunate to avoid some of the more pronounced difficulties that you see in the first-tier markets. Los Angeles you take downtown Los Angeles, san Francisco, chicago, new York, houston some of those markets have not only a more significant base to work from, but when it comes to vacancy and the impacts of this shift in office trends, it's more impactful in those markets.

Speaker 2 10:56

Now we're not immune. We're dealing along the Wasatch Front with double-digit vacancy, which is the worst on record. I mean we're also dealing with what we call negative absorption Companies giving back more space and very little expansion and growth to absorb that vacancy.

Speaker 2 11:19

Our lease rates, thankfully, are staying fairly constant though, thankfully, are staying fairly constant though, and I'll tell you that's one of the bright spots and positive indicators that I think we can look at in Utah and the Intermountain West as leading the rest of the country and preserving values, even though people have to be more creative than ever relative to free rent, enhanced improvements and other concessions and have to look at office space differently as far as amenities and amenitization of these buildings. You look at PEG's headquarters here at Freedom Commons. This building, this complex, is unique in that you have on-site restaurants. You have an on-site fitness facility that is free. People can throw away their gym memberships if they office here at Freedom Commons. You have shower, locker facilities, fitness and services here on site, as well as structured parking, which comes in handy when you have 100-degree weather like we are experiencing.

Speaker 2 12:28

Or sub-zero weather, or zero in the midst of the winter, and we deal with really extreme climate conditions here, between the summer and the middle of the winter, and I think this location is a good example of what companies are gravitating toward.

Speaker 2 12:48

More than ever before, there is a flight to quality and there's a flight to fully amenitized space that enhances employee recruitment and retention In a market with still record low unemployment in many markets across the country, and Utah has continued to show robust employment. The ability to leverage your space, your workspace, environment, in order to create a better quality of life experience is a key differentiator for recruitment and retention, and those projects that prioritize that are going to prevail and lead out of this office downturn. It's not a matter of if it's when Every cycle comes to an end, but we're in a particularly challenging cycle. But I'm really optimistic, especially as I look to the next three to five years. As the market ultimately corrects, we are going to see, I think, a renewed focus on the importance of our workspaces and collaboration. The United States is still a knowledge worker economy to a large degree. I wish we were more diverse, I wish we wouldn't have offshored a lot of our manufacturing, but it is what it is.

Speaker 2 14:13

And we're still a leader on the global stage as far as innovating and developing intellectual property, and it flows through every sector of the economy, and our workspace is more important than ever in rallying people and bringing people together and inspiring them. I think having inspirational and aspirational workspace is a key ingredient to success. It's not just about creating culture, the right culture or accountability.

Speaker 2 14:54

It's about inspiring people to do their best to present their best work product and to be proud of either the company, the venture they're with or what they're producing and I think it's a key part of that and developing the workspaces and the hospitality and amenity spaces that complement that. I mean you look at Peg Peg is a leader.

Speaker 2 15:21

I mean you have so many different advantages when it comes to delivering true mixed use and quality of life benefits for employers and for those whether they're traveling or looking to elevate their way of life in the community.

Speaker 1 15:41

Yeah, you know you bring up a really good point because, again, as we've been expanding, we have been also expanding our titles of you know, employees that we're bringing on. They're more investment-focused or they have, for example, acquisitions is something that we didn't do as much. We started morphing into that during the pandemic because of the distressed hotels situation and you know there's a lot of conversions going on which I do want to go back to that a little bit. But to your point, you know gone are the days of sort of a you know being okay with you know a, class B, class C type you know office and then I think also my understanding to ESG requirements also push everyone into the better buildings.

Speaker 1 16:24

But, it's hard to be competitive if you can't offer a nice space that they can be creative in and innovative and sharp and whatnot.

Speaker 2 16:33

It's all about recruitment and retention and that goes straight to the quality of the environment no-transcript and being equal to the task of delivering solutions and product that speaks to those priorities is going to be it's going to be key to either success or failure. Yeah. Those who evolve, who iterate and push the envelope, are going to prevail long-term and deliver real value to their investors, to their teams their employees and also to the communities that they serve, but it's not for the faint of heart. I will say real estate development and investing.

Speaker 1 17:50

No, it's not. It's a long game too, and I think this generation, or just the current populace, hasn't been through enough cycles to understand that it is a long game. So this is a blip in time, but it's not the definitive, nor will it be, because we will be outlived by the stories that are coming.

Speaker 1 18:11

Okay, so let's talk a little bit about. You know, you said flight to quality Even early on. You were kind of joking but you were like you know only the best buildings. But I think that's really key because Class A highly amenitized, and then, as I mentioned, I know and I only know this because we've been having some ESG conversations and I know that's a priority and so there is a clear bifurcation in this sort of like eventual return to office story. Right, because now you've got class C, class D buildings that are suffering. I mean, they're completely being impacted.

Speaker 2 18:42

No one wants to be in those buildings. You can't recruit or retain talent in that kind of environment.

Speaker 1 18:48

And you've got cities that have huge, older office towers right.

Speaker 2 18:52

Yeah, they're functionally obsolete.

Speaker 1 18:54

Right. And so where do you see this playing out in terms of locally and also nationwide? Because again we've got large office buildings all across the nations. They're vacant, well largely vacant. Keys are being turned back in, banks are not. You know they're going.

Speaker 2 19:16

I mean, the owners are just like we're done.

Speaker 4 19:17

We're not going to refi, they're just giving the keys back.

Speaker 2 19:18

We are seeing a wave of defaults and challenges and this we're not through it. I mean we're in the middle of it. Right now we're in the eye of the storm. But if you look at those markets, you look at the first tier markets that have the highest vacancies, and if you focus on those properties that are the iconic, highest quality, best amenitized properties, you'd be surprised to find that they all have single digit vacancy or no vacancy in some cases, class A developments are outperforming across the board and it's not only because there's a flight to quality.

Speaker 2 20:04

But you look at this reprioritization If you're running a business, if you're an entrepreneur, your greatest cost, your greatest expenses, your people, absolutely of the equation is secondary to recruitment and retention and being able to inspire and to be able to scale if you're a growing company and again dial in the right type of environment for success, Right, and so even those markets that are most impacted, that are apocalyptic right now, that have see-through buildings and more challenges than ever, you see a flight to quality, propping up some of the most iconic properties that will actually not only weather the storm but over the course of the next three to five years, as markets stabilize are going to see, I think, some of the greatest increases in value.

Speaker 2 21:06

I look at the building that we're sitting in here, and even though we're in the middle of a challenging time we're navigating a market with very little activity and growth. Three to five years from now this is going to be in the rearview mirror and I'll tell you the cost of developing this building today versus two years.

Speaker 2 21:30

Three years ago is arguably, if not double, it's significantly higher. Who can tread water and learn to thrive and get creative through this period of time are going to see the greatest return on investments in the next five plus years. You have to play, as you said earlier, the long game. This is not commercial real estate. I know. It is not for the faint of heart. It is not for the faint of heart and it is not a short-term gratification play. It is really the type of business that involves a patient, methodical approach.

Speaker 1 22:18

Yeah, no, I appreciate that and you know we are seeing that as we, you know, we've been historically development focused. Yeah. And we certainly will be, but with costs as they are and interest rate there as they are, and you know everyone's looking for untrended deal on costs at like 7% plus, and I mean it's just tough. It's just tough at where rents are too Right.

Speaker 1 22:42

You can't underwrite and the rents just aren't trending like they were. They had a Right you can't underwrite and the rents just aren't trending like they were. They had a huge rise during the pandemic and now they've kind of leveled off. So you know we were already segwaying into acquisitions, we're starting to do more acquisitions and I want to talk to you about that because now the story is blood right. True, distressed assets Investors are circling the tank. They want blood, they want they keep hearing about refi not occurring. People, like you know, this is all across all asset classes, right, hospitality, multifamily, obviously, office. I mean, that's a given, but just curious, as you know. So where do you see the blood? And tell me a little bit about the Mountain West versus the rest of the country, because I keep hearing that we're immune by any stretch. But the level of like delinquencies or bankruptcy or not bankruptcy, sorry yeah.

Speaker 2 23:39

I mean defaults.

Speaker 1 23:41

Defaults is far less in our region than and I could be wrong, but they're just saying it's like you can't find blood in the same way, maybe a trickle, I don't know.

Speaker 2 23:52

No, the level of distress currently is significantly less than you see in other markets across the country, no different than what we saw and observed during the financial crisis.

Speaker 1 24:05

Right, the last cycles. I was here during that and it wasn't that it didn't happen, but I had friends, obviously, like in Arizona and Florida, and you would have thought that the world had ended.

Speaker 2 24:15

But I was like oh, boop, boop and assets traded at a fraction of their cost and value, really because there was great distress at the time. Yeah, I think it's probably Utah. Moving forward is best characterized as a market for opportunity, and even your opportunistic distressed buyers are able to identify opportunity, to create equity, to create more positive outcomes. Through some of the current challenges. We do not see, as you'd mentioned earlier, the same percentage of bank-owned properties or distressed assets that are in default. That is attributed to the conservative nature of this market, and it's not just Utah. You see it in Idaho, you see it in many parts of Colorado, where there's a conservative multi-generational ownership and development approach that has stood the test of time and served many of these companies well, some of the partners that.

Speaker 2 25:32

PEG has have their multi-generational development companies that strategically have been able to position to not only weather the storms but come out of the storms stronger than ever and more resilient. But it takes a more, I think, a more measured approach. You can't be over leveraged in a market like today, and that's what you see here in the Intermountain region is probably less leverage than you see traditionally utilized in first, first-tier markets and the level of risk we don't participate in the upside when markets are hot. The bad news for Utah is we have never seen the increase, the exponential increase in values that some markets in California, new York, texas and other major markets end up benefiting from. The flip side is, in a market like today, that presents some challenges. You are more buffered. You don't see the level of distress, you do not experience the mass corrections. That isn't to say that there isn't challenge. No, it's yeah we're not immune.

Speaker 2 26:53

No and it takes a creative approach and that involves working with lenders that are willing to extend, that are willing to work with the client in a partnership capacity.

Speaker 2 27:07

I mean looking at that from a relationship standpoint when you're in the middle of a distress situation where the asset isn't performing, where you've hit a pothole in the road to a degree or a speed bump but a very significant speed bump the way that everyone around the table reacts, from lenders to underwriters, your investors, those who have a place on the capital stack, and their ability to personally guarantee and provide assurances all of that has to be taken into consideration and is essential to success. But I do think second tier markets and tertiary markets have a tendency to weather these storms much better and come roaring out of them with, I think, greater stability than you see in some of the first-tier markets. But, as I mentioned earlier, the flip side is in the first-tier markets, with great risk comes great reward, and some of the returns that are banked in those markets are astounding.

Speaker 1 28:18

Yeah, yeah, no, I was. We were just in New York. Have you been lately? Oh yeah.

Speaker 2 28:23

Okay, yeah, go to New York at least a couple of times a year. I used to have an office in.

Speaker 1 28:27

Manhattan York at least a couple of times a year.

Speaker 2 28:28

I used to have an office in Manhattan. I used to have the gosh it was the 20th floor of building 1407 Broadway.

Speaker 1 28:40

when I owned Coldwell Banker Commercial Advisors, I had 30 offices in 11 states, from coast to coast and.

Speaker 2 28:43

New York was a very significant dot on the map as you can, imagine. Having an office in Manhattan was a significant part of growing a national platform, and so I was fortunate to become familiar with that market, and I lived. To tell the tale, it was not pretty. I lost a lot of blood in that market. Again, you talk about risk reward. The first two markets are not for the faint of heart. But what was your experience in New York? Did you see? What did you observe?

Speaker 1 29:19

So you know, I've been in LA a little bit and I've been in San Francisco a little bit and I've been in New York, and there are three very different markets.

Speaker 2 29:27

They feel different, don't they?

Speaker 1 29:29

So different and I know so. In New York we were in the JP Morgan buildings, we had some meetings there and they're building a beautiful new building and I mean it is spectacular and the buzz and energy at JP Morgan and what Jamie and Diamond, I mean it is phenomenal. And then you've got that new one, vanderbilt building. That one I think it's full, I mean so the activity and the buzz is insane.

Speaker 2 29:55

Well, the Class. A iconic locations, as I was mentioning earlier, are prevailing because people are gravitating toward quality and experience.

Speaker 1 30:05

They're willing to pay for it.

Speaker 1 30:08

And it costs, I mean the rates, oh yeah, and I can only imagine what's going on with both labor and just everything, the time that they've been building, you know, and it's been going on forever, obviously years and years and years, but it is so. I I only mention that because, um, you know, as we're talking, the flip side, uh, so financial, uh, real estate and financial firms, they go to the office right, cameron and myself, uh, logan kinghorn is another um on the capital markets. We were here every day during the pandemic. We never stayed at home. I mean, I got covid once, so I stayed at home, but, um, and obviously there are people with children, they had to and things like that. But you know, we just we came in every day, but tech doesn't go in the same rate, right? So you look at San Francisco, very tech heavy, sure, not the same.

Speaker 2 30:56

Well, a lot of their job functions can be handled.

Speaker 1 31:00

Right.

Speaker 2 31:00

Thanks to technology, thanks to connectivity the ability and you look at the prevalence of Zoom calls, microsoft team calls. Well, now it's a part of our day-to-day existence. I mean this morning before 10 o'clock. I had like three different. Zoom or Microsoft team calls. Well, that's great on one hand, yeah. On the other hand, I don't know that you can necessarily build meaningful relationships or resolve concerns on a Brady Bunch screen. That's two-dimensional.

Speaker 1 31:31

No, not the same and that's so.

Speaker 2 31:32

I actually think it's an extremely powerful tool and provides a level of flexibility and, I think, allows us to be more dynamic in our lives, in our workspace. But the flip side is it doesn't replace the I think the essential role that a workplace fills in, helping people come together and develop the interpersonal relationships and the trust and the energetic, I think, relationships that drive business and innovation, even those technology companies that have gone largely remote or hybrid.

Speaker 1 32:22

Well, they're making them come back, right.

Navigating Remote Work and Technology

Speaker 2 32:25

And there's a tug of war between the C-suite and the employee base in a lot of cases. But I think there is a balance that can be struck. And. I think being more sensitive can really be beneficial. It can differentiate you as a company providing some degree of flexibility, sure, can differentiate you as a company providing some degree of flexibility, sure, but I probably. I know I'm going to get shot for saying this because I'm going to mention someone who's very polarizing, but Elon Musk.

Speaker 2 32:58

I actually agree with his approach. He sent out a mandate to his employees that, coming out of the pandemic that everyone needs to be in the office 40 hours a week you know, coming out of the pandemic that everyone needs to be in the office 40 hours a week, I don't know, and he's I'm paraphrasing, but he said I don't care which 40 hours, but you need to be putting in at least 40 hours in the workplace, unless you have some special circumstance or your job function allows you to be just as effective working remotely.

Speaker 2 33:31

I find with myself and I'm a driven, ruthless son of a bitch I mean I go a million miles a day.

Speaker 1 33:37

Like.

Speaker 2 33:38

I do not take my foot off the gas and I have to be honest with you. I mean as driven and focused as I am, and ruthless, If I'm at home trying to navigate in the morning, like this morning, multiple Zoom calls early and trying to get projects out, and the doorbell's ringing, the dog's barking, you've got the Amazon. I swear, I think my ex, I think my whole, you would not believe my, my whole external kind of family dynamic everyone's getting packages delivered, whether it be, um, you know, you've got DoorDash bringing something for someone and then, you've got all of these other external forces that are coming into play and I have to be honest, I'm not very effective when I'm running to

Speaker 2 34:31

go grab the door and I'm trying to dodge through this and my wife is saying, hey, could you run this to the dry cleaner for me or whatever, because I'm accessible? Yeah, it's just not productive and I think we have to be honest with ourselves. I mean, I think there's a lot of dishonesty. I think there's a lot of how do I say this? Delicately and politically, in a politically correct way, but I think that there, claire is kind. I don't think that people have been honest or realistic in a lot of cases relative to the challenges and whether I heard all day, every day for a period of time, the term supply chain within the context of oh sorry, we can't get you your package, sorry, we can't, you can't buy a new fridge.

Speaker 1 35:41

Sorry, you can't get this. It's stuck on a boat somewhere or something, or what.

Speaker 2 35:46

Yeah, or it's just taking twice as long to get anything, to even get basic work product done, and people called it supply chain.

Speaker 1 35:54

Oh, I see You're saying you don't think it's bull.

Speaker 2 35:56

Okay, and I'm sorry about the language. I know this is Utah County, but if we're being really honest, if we're being candid. It's not true. I mean supply chain. In many cases was code, for people aren't working as productively. We're not seeing the same level of production or productivity.

Speaker 2 36:19

And people weren't honest about the fact that it was because people were giving a free pass. People are getting paid a full wage for part-time work and I don't think that that's smart. I think there is a reckoning. Ultimately and we're seeing it already take place in certain sectors I do think that a balance, a creative balance, can be struck. A balance, a creative balance, can be struck.

Speaker 1 36:52

And.

Speaker 2 36:53

I think the one thing the pandemic did, what it taught me, was that the absolute need to be sensitive and provide more flexible environment where people don't feel pressured to come in, if they have an illness in their family, if they're a caregiver. They're trying to balance all sorts of priorities, yet they still can contribute and still produce and still be an incredible member of the team, Having the platform, being able to leverage technology to provide that continuity and that ability to contribute but still create experiences where people have a place to land, where you have collaboration and you come together and you have your culture and you have accountability.

Speaker 2 37:41

I think is important and I think it's going to take us years to figure that out. People will be, sociologists will be writing textbooks on this for decades to come.

Speaker 2 37:55

So it's a challenging topic. There are no easy answers. It isn't black and white. There are lots of shades of gray and there are legitimate circumstances that call for flexibility. Legitimate circumstances that call for flexibility. I mean you look at call centers. There are no call centers. There was a period of time in the 80s, 90s where call centers you know, inbound, outbound that was driving the office market. I mean, some of the largest office requirements, the largest occupiers of office parks were call centers. Well, most of those functions because of technology.

Speaker 1 38:33

You can just do it from home, yeah.

Speaker 2 38:35

And people are able to actually fulfill those job functions in a lot of cases very efficiently.

Speaker 1 38:41

Yeah, and we also don't necessarily have as many call folks as you no Meaning, I can't tell you how many times it's like I can't even call someone, right, I have to like text them, or I have to send an inquiry via email or, like you know me, like meaning humans or we've, we've lost that they well, yeah, customer service is customer service better now than it was 10 years ago absolutely not so helpful.

Speaker 2 39:05

I can't get a hold of a soul, yeah because a lot of these functions customer service, the personal touch is and I think we've got to get back to that.

Speaker 1 39:18

Well you know what? I think it's in the US that it is particularly gone, because I was just. I traveled last year and I went to Japan and they still care about you, they still care about me and they're still there.

Speaker 2 39:31

And.

Speaker 1 39:31

I don't know anything about kind of how their call centers work, but this is so not what I thought I was talking about.

Speaker 2 39:38

Sorry, we're going off on tangents.

Speaker 2 39:39

But the point being is that office yeah office is important, so we kind of run this topic aground. I mean again, I'll be criticized by some for some of the more candid comments I've made, but I do acknowledge that there is a place. I do acknowledge that in order to succeed in today's economy and environment, you have to be quick, nimble and flexible. Flexible. Flexibility and being sensitive to people's personal situations I think it can make you. It's a make or break. It will either make your culture and your company more successful than the competitor or it could cripple you if you're not executing with the right type of balance.

Speaker 1 40:27

So ask me anything, as we're on kind of the home stretch here. So let's then, let's back up a little bit.

Speaker 2 40:32

Hopefully we still have some listeners with us. I haven't bored to death with art.

Speaker 1 40:37

No, no, no, I think we're good. Let's shift a little bit, then, to technology. I'm just curious from where you sit and you have a really unique point of view because of the new companies that come in seeking whatever it is that they're looking for. What are your thoughts on technology and its impact on commercial real estate?

Social Media's Role in Business

Speaker 2 40:57

Boy. I think it's allowing us to transact more efficiently, more effectively than ever before Social media, believe it or not than ever before Social media, believe it or not. Linkedin, instagram, x, formerly Twitter, have proven, at least within my business practice over the course of the last year as effective resources to identify and procure deal flow. Clients. People are looking at getting their information through these platforms more than ever before in business.

Speaker 2 41:38

It's gone from being a gimmick or again social media just a part of your social life to know it's now a key part of your business strategy, I mean you can't be in business without having a social media or digital marketing strategy. In my view, it used to be back in the 90s. I remember in the late 90s as companies were establishing their presence online and the internet was on the rise and the internet was on the rise. The companies, that were really the best positioned to take advantage of e-commerce and build the infrastructure and presence are now the biggest companies on the planet. I mean Amazon good example, I mean.

Speaker 2 42:25

Ancestry. Even you look at Ancestrycom here in our own backyard with its headquarters. One of the great, great online web platforms.

Speaker 1 42:36

So fascinating too, right, just what it's able to do.

Speaker 2 42:39

So I think that today, in the same way that in the late 90s and early 2000s, if you wanted to succeed in business, you really had to establish an e-commerce and an Internet strategy, an online presence, an identity, Today you've got to have a LinkedIn profile. I mean it's your resume, it is your calling card. People don't carry business cards.

Speaker 1 43:05

No, they really don't.

Speaker 2 43:07

If you want to know what someone's work history is or how to get ahold of someone, you're pulling up their social media. You're pulling up their their resume, if you will, if you will, on on LinkedIn, or you're looking at their feed, yeah, and, and people are getting their information through these, these mediums. It's interesting to see. Uh, I look at People were laughing about Elon Musk paying $44 billion, as I recall, for Twitter and saying what an insane.

Speaker 1 43:40

He did try to back out. For the record it's all part of the negotiation.

Speaker 2 43:44

Sure Posturing. But yeah, I think it will ultimately be seen as one of the most brilliant moves in social media and in business. Yeah, because now I mean that's where people are getting their news. Yeah.

Speaker 1 44:02

No.

Speaker 2 44:04

It's an unfiltered, fully democratized platform platform, and I think, in a world right now where you have so many voices and there's so much noise, being able to separate the signal from the noise is going to be a key advantage in the future, a key differentiator for technology companies, and I think commercial real estate to answer your question is going to benefit from technology more than ever before. One thing about commercial real estate, though, is it is not commoditized easily. The amount of creativity and the complexity of the transactions and the negotiation of transactions, regardless of product type whether it be retail, office, industrial, hospitality, you name it In any given week, I'm looking at 100 different types of contracts with different provisions.

Speaker 1 45:18

Sure, constant negotiation, and there is no one-size-fits-all.

Speaker 2 45:22

There is not a standardized form that the entire industry utilizes. A good share of my time is spent with legal counsel for the companies that I represent, the developers.

Speaker 2 45:35

So as much as technology, I think, empowers us and gives us the ability to reach our target audience and to disseminate information and to transact with less friction. With less friction, it's not going to replace the person-to-person the need to be able to engage one-on-one or within groups to be able to reach consensus and to finalize deal. So it's the good news is, commercial real estate is here to stay.

Speaker 1 46:08

Oh, yeah, absolutely. You know what I love about it is you can touch it. You can Touch it, feel it. It's here to stay. Oh yeah, absolutely. You know what I love about it is you can touch it.

Speaker 2 46:14

You can Touch it feel it.

Speaker 1 46:14

It's beautiful, it's something you can be proud of. You can see every day.

Speaker 2 46:18

Yeah, yeah I love it and they're not making any more land. You look at the Wasatch. Front and one thing that sets Utah, apart from the rest of the country, or at least most other markets, since we have a relative scarcity being created. We have a very linear, very narrow development corridor with the majority of the population, where you have the mountains on one side, on the east, and you have on the west.

Speaker 2 46:44

You have mountains as well and you have lakes and you have really a transportation corridor with very few development opportunities left. It wasn't so long ago that we had a lot of green space. There were a lot of open fields. There's a lot of agricultural property dotting our landscape up and down the I-15 corridor, along our freeways that no longer exists.

Speaker 1 47:08

I remember when the prison was like in Timbuktu.

Speaker 2 47:11

Yeah Well, it was in the middle of nowhere.

Speaker 1 47:14

And now it is gone and it's the center of gravity. I know the point. The most strategic infill project in the United States is arguably here in Utah in Draper, utah, right there in the middle of the two counties.

Speaker 2 47:27

It is the 700-acre master plan site that used to house the prison, which has been relocated west of the airport and you have an opportunity to create an entirely new community and center of gravity for not just Utah but for the Intermountain West. It's an exciting time.

Speaker 1 47:48

Oh exciting.

Speaker 2 47:49

We really are witnessing a renaissance, even though we have challenges with financing, with fundraising, in a lot of cases we have incredible opportunity and we have a young population that has access to universities, to institutions here within close proximity. You have public-private partnerships.

Speaker 1 48:17

Your alma mater being the largest one, by the way, utah.

Speaker 2 48:20

Valley University. I got to put a plug in Largest institution in the state 44,000 students is going to go north of 60,000 students eventually here Impressive by the way.

Speaker 2 48:31

Yeah, it is a dynamic university and you couple with UVU's mission. You look at BYU that has more of a global mission with 33,000 some odd students. You have the University of Utah, utah State. The amount of technology transfer that comes out of these institutions, of technology transfer that comes out of these institutions, and I mean it was funny over the last decade we heard several times that there was a disproportionate number of contestants on Shark Tank young entrepreneurs that were coming out of UVU or Utah County.

Speaker 1 49:06

I did not know that True story.

Speaker 2 49:08

Nice. In fact, it was stated that the producers were wondering what is in the water here in Utah? What is going? On, because they were getting such a flood of applicants and good ones that were coming out of. Silicon Slopes out of UVU and the. Wasatch Front. So exciting times. Love this community, Love the opportunity to see a tangible manifestation of my labors on the landscape. Yeah, A lot of people ask me. You're probably aware I started my career as a teenager.

Speaker 1 49:42

I was 18. I heard that.

Speaker 2 49:44

One week out of high school, jumped into commercial real estate, and people often ask well, what would drive a teenager to jump into commercial brokerage with a focus on office parks and corporate users? And I'll tell you it's quite simple. It was the only career path that would not only afford me the opportunity to work with the captains of industry, the entrepreneurs, the people who are literally changing and running our world, but it is also one of the few career paths where you can see a tangible manifestation of your labors, to be able to see dotting the skylines, the communities that I serve, the results of bringing people together to create some of the most innovative, inspirational, some of the most innovative inspirational even aspirational work-live entertainment spaces that really are central to our lives is a great privilege, and working with developers like Peg who make it happen, I mean, I'm only as good as my clients and I'm also perpetually unemployed.

Speaker 2 50:52

I'm only as good as my clients and I'm also perpetually unemployed. I'm only as good as my next deal. No one cares about how many deals are closed last year.

Speaker 1 50:58

They want to know what you're doing this year. What are we?

Speaker 2 51:00

doing today, to execute, to produce results, and being able to constantly sharpen the saw, to innovate, to figure out new ways of being able to drive business. It's critical to success. Yeah, it's critical, yeah To success.

Speaker 1 51:15

Yeah, no, I appreciate that. I think this is a perfect way to end today's episode. You know, we again it's Peaks and Portfolios, because we're here in the mountain, you know the Mountain West Peaks and we have portfolios that we're running and growing. And I appreciate your kind words, but truly it's with folks like yourselves that PEG is able to grow our footprint, not only locally as well as nationally.

Speaker 2 51:43

So we so appreciate Our fates are intertwined.

Speaker 1 51:45

They are. They are. So, anyway, I just want to thank you for joining us. You know, utah is my new adopted home. I'm originally I don't know if you know this from Seattle Washington born and raised, but this has become my new home and I've loved it.

Speaker 2 51:59

Welcome to Utah. We're lucky to have you.

Speaker 1 52:01

Oh well, Hopefully you can put the word out and help. No, you know the podcast has been great. So again, there's a lot of interest in our region for all the things that you've mentioned today.

Speaker 2 52:11

Quality of life chief among them. I mean where in the country can you fly into a new? International airport and, within minutes, be at the footsteps, right at the foot of resort destinations that are world-class. We have the largest ski resort destination in North America, within what?

Speaker 1 52:38

35, 40 minutes of the Salt Lake International Airport and home of the 2034 Winter Olympics. Isn't that exciting? Isn't that amazing?

Discovering Utah's Economic Landscape

Speaker 2 52:45

History is being made once again and we all have the great privilege of watching this unfold and, hopefully, participate. You look at the public-private partnerships and the leadership and, frankly, the quality of this community. I love this place. I love Utah. The Wasatch Front is where it's at. We are looking forward to some of our best days. Yeah, I would agree. In the immediate future if we can just work together to navigate some of these peaks and valleys in our economy.

Speaker 1 53:17

So thank you for having me on.

Speaker 2 53:19

What a privilege.

Speaker 1 53:20

And thank you to all our listeners. So, from the peaks of the Mountain West presented by Pet Companies, and until next time.