Ep 40 - Office Lease Up

A no thrill week for me.  Coming down off the high of signing the lease and getting Grand rented up while shifting focus to Thunderbird.  It's funny the differences between Grand and Thunderbird.  I've never done anything with office space before so everything is new to me.  The types of tenants, desired spaces, market rents etc.  

Starting to get some leads rolling in the door and learning how to work them.  Overall, I'd like to get more people to view the space in person with me as opposed to just giving them the price over message.  I know that will be a big driving factor in getting more butts in seats. 

Transcript

SPEAKER_00 0:01

Boys and girls, welcome back to the commercial real estate starting from scratch podcast with me, your host, John Kleisch, on episode number 40. Woo! Number 40. Sounds good, feels good. Almost a year. That's crazy. I still feel like I'm brand new at this, or this is brand new, I should say. But either way, 40 episodes, we did it, and we're here. If this is your first time tuning in, really appreciate you doing so. Um, would love to hear how you find about uh found out about this uh podcast. There is a send me a message button in the show notes below. So if you are a first-time listener, please let me know how you found out about this. To give you an idea of what we're doing here, I am just documenting my journey into commercial real estate, just like the title suggests, starting from scratch. I started with zero commercial real estate experience and zero commercial assets owned. And I documented my journey all the way up until today, which has been almost a year, probably 10, 11 months, something like that. And now I own two buildings worth somewhere between two and a half to two point seven million dollars in the greater Phoenix Metro area. One's an industrial building and the other one is a office building. So go back, look through the episodes or listen to the episodes starting in chronological order. If you want it, if not, whatever. If you wanted to stick here and move on forward, cool, whatever. You could do what you want. So back to business. Let's see here. So the week wasn't really overall very interesting. The biggest update I had was last week's episode. That was huge. Getting that lease signed for Grand Avenue, the industrial building. That is, I'm gonna call that probably 85% leased up, maybe, yeah, something like that. And I'm just guessing right now, but there are a few outdoor areas and storage lots that we can rent out. And I'm still advertising for that, but my focus is definitely shifted from grand over to Thunderbird, the the office building. But yeah, we're cruising, we're cash-rolling really well on Grand as it sits. The new tenant moves in in two days. The swamp coolers are uh the company tells me they're done. My tenant tells me they're not done. So I need to go there tomorrow and check out and see what's going on. Apparently, there were some parts that they were waiting for, and today they were gonna get it. But when I reached out to my project guy, my project manager, he said, Up, all done, thumbs up. So, who knows? We'll see what happens with that. I imagine that everything is gonna be fine and it'll be good and dandy because I got my guy moving out of his spot and into my new spot on Friday, and then I got the new guy moving in right behind him on the same day, under one stipulation that the swamp coolers are to be operating as they should. If you've been following along, I ordered these things or I gave them the thumbs up probably five weeks ago, maybe more. So we ran into a lot of issues. I feel like it was mostly company-related issues that were on them and they dropped the ball multiple times, but neither here nor there. We'll figure that out later. Hopefully, it's not a problem because I don't want to make a podcast about how I couldn't get a guy to move in because of swamp coolers and blah blah blah blah blah blah blah. So hopefully that is not a big deal because this guy doesn't want to deal with any other big deals right now. So for Thunderbird, as you guys know, it is uh let's see here if I remember the correct numbers, it's like 7,400 square feet. We have 1,200 square foot leased out. It's like a whole separate unit to a fantastic tenant who has been there for a long, long, long, long time. And then the other 6,400 square feet of that building is completely vacant. And we had uh we had a broker go and list it to see if he could get some tenants for us and do the lease up, and it turned out to be uh squat, and I don't know exactly why, um, but neither here nor there. We got close to a deal, very close to a deal with another company that was a co-working company, and ultimately decided not to go with them for the best reasons possible because they suck. And we had insider knowledge on a friend that used them on a couple times and totally got hosed, and it seems to be a very, very common occurrence with that company. So we ixnayed them, and now what are we gonna do? Well, we are planning on doing the same kind of strategy, like a co-working executive suites type of place, but the office itself is really split up in or not shouldn't say split up is very easily split up without like making it feel weird at all into like three big sections. So somewhere about 2200 square foot, 2100 square foot each uh section. They all have about five offices. When I say about, there's a couple areas you could turn into offices. So call it about five offices each. There's multiple bathrooms, one break room would be shared amongst everybody, and that's what we're gonna run with. However, I would like to also do some of that co-working in at least one of the spaces. So, what we're doing now is figuring out what space would be best to use for co-working, and I think I already know that answer. It's gonna be the first floor uh bottom, the which is only let's see here if I remember correctly. There's basically two suites, or we're gonna turn it two suites upstairs and then one suite downstairs. So downstairs will be the whole co-working space, and what we're doing now is researching to see the demand, the price, what are you getting for that price? So we put out Facebook Marketplace ads, which is like my favorite thing on earth. That's how I leased up grand, was all off of Facebook Marketplace. I shop there all the time. I'm an addict for sure. I'm sure many of you are. It's a great little feature on Facebook. I don't even know what else happens on Facebook outside of Facebook Marketplace. That's like my jam right there. So I have gotten it. Started off really slow. I was pretty nervous um why leads weren't coming in and what was going on. And then the last couple days, we're getting about two leads a day. Now, two leads are wildly different than uh you know potential candidates. So far, out of those seven, one of them has been viable. Everybody, as you can imagine, everybody wants a steak dinner for that McDonald's price, right? Everyone wants the biggest private office for $299 a month, and in reality, the smallest private office we have is gonna be $500, and the co-working spaces are gonna start at $300. But what we might do, and I know this too, the beginning, like right now, this is a big office, 6,400 square feet. It's all empty, right? So I haven't done a tour yet with a potential candidate, but I know I've been told this that getting the first few tenants is the hardest because you walk into an office building, it's very quiet, there's dead air, there's no noise, it's wide open, you can hear the echoes, and that's unsettling, right? For a lot of people, a lot of people would rather not be in a very, very like still place like that, especially when you're looking for a co-working spot. So we have that going against us. So, what I'm probably going to do, two things I learned this week is that a I was just talking over Facebook Marketplace chat to these people, qualifying them, asking basically what they do, what space are they looking for, and then I basically give them a price. What I want to do now is I want to get people into the facility and have them walk around, see it, and then talk about price and maybe give them a range, like, oh yeah, we have something in that range that will work for you. And what we can do is especially in the beginning, is if they want a private office for $2.99 a month, like I'll do it. I'll do it. If you're if you're a potential tenant and you're listening to this podcast, yeah, I will. I'll do it. What I'm gonna do though is make it on a month-to-month lease, and then that way we can fill up the building relatively easily, and then one's demand starts to outpace the supply, we can start to bump everybody up, and then they can either pay more or they can GTFO. So I like that plan because right now if I don't get somebody in there, right, that's three hundred dollars a month that we are not making. But the the caveat or caveat, caveat, caveat, caveat. You I am not willing to take a tenant that cannot pay rent. Like if they're wanting a deal because they want a deal and they're like me, always want a deal, that's cool, right? But if they're incapable of paying rent and they're gonna be a problem, or they have like a really weird, noisy business that's gonna affect the other people, that's a hard no. That's a hard, hard, hard no. But if you're just you you can afford the rent, you have a business that can pay the rent and pay them a salary and everything, I I will cut you a deal right now. So that is the goal for next week is to a get as many people into the facility for a tour as possible. That way I can walk them through, I can see them person to person, and uh my specialty is definitely uh sales. So that's what we're gonna do. It's hard to do any kind of selling over messaging on Facebook Marketplace, so I have a feeling the more people I get in that door, the more leases that we're gonna sign. Especially since the beginning, we are willing to, I wouldn't say give stuff away, but borderline just get some momentum going. So as long as you can pay the rent and afford the rent, ooo wee, we're getting you in here. So next week will be a fun week. Hopefully, should have some more positive updates for you. Also, another conundrum is that this place is uh completely vacant to furniture and everything, too. So, do we go out and decorate? Uh, I know that I always go back and forth, right? Like decorating, I don't I don't want to use that term. I want to say more so like furnishing it, making it look a little bit more presentable. And what we came up with instead of decorating, I shouldn't say decorating, furnishing everyone's individual office, what we're gonna do is the common areas, the main entrance, the upstairs, the break room, we're gonna spend some money on that, on furnishing that, hanging up some paintings, putting down some couches and chairs and tables in the waiting room, in the break room, and make that look really, really proper. And then we're gonna leave up the office to the individual, right? The last thing I want to do is get in there and hang some pictures and uh put a desk, and then they're like, Oh, I have a desk, I don't like this picture, I have my own picture, right? And then we spend a thousand bucks and uh you know, my time doing all of that all for naught. So that's what we're gonna do on that space, uh, or for the furnishing portion. However, there is a big conference room that we have, and another big office. What I would like to do is go find some office cubicles and put, I'm hoping we can fit about six small cubicles in that conference room and at least four in a big office on the bottom floor. And those desks are the desks that we will rent out for $300 a month for uh co-working. And to be honest, we can probably even rent those out for less, probably more like $200, $199 special or something like that. That's gonna be some big money that I think is going to be well spent. And you know, surprise, surprise, where am I gonna find these office cubicles? Facebook Marketplace. You got it. So I've already been looking, already looking at furniture and everything like that. Uh, so this week is gonna be finding the furnishings and finding some cubicles, and then probably start tweaking the ads a little bit, maybe uh put out a couple different more with a couple different words and try a couple different things. Marketing is definitely not my shtick. I do not like it. I do not like spending time doing things and tweaking things and changing things and anything about making ads and blah blah blah blah blah. That's a good way to kill me. However, I will do um at least a little bit different iterations of things, change some things to see what gets some uh better feedback. Now, with Grand, I'm very, very comfortable leasing that space. I know what market rent is, I know what different types of shops, what they need, what they look for. I know the ins and outs of the building, I know a lot about the good, the bad, the ugly, what's valuable, what's not valuable. Now, with this office space or office space in general, I am completely new. This is my first go at it as a whole. Sure, I've owned it since November, but we have done, I personally have done zero listing on it and practically zero research um outside of this last week on what rates are, what they go for, and everything like that. Outside of obviously, I had an idea, right? But now I'm actually doing nitty-gritty and looking at things and being very particular about uh the pricing, the space, the offerings, and and all of that. So that will happen next week. We're gonna be doing that and also getting more people in the doors to walk them around, show them the place, and work some deals. I had a boss, Derek Hadad. You'll never listen to this, but shout out Derek Hadad, you're the man. You always said, the more hands you shake, the more deals you make. And I love that quote because it is just true. The more people I get to walk through that door, the more people I will get to say yes to a lease. So that is the motto for Thunderbird. And uh these probably next three to four episodes are probably gonna be a little bit shorter just because A, I'm not trying to make a very long episode or make very long episodes in general, but with all the craziness with Grand and everything like that, I feel like our times got out of control. Uh, like right now, we're at that 15-minute mark and we're pretty much wrapped up here. So uh not expecting to have a very meaty, long podcast, but maybe that's a good thing. I don't know. I'm not sure if people do enjoy the 30 minutes, the 20 minutes, 15 minutes, however long they are. I don't think I've gone over 30 minutes quite yet on a podcast. That'd be a long time to sit there and yap away, which I could probably easily do, but that's not what we're doing here. But guys, that's pretty much a wrap on, I guess. The last update for Thunderbird. Now, it's been a while since I mentioned this. We bought this, did not know there was an HOA. It went through title, everything came back. Uh, no HOA, and uh, you know, we bought this from a bank, and so they didn't know anything about it neither, because they just did a foreclosure on it and took it back. And turns out there is an HOA, and turns out the sellers knew about that HOA, and uh turns out that it's a thousand dollars a month, which really blows chunks because uh do the math, right? You know, if you've been following a a thousand dollars a month, twelve grand, I mean, we're talking, let's see, what what is that like a hundred and sixty thousand dollars worth of uh of value, $170,000 worth of value on that building that we just lost overnight because of the HOA. Now, there are uh many things that we can do, and we're still figuring all of that out. Basically, the HOE, the HOA uh are is a bunch of shitheads. Honest to God, uh fuck off uh HOA because you suck and you're terrible, and I hate your guts. And I hope you listen to this because it's the truth and you deserve to hear it. It's wild and crazy that you have a thousand dollar HOA fee and all you do is cut some grass, and that's it. Literally, uh they cut some grass and provide parking. So the last communication we were just trying to figure out what's going on and talk with them, and then the last bit of information they gave to us was you can talk to our lawyers. So that's going on in the background as well. That is something that is in the back of my mind. My partner John is handling most of that work, so it's um right now we gotta hire lawyers, so that's always fun, right? When it rains, it pours, and I feel like this is the common theme in commercial for me so far, where it's just one thing after another getting your teeth kicked in. However, that is how you learn, that is how you grow, and it's only hard until it becomes easy. Another Derek Hadad quote. Shout out, Derek Hadad. That's another one of my favorite quotes, too. That's very, very, very true. So that is a minor update on that end of things. Do I know how it's gonna shake out? I would venture to say that it is going to shake out, that we just pay the thousand dollars a month, deal with it, make less money than we thought, and move on, would be my guess, because I don't really have an appetite to go out and spend 20, 30 grand on fighting some HOA all for what? Like, what are we gonna get? Right? There is no real big reward at the end of that tunnel. So the only thing that I can do is go out and lease this place up and make a cash flow and just suck it up and deal with it. So that's my take on. I would love to fight them and sue everybody and sue the sellers and blah blah blah sue the HOA. Who you know, that's I don't know. That's just really I've dealt with a couple lawsuits, and it's not fun. I don't like to deal with it. Lawyers are the only ones that win in those situations, so probably not going to go that route. It might just be one of those things where we just deal with it, and it is what it is. That is not a Derrick Had quote. That was a quote from a random stranger that sat next to us at a Packers Cardinals playoff game like shoot 14 years ago, something like that. That's a whole nother story, but it is what it is. Either way, boys and girls, really appreciate you listening again. If you got value out of this or had some entertainment out of it, share it with somebody that you think would like this podcast as well. That would help me out dramatically, which um is awesome for me, not for you. Maybe so, because I'll keep on doing this. But uh, if you did like it and you don't have anyone to share it with and you have not left me a review, go ahead, leave me a review. I forget, guys, if I mentioned this last time, we got 10 reviews. Crazy, crazy, crazy, crazy. Don't even have to write anything, just write five stars, submit, done, see ya, forget about it, on to the next. So go ahead and do that. Follow me on Instagram, John.cleisch. I am going to be posting a lot of content on there, specifically um with the Thunderbird office lease up and furnishing decoration, whatever the heck you want to call it. So follow along on there for pictures and videos and cool updates. And other than that, we're we're out of here. That's it. That's a wrap. Boys and girls, just like that. Episode 40 in the books. Take her easy.