Industrial Real Estate Investing With Chase McLeod
Industrial real estate has become one of the most compelling asset classes for investors looking beyond multifamily properties. In this episode of Lifetime Cash Flow Through Real Estate Investing, Chase McLeod explains why warehouses, flex properties, and small bay industrial assets are attracting institutional capital and creating new opportunities for investors seeking diversification.
Who Is Chase McLeod?
Chase McLeod is the founder and principal of McLeod & Company, a commercial real estate firm specializing in industrial properties. Over the past five years, his company has completed nearly $900 million in transactions, primarily in Southern California and Texas. With nearly two decades of experience in industrial leasing, tenant representation, and investment sales, Chase has developed deep expertise in one of the fastest-growing sectors of commercial real estate.
Why Industrial Real Estate Is Gaining Attention
According to Chase McLeod, industrial real estate is benefiting from several long-term demand drivers. The growth of e-commerce, expansion of logistics networks, and increasing demand from data center infrastructure are creating substantial needs for warehouse and distribution facilities.
He explains that major markets such as Dallas-Fort Worth, Houston, Savannah, and Southern California continue to attract companies looking for strategic locations to store and distribute goods. At the same time, new development has become more difficult due to rising land costs, entitlement challenges, and increased regulations, creating a potential supply shortage in certain markets.
The Different Types of Industrial Properties
Chase breaks industrial real estate into several categories, each serving different types of tenants and investors.
- Super bulk warehouses exceeding 700,000 square feet
- Bulk and medium distribution facilities ranging from 200,000 to 700,000 square feet
- Small bay and flex industrial properties designed for smaller businesses and service providers
He notes that small bay industrial properties have become particularly attractive because they serve a broad tenant base, including contractors, distributors, service businesses, and local companies that need a combination of office and warehouse space.
Why Small Bay Industrial May Be an Opportunity
One of the biggest themes discussed during the episode is the growing interest in flex and small bay industrial properties. Chase believes these assets offer several advantages:
- Strong tenant demand from local businesses
- Multiple exit strategies for investors
- Potential interest from institutional buyers seeking scale
- Opportunities to increase rents on under-managed properties
Unlike large distribution centers that may rely on a single tenant, small bay industrial properties often have multiple tenants and can provide diversified income streams. Chase believes investors who can acquire these assets at attractive prices and improve operations may benefit from significant long-term value creation.
How Data Centers Are Impacting Industrial Demand
Another major trend discussed is the explosion of data center development. While many investors focus on the data centers themselves, Chase points out that an entire ecosystem of companies supports this industry. Businesses that manufacture, store, and distribute equipment for data centers require warehouse space, creating additional demand for industrial properties in markets like Texas.
This secondary demand has contributed to increased leasing activity and is helping reshape the industrial landscape across the country.
Finding Value in Industrial Real Estate
For investors interested in entering the industrial sector, Chase recommends focusing on properties that share characteristics familiar to multifamily investors. He suggests looking for:
- Long-term private ownership
- Under-managed assets with below-market rents
- Strong locations with favorable demand drivers
- Opportunities to improve operations and increase value
He emphasizes that many of the same value-add principles used in apartment investing can also apply to industrial real estate when investors understand the asset class and its unique dynamics.
Industrial real estate continues to evolve as supply chains, logistics, and technology reshape the economy. Chase McLeod provides a detailed look at why warehouses and flex properties are attracting increased investor attention and where opportunities may exist in the years ahead.
If you want to hear the full conversation and detailed insights, watch the podcast video or read the complete transcript below.
Frequently Asked Questions About Industrial Real Estate
What Is Industrial Real Estate?
Industrial real estate refers to commercial properties used for manufacturing, warehousing, storage, distribution, logistics, and business operations. These properties include distribution centers, flex spaces, small bay industrial buildings, and large warehouse facilities.
Why Is Industrial Real Estate a Good Investment?
Industrial real estate has become an attractive investment because of strong demand from e-commerce, logistics companies, manufacturing, and data center infrastructure. Investors are drawn to the sector for its potential for long-term leases, steady cash flow, and opportunities for appreciation.
What Are the Different Types of Industrial Real Estate?
The primary types of industrial real estate include warehouses, distribution centers, manufacturing facilities, flex industrial properties, and small bay industrial buildings. Each serves different tenant needs and offers unique investment opportunities.
What Is Small Bay Industrial Real Estate?
Small bay industrial real estate consists of smaller warehouse and flex units that are often occupied by local businesses, contractors, service providers, and distributors. These properties typically have multiple tenants and are becoming increasingly popular with investors because of their diversified income potential.
What Is Flex Industrial Space?
Flex industrial space combines office space with warehouse or storage areas. These properties are designed to accommodate a variety of businesses, including construction companies, e-commerce operators, and service-based businesses that need both administrative and operational space.
How Does E-Commerce Impact Industrial Real Estate?
E-commerce has significantly increased demand for industrial real estate because companies need more warehouses and distribution centers to store inventory and fulfill customer orders quickly. This trend has fueled growth in industrial markets across the United States.
Why Are Data Centers Increasing Demand for Industrial Real Estate?
The rapid growth of artificial intelligence and cloud computing has created demand for data centers and the companies that supply them. Businesses that manufacture, distribute, and store equipment for data centers often require large industrial facilities, driving additional demand for warehouse space.
What Should Investors Look for in an Industrial Real Estate Deal?
Investors should look for properties in strong markets with favorable demand drivers, long-term ownership histories, below-market rents, and opportunities to improve operations. Location, tenant quality, and potential for rent growth are also critical factors.
Which Markets Are Strong for Industrial Real Estate Investing?
Markets with strong population growth, major transportation hubs, ports, and expanding logistics networks tend to perform well for industrial real estate investing. Cities such as Dallas-Fort Worth, Houston, Savannah, and Southern California continue to attract significant industrial demand.
Can Industrial Real Estate Be Syndicated Like Multifamily Properties?
Yes. Industrial real estate can be acquired through syndications and private investment groups, similar to multifamily properties. As investor interest grows, more opportunities are emerging for passive investors to participate in industrial real estate deals.
00;00;37;23 – 00;00;58;02
Rod Khleif
Welcome back to lifetime cash flow through real estate investing. I’m Rod Cleef, and I’m thrilled you’re here. As always. I’ve got a very interesting gentleman in here today all the way from California. Chase McLeod. Now, Chase is the founder and principal of McLeod and company. And their focus is industrial commercial real estate. Now, you know, we’ve been bringing in lots of different asset classes here.
00;00;58;02 – 00;01;16;04
Rod Khleif
And I was just telling Chase we had our warrior event last weekend, and we had one of my students who’s done a lot of industrial flicks, smaller industrial, do a presentation. Teaching it because we’re teaching it now is to was teaching senior housing there. We’re teaching all these different asset classes. So this is a real treat. Chase welcome brother.
00;01;16;04 – 00;01;18;07
Chase Mcleod
Thank you so much for having me. I really appreciate it.
00;01;18;08 – 00;01;34;19
Rod Khleif
Of course. Well, why don’t you give us a little background on you and and why real estate. And you’ve been at it, you know, 20 plus years, mostly larger tenants and institutional tenants. I think you called them. Yeah. Give us, give us, give us the backstory.
00;01;34;21 – 00;02;04;03
Chase Mcleod
I would love to. Actually, born and bred in Dallas, Texas. Went to SMU. And towards the end of my senior year in college, I actually got into a commercial real estate by accident. I had a core class and needed some extra credit in. Got invited to an economics club meeting. At that meeting, I met the senior vice President of Operations for a boutique commercial real estate tenant representation only firm in Dallas, and had a great conversation.
00;02;04;04 – 00;02;07;12
Rod Khleif
Explain what that means. Tenant representation I know, but my listeners may.
00;02;07;12 – 00;02;42;25
Chase Mcleod
Not sure. I think in any facet of commercial real estate, whether it’s office, industrial, etc., there’s different specialties that brokers tend to gravitate towards. One is tenant representation. You tend to say that you are not conflicted. You’re only representing tenants. You don’t represent landlords. Usually. The other term is corporate services. You’re a brokerage or a team that specifically pursues or chases or wants to represent large companies with a lot of leased facilities, office, industrial, etc. you want to be their broker, whether it’s Tallahassee, Florida or Dallas, Texas.
00;02;42;25 – 00;03;05;04
Chase Mcleod
You want to be their person. Got it. So the first company ever worked for that was their specialty back in the 90s. They actually started representing Federal Express and then Fedex in the early 90s. They made a pitch presentation to them that they should only have one broker, regardless of location. And the reason for that was, is they were going to learn the nuances of the company and the client better than anybody else.
00;03;05;07 – 00;03;07;23
Chase Mcleod
And the location was just, you know, that’s.
00;03;07;25 – 00;03;09;21
Rod Khleif
Viable, viable, viable.
00;03;09;23 – 00;03;15;00
Chase Mcleod
Yeah, yeah, yeah. So I accidentally stumbled into commercial real estate. I really thought.
00;03;15;01 – 00;03;16;00
Rod Khleif
You went to work for this guy or.
00;03;16;00 – 00;03;30;07
Chase Mcleod
What I did, well, the story was I followed up for two months. No response. Then I got a phone call this the second, second semester, my senior year, and he said, we’ve got a young team that needs an intern. When can you be here for an interview? And I said, when do you want me here? So I had one suit.
00;03;30;07 – 00;03;46;18
Chase Mcleod
I had to skip all my classes the rest of the day, went sat in the lobby for two hours, interviewed, got to interview for them or excuse me, work for them almost my entire second semester senior year. By the time I was a week away from graduation, they said, could you help me with some projects over the weekend?
00;03;46;18 – 00;04;04;04
Chase Mcleod
I said, yes, so this is my moment. So I waited about an hour and then I asked the boss. I said, I know that I can be an asset to this firm, to your team. I’d like to work full time, he said. How much? I said, how much money do I want to make? Said how much? I paused, had no idea what I was doing, and I said $30,000.
00;04;04;05 – 00;04;05;14
Rod Khleif
This was when.
00;04;05;16 – 00;04;28;08
Chase Mcleod
2006. Wow. So accidentally got into commercial real estate, but felt like I loved it during my time in college and the team that I originally worked for, they had four national accounts they were doing all around the country tenant representation. So one facet of commercial real estate is specifically representing the interest of tenants. And then a work for that company for a few years in Dallas changed firms.
00;04;28;08 – 00;04;50;06
Chase Mcleod
And then what felt like almost overnight after I graduated college. Lehman Brothers and Bear Stearns announced recession in 2008. I went from basically working for a team that was nonstop to nothing. So the first team I worked for, I learned a tremendous amount about how to do a deal, how to do a commercial lease for a large corporation.
00;04;50;09 – 00;04;56;24
Chase Mcleod
The next individual that I worked for, my next firm, I got an MBA in what I would call sales.
00;04;56;25 – 00;04;58;12
Rod Khleif
Sales, sales and negotiation.
00;04;58;13 – 00;05;06;28
Chase Mcleod
He taught me how to cold call. But most importantly, and I carry this to this day. He taught me how to ask questions on the phone.
00;05;07;01 – 00;05;09;07
Rod Khleif
The best the best sales is asking questions.
00;05;09;07 – 00;05;16;10
Chase Mcleod
He went 100% taught me how to ask questions. That led to a conclusion that I was trying to get to have the other person.
00;05;16;11 – 00;05;18;16
Rod Khleif
You lead the conversation with questions. That is correct. That’s the best.
00;05;18;19 – 00;05;38;03
Chase Mcleod
So my first through of 4 or 5 years, even through the first part of the recession, I was doing corporate services, tenant rep. And then I met my now wife at SMU, and she decided to go back to California after she graduated for graduate school. And then when she graduated grad school, I proposed. And then I begged her to come back to Dallas.
00;05;38;09 – 00;05;55;12
Chase Mcleod
We worked in Dallas for a couple of years, and then in 2011, also a terrible time to be in the business. I was still doing corporate services tenant rep, but I decided she has a very large family in California, Southern California. And I said, if we’re going to build a family, I wanted to do it near your family because I’m a small one.
00;05;55;18 – 00;06;02;07
Chase Mcleod
2011 we moved to California with one car, two dogs, and no money. Is what I say.
00;06;02;08 – 00;06;11;28
Rod Khleif
Nice, nice. So you moved to California? Yeah, with a couple of dogs and no money. What did you do? I mean, just, you know, give us give us some highlights. So I was still.
00;06;11;28 – 00;06;36;25
Chase Mcleod
Doing corporate services and tenant representation. I was still representing a couple companies, fortune 1000, that I had procured myself around the country. And I came home one night and I just. I said to my wife, I said, I feel like I don’t know anyone. I feel like I don’t have any connectivity or relationships here because I was living in Orange County, but I was doing deals everywhere but California, all around the country.
00;06;36;25 – 00;07;05;21
Chase Mcleod
So I made a decision that I wanted to do business in Southern California. I wanted to do bigger business than I had ever done before. I changed firms again to a local firm called Voight Real Estate Services that had an outstanding reputation for industrial local representation. And that was agency leasing, which is when you represent a commercial landlord tenant representation and a ton of reputation and track record of by a rep and seller rep, all on industrial.
00;07;05;24 – 00;07;24;20
Rod Khleif
Now. I mean, just with my own being naive, I would think that LA would be a great place just because it’s a port and you probably got a lot of need for for industrial space. There is that is that is that a driver or what are the drivers in Southern Cal for industrial?
00;07;24;21 – 00;07;50;00
Chase Mcleod
Yeah, the port of LA and the Port of Long Beach have always been drivers for industrial real estate. Okay. And the biggest driver is pricing. So it starts at the port of LA in Long Beach. Over the last 35, 40 years it’s just been migrating east, mainly a function of land prices, right? The developers wanted cheaper land pricing to build cheaper buildings, willingness to lease them for a lower rate.
00;07;50;00 – 00;08;10;24
Chase Mcleod
But it’s all about basis for most of these developers, right? Right. So that’s been the story for 40, 50 plus years in Southern California. What’s been fascinating kind of fast forwarding to now is there are certain markets in Southern California where rent and land prices tend to be higher, a little bit further east than a little bit further west.
00;08;10;25 – 00;08;12;24
Rod Khleif
Well, that doesn’t make any sense. But okay.
00;08;12;25 – 00;08;27;23
Chase Mcleod
Well, there’s more opportunity in larger lots to build larger buildings slightly further east. And there also tend to be different demand drivers. So they’re clear height. Like what. Clear height. The actual height of a warehouse.
00;08;27;25 – 00;08;30;27
Rod Khleif
Oh. So oh the actual height inside the warehouse. Okay.
00;08;30;28 – 00;08;36;28
Chase Mcleod
So if there’s an opportunity to build a taller building further east and a tenant.
00;08;37;00 – 00;08;39;13
Rod Khleif
Because the eggs aren’t as strict or what?
00;08;39;16 – 00;08;57;06
Chase Mcleod
There’s an opportunity to buy a larger parcel or acreage assemblage. Right? And then usually there’s a there’s a tipping point on industrial warehouse square footage is where you really don’t build a certain height unless you’re building a certain size.
00;08;57;07 – 00;08;57;25
Rod Khleif
Yeah. That makes.
00;08;57;26 – 00;09;01;09
Chase Mcleod
So, for instance, you know, everyone knows that Amazon has Monster Warehouse.
00;09;01;09 – 00;09;02;18
Rod Khleif
Yeah. I was just going to bring that up. Yeah.
00;09;02;20 – 00;09;29;25
Chase Mcleod
So Amazon typically when they have developers build warehouses or frankly speaking, if developers are building warehouses with Amazon and Walmart and Target in their mind, right, it’s taller the better. Okay. There’s two real drivers for development, which is kind of on the same topic or kind of a little bit different. But the two biggest drivers of development right now, if you can find something big enough to build in Southern California, and if yes, that is true, which I’ll bring up Texas because I was just there a couple of weeks ago.
00;09;29;26 – 00;09;40;18
Chase Mcleod
Okay. It is becoming painfully difficult to not only find good, buildable sites in Southern California, but to actually get approval to build them.
00;09;40;20 – 00;09;48;11
Rod Khleif
Oh, yeah. Geez, don’t get me started on that. So these poor people who lost their houses through fires can’t, can’t rebuild their freaking homes because of this bullshit.
00;09;48;12 – 00;09;56;06
Chase Mcleod
Yeah. Then there seems to be some backdoor politics happening. Were somehow half of what got burned down is now right? Is as low cost.
00;09;56;06 – 00;10;08;24
Rod Khleif
Or got to be affordable housing. Yeah. Don’t get me started. We won’t go down that political rabbit hole. But but. Yeah. No. So. So you started your own company. Yes. Yes, sir. Okay. And you’ve had it. How long?
00;10;08;25 – 00;10;10;26
Chase Mcleod
Five years. Five years this year.
00;10;11;00 – 00;10;16;19
Rod Khleif
And you’ve done, like a billion, almost $1 billion in transactions. Correct. Yeah.
00;10;16;20 – 00;10;23;15
Chase Mcleod
So as of as of this month, we’re almost at 900 million nice and close transactions. We’ve been very.
00;10;23;19 – 00;10;24;05
Rod Khleif
Your company.
00;10;24;06 – 00;10;24;23
Chase Mcleod
For my company.
00;10;24;27 – 00;10;25;15
Rod Khleif
Congratulations.
00;10;25;16 – 00;10;33;13
Chase Mcleod
So we founded a little over five years ago. Vast majority of that is Southern California, but about 250 million of that. Those transactions were actually in.
00;10;33;13 – 00;10;44;08
Rod Khleif
Texas, in Texas as well. Yeah, I love Texas. I’ve got assets in Texas. I love visiting California. But yeah. So the most went there again. Almost went there again.
00;10;44;11 – 00;11;15;26
Chase Mcleod
The most interesting thing. And this is industrial real estate. This is Southern California, right. The the location of where the ports are, the amount of population that California has. And frankly speaking, I don’t know I don’t know statistics on me, but I guarantee you I went to SMU. We go to SMU alumni and recruiting events annually. The dean of the business school still comes to Southern California.
00;11;15;28 – 00;11;33;27
Chase Mcleod
Actually, he’s brand new, but the pitch used to be at SMU. Give me your kids for six years because I’ll give them a four year education, and then I’ll give him a job for two years. Then I’ll send them back to California. The new pitch of SMU, which, by the way, do you know what the number two incoming freshman population every year is for SMU, Southern California, really?
00;11;33;28 – 00;11;35;25
Chase Mcleod
Not even the state of California, Southern California.
00;11;35;27 – 00;11;36;12
Rod Khleif
Interesting.
00;11;36;12 – 00;11;48;17
Chase Mcleod
So the only reason why I bring that up is even schools like SMU and TCU know that California kids want to go to Texas. The flip side is a ton of them. Even if they’re given opportunities to get jobs in Texas and.
00;11;48;17 – 00;11;48;26
Rod Khleif
Stay.
00;11;48;27 – 00;11;55;27
Chase Mcleod
They want to come back. So as many I don’t know if this to the statistics, but for as many people that are trying to get out of California, there’s still.
00;11;55;27 – 00;11;57;06
Rod Khleif
A lot trying to get out.
00;11;57;12 – 00;11;58;02
Chase Mcleod
There’s a lot trying.
00;11;58;02 – 00;12;15;20
Rod Khleif
To get out. I mean, I see articles every day because my AI sends me articles to to do green screens on and talk about, you know, and a common topic is just the exodus from the blue states. I mean, you got that billionaire. I mean, we’re digressing a little bit here, but you have that billionaire tax, they’ve got these high income taxes.
00;12;15;21 – 00;12;37;00
Rod Khleif
And I was just listening to Joe Rogan interview Andreessen, you know the venture capitalist. Yeah. Mark Anderson and talking about how they’re worried that it could be a national thing at some point where there’s a, a tax based on your net worth. And, and so yeah, just anyway, we won’t digress. Let’s stick with you here. But but.
00;12;37;08 – 00;12;38;18
Chase Mcleod
I don’t know if that’s ever going to happen.
00;12;38;19 – 00;12;51;18
Rod Khleif
Yeah. Well let’s hope not. I mean, there’s some things right now. I mean, it’s it’s going to be there’s an election, it’s in the election. This this billionaire taxes. It’s there and it’s 5050 that it’ll pass.
00;12;51;20 – 00;13;04;05
Chase Mcleod
So I it would absolutely shock me if it did absolutely not shock me if somehow we, you know, wiggles through. They have the mansion tax in LA right. That that was meant to raise taxes or to raise more tax income. It didn’t.
00;13;04;06 – 00;13;11;25
Rod Khleif
Know of course people they leave and then then the rest of the people have to they lose money from their tax base. The rest of people have to make that loss up.
00;13;12;01 – 00;13;32;23
Chase Mcleod
There’s there’s a new bill that got past about a year and a half ago called AB 98 in Southern California. Basically, you can’t build a new industrial facility over 100,000ft² if you’re within 1000ft of residential. I can’t tell you where the good sites left to build are that aren’t within 1000ft of residential. And so that’s an interesting tipping point for our market in general.
00;13;32;28 – 00;13;48;22
Chase Mcleod
I watched one of your shows and they were talking about you had a wonderful gentleman on there. They had 900 employees all across the US. Your tagline was they’re going to buy at 1.5 billion in apartments this year with the gentleman’s name was oh, I don’t I watched it was.
00;13;48;22 – 00;13;49;29
Rod Khleif
A 1300 interviews.
00;13;50;05 – 00;14;07;21
Chase Mcleod
It was it was a great interview. You guys were talking about development. And when the tipping point was when people were going to build again and where values were going to go, because no one is building through 26, maybe early 27. Right. That’s the most fascinating thing about Southern California industrial real estate. Okay. So you’ve got two things that are conflicting.
00;14;07;21 – 00;14;25;13
Chase Mcleod
One, no one knows where the leasing market is. Sometimes the leasing markets great in one pocket. Sometimes it’s devastating even on the market for three years. In other pockets, you have a massive barrier of entry to be able to develop new product. Because of things like AB 98, we don’t have a good leasing market. So how do you underwrite a new build?
00;14;25;18 – 00;14;34;24
Chase Mcleod
It takes three and a half years to get it entitled. Why would you want to build. Right. So it hasn’t fully happened yet, but it will where existing building values will skyrocket.
00;14;35;01 – 00;14;35;26
Rod Khleif
Yeah, for sure.
00;14;35;27 – 00;14;57;24
Chase Mcleod
If we get a few more extra lease comps, right, if we get a little bit of a adjustment and interest rates, and if the namesakes, the lengths, the Blackstone’s, the JP morgan’s, the Clarens, etc. if those guys have a mandate where they jump in, then everyone will want to catch up before it jumps another 100 bucks a building.
00;14;57;25 – 00;15;06;10
Rod Khleif
Let’s talk about other types of industrial, because again, I told you my students are doing the industrial flex. So what are the different types of industrial that people can do?
00;15;06;15 – 00;15;07;17
Chase Mcleod
00;15;07;20 – 00;15;10;11
Rod Khleif
Of course there’s a big box stuff that you do, which is.
00;15;10;14 – 00;15;16;22
Chase Mcleod
Give a few categories. I’ll I’ll call it super bulk. Super bulk is going to be at least 500,000.
00;15;16;22 – 00;15;18;00
Rod Khleif
Square feet. An Amazon warehouse.
00;15;18;08 – 00;15;25;00
Chase Mcleod
That’s at least super bulk is probably 700,000ft² or more. If you’re speaking that developers are more afraid, they’re.
00;15;25;00 – 00;15;38;22
Rod Khleif
Building, expect 700,000 square foot warehouses. By the way, spec means you build it and you don’t have an end, and you know you don’t have a tenant for it or you don’t have it resold. Yes. That’s a that’s a that’s a big kahuna spec in the seven.
00;15;38;25 – 00;15;49;01
Chase Mcleod
My, my home and my specialty is Southern California. But I’m born and bred in Dallas, right. I was in Dallas Fort Worth, Houston three times last month.
00;15;49;03 – 00;16;03;08
Chase Mcleod
In Dallas Fort Worth. This this is a corroborated story from some of the best brokers, the best investors in the market in the Dallas-Fort worth market. Right now, there’s at least ten leasing requirements for at least 1,000,000ft² of warehouses.
00;16;03;09 – 00;16;06;02
Rod Khleif
Meaning there’s a demand for minimum. Wow.
00;16;06;03 – 00;16;08;08
Chase Mcleod
There’s at least ten requirements. Usually an industrial.
00;16;08;12 – 00;16;10;03
Rod Khleif
Requirement means there’s somebody that wants it.
00;16;10;04 – 00;16;15;22
Chase Mcleod
There is a rumor or there are tours or is legitimate or is a legitimate requirement in the market. Wow.
00;16;15;25 – 00;16;16;17
Rod Khleif
For a million square.
00;16;16;17 – 00;16;37;16
Chase Mcleod
Feet in industrial, the term is Tim. Tenants and market and and the biggest investors want that list. They want to know who’s in the market because a lot of them have either vacant buildings or they’re building buildings. Right. So the the actual rumor is there’s at least ten requirements. Wow. Looking for 1,000,000ft² or more. There are only three existing buildings built in the metroplex in that size range.
00;16;37;23 – 00;16;40;27
Chase Mcleod
So it went from kind of last 20.
00;16;41;00 – 00;16;53;03
Rod Khleif
Talk about the different. Sorry, sorry to interrupt, but but so what are the uses that you think comprise those ten? Just out of curiosity, what are the highest uses because you hear about data centers. I’m hearing about that a lot. Yes. Is that one?
00;16;53;04 – 00;17;10;00
Chase Mcleod
The most interesting part is everyone’s talking about data centers, right? The actual data centers themselves. What’s driving part of the industrial leasing market right now in markets like Texas? Right. Companies that store, distribute and sell equipment and components for.
00;17;10;02 – 00;17;10;27
Rod Khleif
The data centers.
00;17;10;29 – 00;17;12;03
Chase Mcleod
Need the warehouses.
00;17;12;04 – 00;17;12;27
Rod Khleif
Wow.
00;17;13;00 – 00;17;26;02
Chase Mcleod
And you have markets like Houston, Baytown, etc. there’s a limited requirements to entitle and approve and permit construction in a place like Texas. Entitling is the.
00;17;26;05 – 00;17;38;21
Rod Khleif
It’s not a pain in the ass. No it’s not. Houston doesn’t even have a zoning. I’m actually buying six assisted living facilities right now in Houston, Dallas and San Antonio. Yes, I love Texas. Yes. You know, I love Texas as much as I love Florida.
00;17;38;22 – 00;17;57;28
Chase Mcleod
So. So one question I asked on my tours in Houston and Dallas two weeks ago is I said, your developers that have fully entitled land for warehouses, that have been sitting on them waiting to go spec build without a tenant, right. Are they now debating reinstating it to a data center? The answer is yes.
00;17;58;00 – 00;17;58;22
Rod Khleif
The answer is yes.
00;17;58;25 – 00;18;07;29
Chase Mcleod
Yes. But the flip side is if they spec it with what it was already planned to be, which is a warehouse, will they still get at least because of what I’ll call the the data center trickle effect?
00;18;08;00 – 00;18;30;14
Rod Khleif
Well, yeah. The manufacturers and distributors that are that are supporting the data centers. Yes. Yeah. Wow. That’s crazy. That’s it. You know, you read some of these articles about the the economic needs that these data centers have. It’s like trillions. I mean, it’s it’s crazy. They’re talking about putting them in space for the cooling and the ocean for the for the energy.
00;18;30;15 – 00;18;31;15
Rod Khleif
I mean, just some crazy.
00;18;31;16 – 00;18;36;15
Chase Mcleod
Well, it’s a power consumption thing, but what most people don’t realize is, and I’m only on the surface of understanding the details.
00;18;36;15 – 00;18;37;03
Rod Khleif
Of this.
00;18;37;05 – 00;18;42;12
Chase Mcleod
There’s a water consumption component of it on certain data centers as well. It’s cool from a cooling standpoint.
00;18;42;18 – 00;18;43;10
Rod Khleif
Interesting.
00;18;43;11 – 00;19;14;00
Chase Mcleod
Wow. So the so if we’re talking about vampires, the Southern California market that we specialize the most in the Inland Empire is a hub for most third party logistics companies. Basically others that are getting paid to either bring in product from overseas and store it or bring it in, store it, and ship it. The the interesting thing is, at least 50% of our third party logistics clients we represent in Southern California are all asking us about Dallas, Fort Worth and Houston.
00;19;14;01 – 00;19;14;23
Rod Khleif
Really. So they want.
00;19;14;29 – 00;19;15;26
Chase Mcleod
Their next facilities.
00;19;16;00 – 00;19;16;19
Rod Khleif
They want to move there.
00;19;16;20 – 00;19;21;25
Chase Mcleod
They’re debating Houston for that port versus Dallas Fort Worth for location population.
00;19;21;27 – 00;19;26;14
Rod Khleif
Yeah, yeah, that makes complete sense. So back to my question about the different types of industrial.
00;19;26;15 – 00;19;41;12
Chase Mcleod
Yeah. So I’m sorry. So I’ll say super bulk which really is categorized I would say at least 700 to 750,000ft². When you’re speaking those buildings. Most developers are afraid of buildings that big becoming obsolete. Yeah. So the two things they’re looking.
00;19;41;12 – 00;19;44;04
Rod Khleif
At, that’s a that’s a life changing event that happens.
00;19;44;04 – 00;20;03;11
Chase Mcleod
How tall can we build it structurally? Usually it’s 40 to 42ft minimum. Clear. That means the building is probably another ten feet taller than that 5 to 10ft. Interesting. When when someone quotes a minimum clear height, it’s the minimum area under the right. Yeah. That you could you could store, I would say in between medium and 500,000ft² is still.
00;20;03;12 – 00;20;03;18
Rod Khleif
It’s.
00;20;03;18 – 00;20;32;20
Chase Mcleod
Not it’s still bulk. Right. But I would say bulk not super bulk is maybe somewhere around 400,000ft² up to that 700,000 square foot range. And then anything below 400 to about 200 is like medium. Okay. That, that that square footage size range could be fortune 1000 credit. It could be an overseas three pl third party logistics company you have never heard of before.
00;20;32;23 – 00;20;46;25
Chase Mcleod
That has one facility. One guy owns it. He’s bringing a bunch of product from overseas, mainly China, mainly Asia, and then under 200,000ft² down to about 50. Small to medium.
00;20;46;26 – 00;20;47;22
Rod Khleif
That’s small to medium.
00;20;47;24 – 00;20;48;01
Chase Mcleod
Small to.
00;20;48;01 – 00;20;49;02
Rod Khleif
Medium industrial. Yeah.
00;20;49;03 – 00;21;02;01
Chase Mcleod
So everything that I just named on square footage wise is what I would, what we would call a distribution warehouse. It’s meant to have a ton of doctors or an 18 Wheeler can back up. It’s meant to store high.
00;21;02;04 – 00;21;09;02
Rod Khleif
It’s meant to have you see, you see them where the doctors are level with the back of a trailer so they can literally roll them. Right? That’s correct. Right.
00;21;09;09 – 00;21;36;10
Chase Mcleod
And, and there’s a bunch of newer technology that’s been created and put in these buildings to make it as easy as possible for the truck to come in, sit flush of the forklifts, go in and out, in and out. Relatively speaking. The only thing I’ll add onto those medium bulk and super bulk facilities is they usually the distribution companies break their business down into kind of two models fulfillment and trans load fulfillment e-commerce.
00;21;36;17 – 00;21;50;00
Chase Mcleod
They’re bringing as much as you can, stack as much as you can inside of it and eventually ship it out, ship it out, ship it out. Trans load is really not meant to be stacked. It’s really meant to be sat on the floor because it’s moving so quickly in and out.
00;21;50;01 – 00;21;50;12
Rod Khleif
Gotcha.
00;21;50;19 – 00;21;54;02
Chase Mcleod
Those companies need as many doc doors as they can because they have a ton.
00;21;54;02 – 00;21;55;20
Rod Khleif
Of trucks. Need the ceiling height.
00;21;55;21 – 00;21;56;16
Chase Mcleod
They don’t use it.
00;21;56;18 – 00;21;57;22
Rod Khleif
Yeah, right. At least they don’t.
00;21;57;24 – 00;21;59;25
Chase Mcleod
So the two things they need is a lot of doctors.
00;21;59;26 – 00;22;00;07
Rod Khleif
Right.
00;22;00;08 – 00;22;06;11
Chase Mcleod
And the truck court has to be huge because they’re actually storing 18 wheelers overnight. Got it in between their trucks.
00;22;06;18 – 00;22;07;10
Rod Khleif
It’s called.
00;22;07;12 – 00;22;09;28
Chase Mcleod
Your flex question. I break that down.
00;22;09;28 – 00;22;19;04
Rod Khleif
And so we’re talking we’re going to talk about flex now guys which is what a lot of my students are doing. So okay so talk about that. Flex and their small bay as well right.
00;22;19;07 – 00;22;22;00
Chase Mcleod
Well there’s intertwining terms.
00;22;22;01 – 00;22;22;19
Rod Khleif
Okay. All right.
00;22;22;20 – 00;22;24;24
Chase Mcleod
All right I think flex and small bear the same.
00;22;24;25 – 00;22;25;15
Rod Khleif
Same thing. Got it.
00;22;25;16 – 00;22;29;07
Chase Mcleod
I think small Bay is a sexier institutional term.
00;22;29;09 – 00;22;31;01
Rod Khleif
Flex. Okay. Okay. Got it.
00;22;31;02 – 00;22;48;23
Chase Mcleod
Okay. Because everyone knows distribution warehouse. Everyone knows bulk. Right. Small bay. I’m not going to say that it was invented by institutions and investors, but it sounds more institutional than flex. Got it. Flex to me. Sounds private investor. Right. Small bay. Sounds like I’m building a portfolio of 30 properties that are small bay. Here’s my perspective.
00;22;48;25 – 00;22;52;11
Rod Khleif
Gotcha. Okay. All right. So? So describe describe it for my listeners.
00;22;52;12 – 00;23;02;04
Chase Mcleod
Yeah, I think there’s there’s two ways that we see the product. One is grade level only doors. They’re not meant for large.
00;23;02;05 – 00;23;03;05
Rod Khleif
Not meant for a semi.
00;23;03;06 – 00;23;12;28
Chase Mcleod
They’re not meant for a semi. And then that’s where small Bay comes into play. Small bay industrial can be dock high served. It can. More often than not, it is dock high served.
00;23;12;29 – 00;23;13;06
Rod Khleif
Oh, it.
00;23;13;06 – 00;23;22;29
Chase Mcleod
Is flex. I’ll just. I’ll give the category based on the businesses that go in there. Okay. Flex I would say t shirt silk screening business. Yeah. Next to the crossover.
00;23;22;29 – 00;23;25;25
Rod Khleif
Or carpet company that needs to the carpet storage next.
00;23;25;25 – 00;23;26;16
Chase Mcleod
To the CrossFit jump.
00;23;26;18 – 00;23;28;10
Rod Khleif
Right next to the CrossFit gym inside there.
00;23;28;12 – 00;23;53;23
Chase Mcleod
Okay. Really good flex in certain great locations. Looks like retail from the front. No kidding. Ton of glass. Great auto parking. And then 1 or 2 doors per unit in the back. Interesting what certain developers have. Excuse me. What certain investors have been fighting to buy around the country, and certain developers and certain pockets of the country, like one of my best friends in Fort Worth has started a development company specifically to develop.
00;23;53;26 – 00;23;54;14
Rod Khleif
Small bag.
00;23;54;17 – 00;23;54;23
Chase Mcleod
Yeah.
00;23;54;24 – 00;23;56;05
Rod Khleif
Small bag. It’s very lucrative.
00;23;56;06 – 00;23;56;16
Chase Mcleod
Because.
00;23;56;16 – 00;23;57;08
Rod Khleif
He knows.
00;23;57;10 – 00;24;15;06
Chase Mcleod
You can’t really buy good institutional grade product in that category. And if you build it the right way, if you can find a really good site that gives you two things permission to build tall so they can store if they want to install doctors. But also what are you missing on these.
00;24;15;07 – 00;24;15;26
Rod Khleif
Location?
00;24;15;27 – 00;24;17;00
Chase Mcleod
Its location.
00;24;17;00 – 00;24;18;03
Rod Khleif
But it’s also the freeway.
00;24;18;04 – 00;24;18;12
Chase Mcleod
Truck.
00;24;18;12 – 00;24;19;14
Rod Khleif
Parking truck park.
00;24;19;16 – 00;24;19;23
Chase Mcleod
Can you.
00;24;19;23 – 00;24;20;29
Rod Khleif
Do both? Interesting, interesting.
00;24;21;00 – 00;24;35;02
Chase Mcleod
Can you do truck parking on a small bay? If you have both, it’s it’s almost impossible to be a tenant who needs 20,000ft². Two doctors and room for two trailers. You can’t find that. So if you can find that.
00;24;35;03 – 00;24;35;21
Rod Khleif
Or create.
00;24;35;21 – 00;24;55;07
Chase Mcleod
It or create it, the thesis that one of my friends who’s the developer is coming to is. Institutional capital will always overpay for someone who solved the problem that was difficult to solve. And if they can get capital out the door at volume. So it’s not process is if I can build this at institutional level.
00;24;55;11 – 00;25;15;24
Rod Khleif
Or, or build enough of them so that it attracts institutional money. Like I’ve got students doing roll ups right now, which is the same kind of dynamic, just a different business. So your buddy, your best friend is building is building these things. I’m assuming to get some scale to ultimately sell to a to an institutional player, or just for cash flow.
00;25;15;26 – 00;25;37;01
Chase Mcleod
Or have enough of a portfolio that he can put into production for construction. And then if, if what he has prepared to build is big enough, the partner that his his partner that builds excuse me, got his equity partner for the construction would then take him out. Right. At stabilization.
00;25;37;02 – 00;25;37;14
Rod Khleif
Interesting.
00;25;37;14 – 00;25;39;05
Chase Mcleod
Doesn’t have to sell it right there.
00;25;39;05 – 00;25;48;14
Rod Khleif
Just just exit right inside his own team. Correct. Well that’s cool. That’s very cool. So describe why it’s called flex space.
00;25;48;16 – 00;26;09;03
Chase Mcleod
Typically flex or flex industrial. It’s all about ratios of square footage is. So if you look at a 50,000 square foot warehouse that’s meant to be a distribution warehouse. Usually developers don’t build. And frankly speaking, tenants don’t want more than 10% office in a building of that size. We’re really not looking for more than 5000ft² or a 50,000 square foot.
00;26;09;04 – 00;26;11;18
Rod Khleif
You need a bath, couple of bathrooms and some offices.
00;26;11;19 – 00;26;23;11
Chase Mcleod
Correct. Flex is closer to 50% on average. Oh it is. It’s meant to be a higher finish of office in the front. Meant to be a higher finish of maybe drop ceiling showroom and then almost warehouse as a secondary.
00;26;23;14 – 00;26;44;00
Rod Khleif
Interesting. Okay, interesting. But the flex piece relates to the office warehouse flex or the size of the units. Like if you’ve got a 100,000 square foot building, does flex relate to your ability to make one of the units larger than the others, or is it is it more relating to office versus warehouse?
00;26;44;01 – 00;26;51;13
Chase Mcleod
Yeah. I mean, when I think of flex, I think of multiple small units that could be expanded upon or combined.
00;26;51;14 – 00;26;56;11
Rod Khleif
Or combined. Okay. Got it. Okay. All right. So you’re not moving walls. You’re just maybe combining them.
00;26;56;13 – 00;27;16;05
Chase Mcleod
Yeah. Either if you’re expanding to it based on our experience, if you’re expanding to an adjacent or next door unit, you should, in theory if you need it. Either use both the glass fronts as your entrance, or you can tear a couple of walls down, either in the warehouse or in the office, or both. Okay. But flex is meant to be small units.
00;27;16;07 – 00;27;19;01
Chase Mcleod
And they’re also painfully expensive to build.
00;27;19;02 – 00;27;19;23
Rod Khleif
Oh, they are.
00;27;19;27 – 00;27;23;28
Chase Mcleod
Well, warehouses when you’re talking about 100,000ft² with four concrete walls in.
00;27;23;28 – 00;27;24;14
Rod Khleif
A roof.
00;27;24;21 – 00;27;37;18
Chase Mcleod
Right? You have less office finish. Right now, the land might be more expensive. That’s the counterintuitive part of it. Sometime back in 21 and 22, in the Land Empire, we were selling land for development at 80, 90, $100.
00;27;37;18 – 00;27;40;19
Rod Khleif
A year. Describe what the Inland Empire is for those that don’t know what you’re talking about.
00;27;40;19 – 00;27;49;13
Chase Mcleod
So the Inland Empire is what I would call a landing zone for product that needs to be stored. That comes in from the port of LA in Long Beach.
00;27;49;14 – 00;27;52;27
Rod Khleif
And it’s, it’s it’s east of of. Correct. Okay.
00;27;52;28 – 00;27;58;09
Chase Mcleod
It’s about it’s about depending on traffic. It’s about 60 to 120 minutes east of the port of L.A..
00;27;58;10 – 00;28;00;19
Rod Khleif
An hour to two hours east of. Right. Okay.
00;28;00;21 – 00;28;29;11
Chase Mcleod
And it’s Riverside County in San Bernardino County. If I’m saying this correctly, which I hope I am, I believe San Bernardino County is at or around the same size as Rhode Island, but the bulk of where the Inland Empire is in San Bernardino County is the westernmost part. So Riverside and San Bernardino counties for industrial, real estate, industrial warehouses, it is, I mean, what I would call the landing zone of product that comes in from the port.
00;28;29;13 – 00;28;42;27
Chase Mcleod
Now, certain businesses still use Orange County, LA, etc., but developers and investors originally expanded the Inland Empire for cheaper land to build.
00;28;42;28 – 00;28;49;29
Rod Khleif
Okay. Talk about the impact of Chinese capital in your business.
00;28;50;01 – 00;28;51;08
Chase Mcleod
It’s absolutely huge.
00;28;51;11 – 00;28;53;17
Rod Khleif
So what’s happening?
00;28;53;19 – 00;29;13;00
Chase Mcleod
I’ll tell you two stories. One, one of, if not the largest public rights in the world for industrial real estate. I had a meeting with them a few months ago. We were talking about the market. We were talking about clients that we were representing, that were looking for 3 to 4 to 500,000ft² of warehouses in the Inland Empire.
00;29;13;04 – 00;29;27;18
Chase Mcleod
Three months ago, they said if it was not for Chinese and Asian businesses leasing warehouses, that the leasing market would be close to crickets.
00;29;27;19 – 00;29;29;04
Rod Khleif
No kidding right now. Well.
00;29;29;10 – 00;29;59;07
Chase Mcleod
The same is almost occurring in places like Texas. Another story I’ll say is about a year ago, we were working on a deal representing a tenant to help them lease a warehouse 380,000ft². Everything was done. Everything was negotiated on the lease. Terms were agreed to. The final lease was issued. This was someone. It’s very, very typical. So the owner of the company typically lives overseas.
00;29;59;10 – 00;30;27;28
Chase Mcleod
The business needs one, two, maybe three warehouses in Southern California. Sometimes they’re in Texas, North Carolina, Savannah, etc. and on Thursday night, I get a phone call from the head of operations. You know, locally in California, we’re good to go send the lease for DocuSign. Well, why are the deposit okay? Did everything Thursday night. Didn’t hear anything. And I’m in a meeting and I get three back to back phone calls from the local operations guy.
00;30;28;04 – 00;30;49;03
Chase Mcleod
I had to leave the meeting like this is. This is not good. Called him back. He said, I’m so sorry. I said, don’t don’t say that. What happened? He goes, we were all ready to go. We went to go initiate our wire for $6 million to cover the deposit, first month’s rent and some buffer money for the brand new deal, ten year lease.
00;30;49;03 – 00;31;07;11
Chase Mcleod
And the government restricted us to only wire out 3 million. We have no idea where we’re going to be able to get the other 3 million. That was last April, right at the beginning of tariffs and the ripple effect from that. Now fast forward to now. So that deal died.
00;31;07;12 – 00;31;08;29
Rod Khleif
That deal. That deal done that.
00;31;09;00 – 00;31;39;05
Chase Mcleod
Wow. That was a 20 plus million. The value of that lease that we get paid on as a commission. The value of that lease was over $20 million. The evaporated overnight. Now you fast forward to now. And you look at the first five months of leasing for warehouses over 250,000ft² in the land empire, I would venture a guess that at least 35 to 45% of those leases have been done by Asian or overseas.
00;31;39;06 – 00;31;43;19
Rod Khleif
Three pieces. So did did you figure out why they wouldn’t allow the full six.
00;31;43;24 – 00;31;45;10
Chase Mcleod
Government was restricting.
00;31;45;11 – 00;31;46;14
Rod Khleif
Taking these government?
00;31;46;15 – 00;31;50;17
Chase Mcleod
The Chinese government was restricting taking money out. And this was.
00;31;50;19 – 00;31;51;00
Rod Khleif
About that.
00;31;51;01 – 00;31;51;21
Chase Mcleod
And this was right at the.
00;31;51;21 – 00;31;54;09
Rod Khleif
Beginning of the United States. It was China. Oh. Got it.
00;31;54;10 – 00;32;08;14
Chase Mcleod
No, it was the Chinese government restricting it. Wow. So we sold a warehouse last December for a client of ours that 51% of the parent company was owned by the Chinese government. Wow. Took us two and a half years to.
00;32;08;14 – 00;32;10;07
Rod Khleif
Sell it. Wow. Wow wow wow.
00;32;10;08 – 00;32;35;14
Chase Mcleod
So in answer to your question, it’s a it’s a it’s almost a counterintuitive story. The last 14 months, the leasing market went crickets because of the lack of Chinese and Asian businesses that were allowed to lease warehouses. Now, fast forward to today, 35, 45, 50% of all leasing that’s happening in a pocket like Inland Empire are those same Chinese businesses.
00;32;35;20 – 00;32;52;24
Chase Mcleod
But then one step forward is we were talking about the government. We were talking about bills and things like that. There’s now a new bill in Texas that it really was created to protect land acquisitions by foreign entities around.
00;32;52;24 – 00;32;55;26
Rod Khleif
Air force bases. You hear about them buying land around military bases.
00;32;55;27 – 00;32;56;24
Chase Mcleod
Called SB 17.
00;32;56;25 – 00;32;57;05
Rod Khleif
Okay.
00;32;57;06 – 00;33;22;27
Chase Mcleod
So I think the real reason or the I’m not an attorney, right. But the real reason for that bill was to protect things like that. What the byproduct has happened is if. A person owns more than 10%, this is what was explained to me. I’m not an attorney. If someone domiciles in China and they own more than 10% of a company or entity looking to lease a commercial facility.
00;33;23;00 – 00;33;24;27
Rod Khleif
In Texas, build.
00;33;25;00 – 00;33;26;05
Chase Mcleod
Lease, maybe.
00;33;26;05 – 00;33;27;18
Rod Khleif
Purchase. Okay.
00;33;27;20 – 00;33;40;07
Chase Mcleod
It’s restricted on the east side. They only allow 364 days of a lease. You can’t go longer than that. You have to have an entity that is not owned or controlled by a foreign domiciled individual.
00;33;40;08 – 00;33;44;24
Rod Khleif
I don’t understand why the leasing would be a big deal. I can understand buying land around a military base.
00;33;45;02 – 00;33;47;05
Chase Mcleod
I think it got somehow like incorporated.
00;33;47;05 – 00;33;59;18
Rod Khleif
Convoluted into it. Okay, so one of your interview topics you put on your bio was the industrial market just gave tenants the best hand they’ve had in a decade? Yes. What are you talking about with that?
00;33;59;19 – 00;34;03;07
Chase Mcleod
The market is unbelievably inconsistent right now. Okay. And frankly.
00;34;03;09 – 00;34;07;18
Rod Khleif
Because so. Oh got it. So it’s a it’s a leasing. It’s a it’s like a buyer’s market.
00;34;07;20 – 00;34;09;23
Chase Mcleod
It is 100% attendance market.
00;34;09;24 – 00;34;10;10
Rod Khleif
Gotcha.
00;34;10;16 – 00;34;37;07
Chase Mcleod
Mainly because if we’re talking about the large bulk warehouses let’s call Southern California text is a little bit different right now. But in Southern California, anything over 100 and 200,000ft², most of that is institutionally owned. The links, the JPMorgan’s, the clearance, etc.. Right. And a lot of it has been sitting vacant for a long time. Wow. Six months, one year, two years, etc..
00;34;37;08 – 00;35;07;07
Chase Mcleod
Now if you layer on the vacancy component with that term, we talked about tenants and market. There aren’t a ton of tenants in market looking to lease those spaces. So when it was 2022 for a 100,000 square foot warehouse in the Land Empire Fontana, we were seeing deals done at $2 per square foot per month. Triple net, which means property taxes, insurance cams are on.
00;35;07;07 – 00;35;08;15
Rod Khleif
Top of the tenant pays everything.
00;35;08;15 – 00;35;20;22
Chase Mcleod
So if it’s a gross number that was $2.30 per square foot per month for 100,000 square foot unit. Okay. Excuse me. Building. I want to say unit today. It’s almost half.
00;35;20;24 – 00;35;23;04
Rod Khleif
Really? Wow. Wow.
00;35;23;10 – 00;35;47;20
Chase Mcleod
So the most difficult thing about our market right now is this is on the buyer and seller side. This is on the tenant and landlord side for for the Inland Empire. We still don’t really know what these buildings are worth anymore because of inconsistency. Right. A building over here in this part of the market and what’s called San Gabriel Valley, City of Industry, it’s a very, very heavy Asian business market.
00;35;47;22 – 00;36;05;18
Chase Mcleod
We sold a building for $328 a square foot last month. If you go 15 to 20 miles east, which is not that far, there are buildings selling for 190 per square foot. Now on the leasing side.
00;36;05;20 – 00;36;28;24
Chase Mcleod
Landlords have an unbelievably difficult job right now because sometimes there’s good comps and an institutional landlord like you would if you own a 200 unit apartment complex in a great market, Miami, you’re going to cling to the best comp, right? That’s your benchmark. We have a couple of benchmarks. We have a lot of vacancy. So do you want to take the next tenant and give the most concessions and get the deal done.
00;36;28;24 – 00;36;33;10
Chase Mcleod
Or do you think it’s going to turn on a dime? Yeah. That’s the hardest thing about industrial estate in Southern California.
00;36;33;10 – 00;36;56;02
Rod Khleif
Right now. Yeah, we’re having a challenge with a couple of appraisals on this six pack of assisted living facilities. Facilities were mind because the cops are just just aren’t there and they’re screaming deals but the cops aren’t there. Well, before we started recording, you mentioned that industrials becoming very sexy. And you think that they may bring in retail investors, which is what we do.
00;36;56;03 – 00;37;10;09
Rod Khleif
You know, we’ll bring in somebody for 100,000 a pop. And that’s like I’m raising 7.2 million for this six pack at about 100,000 a pop. Those are retail investors, right. Talk about elaborate on that.
00;37;10;12 – 00;37;30;22
Chase Mcleod
To me. You go to a cocktail party and you talk to people about diversification and real estate, right? Nine times out of ten apartments are going to come up, right? Apartments are easily digestible by someone who’s never been an investor before. Because you know what an apartment looks like. You know what it smells like and tastes like, etc. most people can’t say that about industrial.
00;37;30;28 – 00;37;55;04
Chase Mcleod
Most people can’t say that. Now. The flip side is from an investment standpoint, it’s unbelievably difficult to find a good deal, right? And the risk profile is different, right? If you buy a 20 unit complex in a outskirt market in Dallas, you’re pretty safe. Large one bedrooms, baristas, bartenders, etc. you’ve got rental cash flow. You’ve got comps that support it.
00;37;55;04 – 00;38;18;21
Chase Mcleod
You lose three units. Just call my property manager and figure it out. You put 250 grand into a syndication, or a fund that buys a 50,000 square foot building for a great price, right? The basis is awesome. The location is awesome. Those leases get done every 3 to 5 years. We are in an environment right now where there’s probably 1750 on the market for lease right now that are vacant.
00;38;18;25 – 00;38;25;02
Rod Khleif
No kidding. 1750s oh 17 50 square foot facility is what you’re saying.
00;38;25;04 – 00;38;26;08
Chase Mcleod
A 50,000 square foot.
00;38;26;08 – 00;38;27;21
Rod Khleif
Warehouse, 50,000 square foot warehouse.
00;38;27;26 – 00;38;44;24
Chase Mcleod
So a 50,000 square foot warehouse in the industrial real estate world is really small. Gotcha. Relatively speaking. Now, if you were to buy a 50,000 square foot warehouse in a market like the Inland Empire, I would probably say you’d be lucky to buy it for $13 million.
00;38;44;25 – 00;38;47;08
Rod Khleif
Wow. Holy shit. So that’s crazy.
00;38;47;08 – 00;38;59;09
Chase Mcleod
But what’s interesting to me is if you can get over the risk profile, I think the tenant pool, relatively speaking, is just as big as something like apartments.
00;38;59;12 – 00;39;26;09
Rod Khleif
Listen in. Especially if even smaller than that. Even smaller than 50,000 square foot. You know, like a flex. These flex things, you’ve got office warehouse. Every trades company in the world wants one HVAC, electrical, plumbing, drywall, I mean the painters, a carpet, flooring installation. They need some warehouse and they need an office. And so there’s, you know, and then like, I know my some of my students have assets in Savannah Port.
00;39;26;09 – 00;39;27;04
Chase Mcleod
They’re great.
00;39;27;06 – 00;39;47;13
Rod Khleif
Great market. Yeah. Reporting Houston. Yeah yeah yeah yeah. So you know, I think there’s a I think there’s an opportunity in that asset class in some of these smaller industrial flex basis. As long as the demand drivers are there. And that was the big focus of the, you know, the presentation we did last weekend.
00;39;47;15 – 00;39;52;09
Chase Mcleod
So a ton of your background originally was single family investing. Correct.
00;39;52;10 – 00;39;53;24
Rod Khleif
And then multifamily in a big way.
00;39;53;25 – 00;40;13;02
Chase Mcleod
So I got to watch a ton of your shows leading up to our time together. And I this is the best analogy I can give. Would you agree? Single family home to single family home. An owner user that wants to buy it, move in and raise his family is going to pay more than an investor that wants to buy it and lease in cash.
00;40;13;02 – 00;40;13;14
Rod Khleif
Flow it.
00;40;13;16 – 00;40;27;05
Chase Mcleod
For sure. Okay, so that’s the dynamic of what’s different about industrial is I think you have different exit strategies. So if you buy it right, you could at least and hold it. You could sit on it for two years and flip it.
00;40;27;06 – 00;40;28;29
Rod Khleif
Couldn’t you condo condo it.
00;40;29;00 – 00;40;29;19
Chase Mcleod
And you.
00;40;29;19 – 00;40;31;15
Rod Khleif
Can insert each one individually.
00;40;31;19 – 00;40;38;25
Chase Mcleod
It depends on the the makeup of the facility. Condo mapping is possible. Kind of depends on.
00;40;38;25 – 00;40;39;16
Rod Khleif
I’ve seen it done.
00;40;39;21 – 00;41;06;16
Chase Mcleod
Yeah. Yeah, it depends on the makeup. Usually condo wing happens back to your term out flex. Condo map happens when you buy a 50,000 square foot flex building that already has 15 units. But it’s one parcel, right? So you put the map on. So that was very popular in Southern California. The difference is I still think there’s going to be a way of eventually of retail investing in assets like industrial, real estate.
00;41;06;17 – 00;41;07;13
Rod Khleif
Larger industrial.
00;41;07;14 – 00;41;23;03
Chase Mcleod
Larger industrial. Interesting. Now someone’s going to go out and syndicate it, or they’re going to raise it or whatever and be the operator. And that’s that’s difficult because most industrial real estate investors prefer to have one partner. They want to go to one institutional partner to have.
00;41;23;04 – 00;41;30;02
Rod Khleif
Yeah. I think this is your model of the world just because you’ve been at it. But yeah, you can you can teach around that. Oh, you can.
00;41;30;04 – 00;41;31;15
Chase Mcleod
See that’s why I think it’s the future.
00;41;31;16 – 00;41;31;21
Rod Khleif
Yeah.
00;41;31;22 – 00;41;51;14
Chase Mcleod
Okay. Because those institutions are unbelievably difficult to deal with sometimes on small deals. Gotcha. Now, the flip side is if if both of us have access to a 50,000 square foot warehouse in Ontario, California, and we can prove we’re getting it for 20% below market, we don’t think there’s that much we have to invest in to fix it.
00;41;51;15 – 00;42;05;03
Chase Mcleod
We think it’s going to take us eight months or less to lease it. Now, the flip side is the exit strategy on a 50,000 square foot warehouse in Southern California is in five years. An owner user might drastically overpay us to put his business in there.
00;42;05;03 – 00;42;09;25
Rod Khleif
Yeah, yeah. So very viable. I think that’s not just in California. I think that’s it’s all over the country.
00;42;09;26 – 00;42;20;21
Chase Mcleod
All over the country. Yeah, Miami. We actually just did our first industrial lease by the Miami airport. Oh, yeah. For one of our clients. And you’re right. Miami. New Jersey. Savannah.
00;42;20;26 – 00;42;39;06
Rod Khleif
Chicago can’t keep people out of Florida. You can’t keep him out of out of Savannah, Georgia, parts of Georgia, the Carolinas, Texas. I mean, it’s crazy. Well, listen, brother, I really appreciate you coming on to the show. Thank you so much. A ton of value. I my head’s swimming a little bit from all the stuff we were talking about.
00;42;39;06 – 00;42;44;29
Rod Khleif
And, you know, it’s a real pleasure to meet you. And, you know, you’ve done some big things. And I’m sure that’s going to continue.
00;42;45;05 – 00;43;14;18
Chase Mcleod
Would you mind if I ask you a question? Sure. So impressed and blown away by the seminars and the educational platform that you’ve built. Thank you for for your audience. Thank you. What I think is missing, frankly speaking, in my business, is there’s not a very good platform, if any, that’s willing to share insight on how to broker these deals.
00;43;14;19 – 00;43;35;03
Chase Mcleod
That’s number one. And number two, there’s no one that’s really sharing an educational platform on how to invest in it. Yeah, because when you look at apartments, like you and I were talking about, no one, no one who has ever invested in partment needs to be educated on what apartments are, right, what they what they can be. It’s the complete opposite for industrial.
00;43;35;04 – 00;43;37;16
Chase Mcleod
Yeah. And I think there’s a fear.
00;43;37;19 – 00;43;55;12
Rod Khleif
Well, it’s just an ignorance. They just don’t know it. They don’t. They don’t understand it. Well, I’m going to brag for a minute. This. We just discovered this on Wednesday. I now have the largest real estate coaching program. Really? On the planet. Really? Yeah. My students on 300, we’re counting, and we’re at 305,000 units that they own under my tutelage.
00;43;55;12 – 00;44;15;03
Rod Khleif
And we know it’s a lot more than that because nobody, not everybody responds. And yeah, which is more than everybody else that teaches this combined. So on the multifamily side and then we’ve got every asset class represented, including the smaller industrial, like I said, senior housing, self-storage, student housing, mobile home parks, all of it. And it’s really exciting.
00;44;15;03 – 00;44;43;05
Chase Mcleod
But I will give some insight to your students on this because you talked about your students are expanding into flux, right? Small bay in flux. One of them. Yeah. So the number one profile that most investors are seeking when they buy any type of industrial is you’re looking for something that has been legacy owned under managed with lack or inconsistency of pushing rents.
00;44;43;13 – 00;45;04;03
Chase Mcleod
That’s a story as old as time for opponents, right? Sure. I think I told you this. So we have a new apartment listing for sale in Riverside, California. That’s that profile, 1970s build. The the brother and sister that are our clients that were selling it for their father. Bought the land built at 156 units. That’s the profile. Yeah.
00;45;04;07 – 00;45;29;18
Chase Mcleod
Even if your students have never invested in industrial, never been in industrial, etc., if they were going to start through your program and you guys were going to go look for the next round, the number one thing that I would seek out in any market, private ownership, own for at least 20 years. And then I would try to do some level of due diligence, if you can, on the tenants, which you can find on CoStar and stuff like that.
00;45;29;18 – 00;45;36;01
Chase Mcleod
But that demographic doesn’t want to be a landlord anymore, right?
00;45;36;02 – 00;45;36;23
Rod Khleif
No. They’re tired.
00;45;36;24 – 00;45;37;07
Chase Mcleod
Doesn’t want.
00;45;37;07 – 00;45;42;07
Rod Khleif
To be. There’s 10,000 people a day turning 65 in this country. They own some of this property and they.
00;45;42;07 – 00;45;50;15
Chase Mcleod
Want out. And I bet if you actually peel the onion, here’s the next thing. You definitely want them to have inherited it from.
00;45;50;15 – 00;46;08;12
Rod Khleif
Their kids. Don’t. Yeah, the kids don’t listen. Mom and dad did that. I just want the money. Totally. Right. You know. Yeah, that’s happening to in a big way. There’s lots of opportunity right now, guys. You can buy businesses. Like, he was just describing that a lot of opportunities in real estate where that’s happened, where properties have been inherited.
00;46;08;12 – 00;46;16;14
Rod Khleif
And you know, I finally got my kids interested. Good God, after freaking, you know, 48 years doing this. But yeah.
00;46;16;15 – 00;46;45;08
Chase Mcleod
But the profile is the same on on on flex or smoke. Now, now single tenant industrial is a little bit different. But the the let’s just call it what it is. It’s multi-tenant industrial I would really say three four plus the the same strategy that you teach your students on multifamily, whether it’s Sarasota or San Diego. To me, the the opportunities to go out and by flex industrial right now is one.
00;46;45;12 – 00;46;48;10
Chase Mcleod
Institutions don’t want to buy small deals, right. They want to buy portfolio.
00;46;48;12 – 00;46;48;28
Rod Khleif
Same with the.
00;46;49;01 – 00;47;04;28
Chase Mcleod
Complex number one. Number two more often than not they’re under managed. Number three, to create a transaction. Right. There has to be some level of urgency. Right on the other end, on the on the side where it feels like the buyer.
00;47;04;29 – 00;47;13;24
Rod Khleif
And I get people he doesn’t want to sell. What can I do? I’m like, you’re pushing a rope. There’s got to be motivation, right? Right. Totally love it. Well thanks, brothers, very much. A pleasure.
00;47;13;24 – 00;47;18;01
Chase Mcleod
To meet you. Unbelievable. Grateful that you reached out. I’m glad I was already all the way.
00;47;18;02 – 00;47;19;06
Rod Khleif
Yeah. You were here anyway.
00;47;19;07 – 00;47;19;14
Chase Mcleod
On the.
00;47;19;14 – 00;47;25;27
Rod Khleif
Side of the country. Thank God you have to fly from California. I’ve had that happen many times, but no, that’s much easier. Well, it’s a pleasure, brother.
00;47;25;28 – 00;47;26;25
Chase Mcleod
Thank you so much again.
00;47;26;26 – 00;47;27;11
Rod Khleif
You bet.
