Episode 8 | Dustin Mortimer with Mountain West Commercial Real Estate
Transcript
00:00:05 Greg Croft with Resin Architecture
Welcome to Vision Driven with Resin Architecture, the podcast where we dive deep into the world of architecture, development, and construction.
00:00:12 Greg Croft with Resin Architecture
I’m your Host, Greg Croft, and my Co-Host is Jamee Moulton, and we are thrilled to have you join us on this journey of learning, inspiration, and insight.
00:00:19 Micki Schwartz with Rudd & Co
When you talk about real estate, I would always recommend that you go into it with the exit in mind. 00:00:25 David Frew with Bank of Idaho
Advice I'd give somebody that's presenting their case, or pitching their loan to a bank, is just to be really well prepared.
00:00:32 Jamee Moulton with Resin Architecture
Whether you're dreaming of building a space for your business or simply curious about the fascinating world of architecture and development, join us on this exciting adventure as we unlock the secrets to successful projects and empower you to turn your vision into reality.
00:00:51 Greg Croft with Resin Architecture
Today we were with Dustin Mortimer with Mountain West Commercial Real Estate, and we're excited to hear what you have to say to us about commercial real estate. We've got quite a few questions. The first question that we have that I'd like to know is just how did you get interested in commercial real estate?What kind of brought you into that field and how long have you been doing it?
00:01:10 Dustin Mortimer with Mountain West Commercial Real Estate
Absolutely. Yeah. I appreciate the opportunity to be here with you guys. I'm excited. My background or what got me excited about it, change of career. Honestly, I was working for the Department of Finance in the mortgage industry, kind of an auditor. Yeah, it sounds as fun as it was and just needed to change. My family has been in building developing, so basically real estate, for as long as I can remember, since I was a little kid. And so when I made a change, I thought, man, maybe real estate would make some sense.
00:01:41 Dustin Mortimer with Mountain West Commercial Real Estate
I went and took the classes and got licensed, and I was like, man, this is fun. I hadn't quit my other job yet. And I said, hey, I can do this. And then I specifically chose commercial because for better or for worse, I didn't want to deal with (apologies) housewives and emotion. Commercial real estate is much more logical. Businesses are 9 to 5 and so just fit my history better, my degree better. And that's what got me into it, and I've loved every minute since I've been doing it.
00:02:08 Greg Croft with Resin Architecture
Did you ever touch residential or was it just like, you know, I'm just doing commercial? 00:02:11 Dustin Mortimer with Mountain West Commercial Real Estate
I have. I have not. No, I have not sold a single family house. No.
00:02:15 Greg Croft with Resin Architecture
Yeah, interesting.
00:02:16 Dustin Mortimer with Mountain West Commercial Real Estate
I've been doing it - I'm in my fifth year just and like I said, enjoy every minute, every day is a different puzzle. It's a different challenge. Get to meet wonderful people. And so I plan on doing it for a long, long time.
00:02:29 Jamee Moulton with Resin Architecture
We're talking to people that have diverse experience for helping people who are building their first building. Tell us what role a commercial real estate agent plays in that process.
00:02:44 Dustin Mortimer with Mountain West Commercial Real Estate
First business owner getting into building something. Probably any avenue of that is when I can get involved, probably very similar to what Resin does. You know we're educators, we teach people what they don't know or reinforce what they do know and so whether it's hey, I'm thinking about building it.
00:03:06 Dustin Mortimer with Mountain West Commercial Real Estate
If I don't have property, we can get involved at the front end. Hey. Yeah, it sounds like you're going to do this, and you probably need this much land or you need this type of building. We can go all the way from the start to hey, they've purchased the land or they even purchased the building, but they have extra space. A commercial real estate agent can come in and teach them what those assets are and how they can be used.
00:03:30 Greg Croft with Resin Architecture
As you are getting involved with somebody from a commercial standpoint, what kind of research are you doing in the market? So if they are looking for office space what kind of research tools do you have there and how do you stay up to date on that where all the like tools and aspects that you have at your [disposal]?
00:03:53 Dustin Mortimer with Mountain West Commercial Real Estate
I think you're asking how do I do the job that I do, you know? So for example, you. Yeah, you mentioned office space. So it starts with a really in-depth conversation. What are you looking for? What do you need? When do you need it? All those needs & wants that we kind of talked about a second ago.
00:04:10 Dustin Mortimer with Mountain West Commercial Real Estate
But how we do that? The market has shifted over the last 10-20 years, right? It used to be that there was a broker that kind of knew all the properties out there . If you look at residential, they have the MLS right? That's the repository of all the properties. In commercial, especially in a smaller market like we have here in Southeast Idaho, we don't have that specifically set up for commercial. The MLS isn't used as well for the commercial market. And so there's a few different repositories that we use.
00:04:44 Dustin Mortimer with Mountain West Commercial Real Estate
We still use the MLS, but it doesn't capture quite as much, because some companies will use it, some won't. There's ins and outs or nuances with using these repositories, but there are nationwide listing services: Loopnet, Crexi, CoStar. And so we'll research all of those as well as research all of our - I'll use the term competitor right now – but our fellow brokers, our fellow agents. They all have websites and so we do a lot of research into what they have in listings.
00:05:10 Dustin Mortimer with Mountain West Commercial Real Estate
Then we maintain a customer retention program or a customer service database. Hey, we know these clients have had this property. Maybe they have space again or maybe they need space. And so it's just a lot of background understanding of who is in the market and then how to go find what's been placed on the market, if that makes sense. Does that answer kind of the question there?
00:05:39 Jamee Moulton with Resin Architecture
We do a lot of programming when we start projects too, where we're asking a lot of questions. So what types of questions are you asking your clients?
00:05:49 Dustin Mortimer with Mountain West Commercial Real Estate
Again, apparently I'm going to use the term wants & needs regularly today, but just those things. If you've got a certain type of business, let's just say for example a retail business, let's use Starbucks as an example, right? They know pretty much what they need, you know 1,200 to 2,000 feet and they know they're going to need a drive-thru.
00:06:11 Dustin Mortimer with Mountain West Commercial Real Estate
Ever since the pandemic, we know that they're probably going to want to double drive through right? We're going to walk through all the different things that they need in a location, and then we'll walk into some of the wants of the location and then we're going to talk about the timing of the location, how quick they need to get into it, or if they have time to build it from ground up.
00:06:31 Dustin Mortimer with Mountain West Commercial Real Estate
There's just a lot of little nuances on each property and each client that you've got to get that information in your arsenal to go and find the find the right property.
00:06:40 Jamee Moulton with Resin Architecture
For a lot of clients, our clients anyway, this is their very first building that they're building. So when they meet with us, they're doing some of that programming. Do you recommend that they work with a commercial real estate broker at the same time that they're working with an architect to try and figure out their space planning needs?
00:07:03 Dustin Mortimer with Mountain West Commercial Real Estate
Absolutely a client may already have a piece of property. The property may fit certain sizes and scope which is what Resin’s going to be able to indicate. If you want this much, you need this much space. Will it fit with the property you've got or will it not? Right? And that's probably where we come in and can have a better understanding of the zoning use, the types, the size of the building that can fit, or the use type to make sure it works, for example, in that property.
00:07:35 Dustin Mortimer with Mountain West Commercial Real Estate
So yeah, usually the sooner the better, probably similar to what you guys would tell people. The sooner you reach out to an agent the more educated you can be upfront and not make some of those mistakes that you don't want to make.
00:07:47 Greg Croft with Resin Architecture
Yeah, I know that we've run into where people have purchased a piece of land that it's like his doesn't actually work and now you're paying an agent to resell it and that's not something anybody ever wants to deal with so that's an expensive mistake.
00:08:03 Dustin Mortimer with Mountain West Commercial Real Estate
It can be. Yep, it absolutely can be. And it happens more than you want to admit. In all honesty, we've seen people use agents and make the wrong purchase, but for the most part you'll find people that ask the questions, understand what they need, and get through to the right property so you don't have to go through that.
00:08:23 Jamee Moulton with Resin Architecture
What would you say usually creates those scenarios where land doesn't work out? Is it space? Is it zoning? With us, we notice it's parking a lot, that the parking won't fit.
00:08:33 Dustin Mortimer with Mountain West Commercial Real Estate
Green space, parking. The other one is if they buy a piece of property that's for example, not zoned yet or not part of the city, for example, city of Idaho Falls yet - or any of the municipalities.
00:08:47 Dustin Mortimer with Mountain West Commercial Real Estate
They're basically looking at a land use plan and expecting the city or the county to rezone it or to allow it to be a certain use. Sometimes it just doesn't happen right? For example, an old farmer wants to sell 40 acres and then an industrial park wants to come in.
00:09:04 Dustin Mortimer with Mountain West Commercial Real Estate
He wants to buy those 40 acres and build 30 industrial properties buildings that he'll lease out or sell or rent, and it looks like the land use plan should fit that category. And if you buy it, maybe without a contract that allows you to go through that process - which we usually suggest - you could buy it close and then go through the process of rezoning it or annexing it and the even the code may say it's supposed to go to that, but it can happen where it doesn't happen.
00:09:37 Dustin Mortimer with Mountain West Commercial Real Estate
They turned down the annexation or they turned down the rezone and they're stuck with a piece of property that they don't know what they're going to do with, so it can't happen.
00:09:49 Dustin Mortimer with Mountain West Commercial Real Estate
Not as often in our markets, but it still can happen. The turn time on administrative actions in zoning and rezoning and plat approval etcetera, that has changed quite a bit even over the last 24-36 months.
00:10:05 Dustin Mortimer with Mountain West Commercial Real Estate
When I first got into kind of the the normal was about 60-90 days you could put in a permit and probably get that back maybe, maybe 100 days was kind of the longer side of going through the city processes. That's basically doubled if not tripled. Now I tell most of my clients if you're wanting to buy something and get it through, I'd probably plan six months to a year to buy it or during th e purchase process zone it, annex it, and get it ready for what you want to do with it, so timing has changed significantly over the last 36 months.
00:10:39 Greg Croft with Resin Architecture
We've seen that on the building permit side as well, where times have just double or tripled. 00:10:47 Dustin Mortimer with Mountain West Commercial Real Estate
.So yeah, the timelines have changed. 00:10:51 Greg Croft with Resin Architecture Yeah, I guess we're turning into a big city.
00:10:54 Dustin Mortimer with Mountain West Commercial Real Estate
Slowly. Yeah. Or faster than maybe some people want, but we are where we are. 00:11:00 Greg Croft with Resin Architecture
What are some common mistakes that you've seen people make? I I feel like we've talked about some of these, but are there other common mistakes that you see that people make that could have been prevented, that a competent commercial realtor would prevent?
00:11:21 Dustin Mortimer with Mountain West Commercial Real Estate
Some negotiation tactics can get involved and people can make some mistakes. I'm by no means a hostage negotiator by any means. But when we negotiate regularly, we kind of get the hang of what people's psychologies are in those tactics. And that's something that I've seen.
00:11:39 Dustin Mortimer with Mountain West Commercial Real Estate
I mean, even recently I had a client that, hey, I've got a piece of property. I know the owner. I'm going to call him and he did and he got a price that I felt was reasonably fair. But I think if he had brought in a real estate agent sooner It could have been a little more in his favor, right?
00:11:54 Dustin Mortimer with Mountain West Commercial Real Estate
There are tactics to negotiating. We won't need to go probably too deep into some of those, but there's just ways and I don't want to feel like you're playing the system or we're trying to be rude because in my opinion and my philosophy in the way I run business, it's got to be win, win.
00:12:15 Dustin Mortimer with Mountain West Commercial Real Estate
Right? You've got to be fair, honest, in my opinion, win, but there are ways to kind of structure offers or time offers that can benefit either side when you're working with an agent.
00:12:30 Greg Croft with Resin Architecture
Well, an agent probably recognizes those opportunities a little bit more where it's like, you know what, let them continue to use the land for six more months, but go ahead and close because that's allows them to move on with their next phase or something. You know, there's probably a lot of different scenarios depending on the person.
00:12:52 Greg Croft with Resin Architecture
Are there any other ideas that you have in terms of mistakes that you feel like, hey, this could have been prevented, this could have been better?
00:13:04 Dustin Mortimer with Mountain West Commercial Real Estate
That's kind of a tough question. What mistakes do I see? Maybe I'm I blindly look over people's mistakes, right? Rushing is pretty common. Hey, let's just get this done. Let's do it quick. Like, yes, we want to get it done, but we want to think through it. We want to understand. Due diligence is extremely vital in commercial real estate because our deals are usually bigger deals. You know it's not pocket change for most of us.
00:13:21 Greg Croft with Resin Architecture
Don’t skip steps, like trying to skip over the due diligence. 00:13:32 Jamee Moulton with Resin Architecture
Is the due diligence something that you particularly are helping with or is that a title company job? 00:13:37 Dustin Mortimer with Mountain West Commercial Real Estate
We can, yeah. All of the above. Yeah. Due diligence is a broad term for a buyer’s research of the property to make sure that it fits their needs. It can be stipulated. It can be defined very clearly in a contract, or it can be very broad, meaning, for example, a pretty common due diligence period in a lot of the contracts are 60 to 90 days, meaning a buyer has 60 to 90 days to truly determine if this property makes sense. They're under contract. I mean they control the property.
00:14:12 Dustin Mortimer with Mountain West Commercial Real Estate
Now they have 60 to 90 days to go to the city to talk with all of the city planners to say, hey, yeah, the zoning is right. This is my business. Will that fit in there? This is the building size we're going to do. Will that fit in there? It's time to call the utility companies. It's time to go through any of those processes [so] that you feel comfortable enough to buy the property.
00:14:32 Dustin Mortimer with Mountain West Commercial Real Estate
Those can be again blanket where if let's say on a 90-day contract on the 89th day you just decide this isn't going to work for me. You can just walk away. And so due diligence is very important to make sure you're not rushing through and buying something that doesn't work as a business.
00:14:54 Jamee Moulton with Resin Architecture
Is there earnest money like in a home purchase that's put down for that? 00:14:58 Dustin Mortimer with Mountain West Commercial Real Estate Yes, yes, absolutely. Earnest money is still a very common tradition.
00:15:04 Jamee Moulton with Resin Architecture Is it a percentage of the sale?
00:15:07 Dustin Mortimer with Mountain West Commercial Real Estate
A percentage that both parties feel good about, the good and bad or the double-edged sword of commercial real estate is that there's no set standard, right? Everything's negotiable and earnest money, amount, contract price, everything is basically negotiable. I kind of joke with clients and say if you want to buy this piece of land literally you could add your boat to the purchase price of $10,000 cash and a boat. So that's the good and the bad. Regarding earnest money, the other thing that comes to mind is that earnest money for the most part has become almost fully refundable for the most part in those due diligence windows.
00:15:44 Dustin Mortimer with Mountain West Commercial Real Estate
Each seller is a little different, but I haven't seen people lose earnest money for quite a while. Most of those contracts are written where if they decide to walk away for any or almost no reason, that goes back to the buyer. And so earnest money is not probably as valid a determinant of risk (buyer/seller risk) as it once was.
00:16:11 Jamee Moulton with Resin Architecture
Tell us about the state of commercial real estate in this area and any trends that you're seeing for Southeast Idaho.
00:16:18 Dustin Mortimer with Mountain West Commercial Real Estate
You bet. You bet. Southeast Idaho is a great market. If we look at national trends and then we look at Southeast Idaho, we are traditionally and historically in a better position. We're buoyed a little bit and a lot of that is based on the strength of our employers and the market itself.
00:16:43 Dustin Mortimer with Mountain West Commercial Real Estate
So for example, the INL [Idaho National Labs] is a very consistent employer that brings in high paying jobs that kind of keep our area going.
00:16:52 Dustin Mortimer with Mountain West Commercial Real Estate
A lot of people don't know, but the metro (or city of Idaho Falls, right) and Ammon are right around 100,000 if you go city of. Metro or the area is about 150,000-175,000. But if you go to how many people Idaho Falls supports or feeds, we're actually almost 300,000. And so that's why Idaho Falls is a really good spot to be in Southeast Idaho when we're talking about healthy markets.
00:17:21 Dustin Mortimer with Mountain West Commercial Real Estate
And so a lot of people don't realize that we feed (or we support) people from Jackson Hole to Montana to Salmon and then south to Blackfoot, right. So our south border is near, but everything going north, east and central Idaho, Idaho Falls feeds that. And so it keeps us stronger than some of our neighboring cities and or markets.
00:17:43 Dustin Mortimer with Mountain West Commercial Real Estate
In general, we're still in a seller's market. Vacancy is very tight, meaning very few open buildings for sale or very few open buildings for lease and that can be broken down into a few different categories. We break it down into industrial properties, office properties, retail properties and then land. Those are our four markets and then all of them were historically very tight.
00:18:09 Dustin Mortimer with Mountain West Commercial Real Estate
I think the last time I noticed industrial was at 4 or 5% vacancy, right, very, very narrow. So basically anything that's on the market for the most part is what we call functionally obsolete.
00:18:21 Dustin Mortimer with Mountain West Commercial Real Estate
So if you come to market with a new industrial building or an older industrial building, but it's functional, you're still going to get good rates, sell it for a higher price than we've probably seen. The market still appreciate it in most places. Office is the one that struggles a little bit right now. I think our vacancy rate there, depending on if it's single or multi tenant is if I recall right around 10%. So still pretty common to sellers right on that equilibrium market.
00:18:52 Dustin Mortimer with Mountain West Commercial Real Estate
Office is struggling a little bit, and that's still a response from the pandemic. Still, we've transitioned to a lot of office users, will work from home. And so we're still shaking that out. Retail again, I think we're at 3 or 4%. Basically if you drive around town, you see a retail space that's on a high traffic road it's full, right? Very few [available]. I've got, I think three clients right now that would love something with a drive through. Not available. Nobody's building it because of build costs.
00:19:22 Dustin Mortimer with Mountain West Commercial Real Estate And then everything that's out there is full.
00:19:26 Jamee Moulton with Resin Architecture
As far as the office space and the vacancy there is that 10% mark when a client should consider building, what is that sweet spot for [when] the market is too tight and you're not going to be able to rent a space? Where is the cost is going to be too high, so you might as well build?
00:19:45 Dustin Mortimer with Mountain West Commercial Real Estate
Yeah, that's a great question. You know, I don't think I've ever heard like, hey, there's a percentage or there's a use type, a lot of it's just market research.
00:19:54 Dustin Mortimer with Mountain West Commercial Real Estate
For example, developer builder can go out and say I can go buy a piece of property for this much. Maybe it's on the market or maybe it's a friend of a friend who owns it and he knows he can buy it for this amount.
00:20:07 Dustin Mortimer with Mountain West Commercial Real Estate
So he'll do the backwards math. I know I can build it for this much. I now I can buy the land for this much and I know that their rents are going for about this much right now and then he can determine for the most part if there's a profit margin in there that makes sense for him is to take on that risk, that capital outlay. And so that's usually how most people go into it.
00:20:29 Dustin Mortimer with Mountain West Commercial Real Estate
I see a need and I'm going to go build it. The other thing is comfort level. A lot of developers will get into something that they're used to. So for example, maybe they - I'll use my dad as an example. He was a residential builder building homes when he started his Comfort Construction.
00:20:48 Dustin Mortimer with Mountain West Commercial Real Estate
And so he understood the home building process. And so then some of his first developments went out and he built a subdivision right, so he knew he could do the one thing so he felt comfortable and then developed subdivisions. Similarly. Other people have owned office buildings, maybe for their own business or for someone else.
00:21:07 Dustin Mortimer with Mountain West Commercial Real Estate
And they’re like, oh, I see a need that's out there. Because hey, I called Dustin and I can't find what I would want as a business owner. And so they go build it and it works for somebody else. So I don't know if there's a specific percentage of vacancy. Usually I see, hey, there's a need out there or my business won't fit anywhere. So I need to go build it. So if I know I need it I know somebody else needs it. And so they'll go take that risk when they're determining on developing a property or building a new building.
00:21:34 Greg Croft with Resin Architecture
That's kind of an interesting point to know. It's just knowing the vacancy rate. A lot of pro formas out there, it's like you would plug that in and then discount yourself that much assuming that you're vacant 10% of the year because that's what the current rate is. Over the long term that probably averages out to be OK. If the numbers pencil out at 10%, it probably pencils out long term.
00:22:01 Dustin Mortimer with Mountain West Commercial Real Estate
Right. Yeah. The industry standard is kind of penciling out a pro forma at about 5%, right? They say 5% is kind of our normal. What [percentage] we expect our property to be to be empty in an annual pro forma.
00:22:15 Dustin Mortimer with Mountain West Commercial Real Estate
I've had some clients that because of how tight the market is here in southeast Idaho, how well it's been doing, have dropped that right. When you go to sell a property the standard may be 5% but I can show over the last 5-10 years I've been at 2%. Right? You can show 2% and then it's again a little bit of the numbers game, the accounting game.
00:22:36 Dustin Mortimer with Mountain West Commercial Real Estate
But then they can show that and prove that and then maybe that determines that they sell it, or they buy it. Or they build something.
00:22:42 Greg Croft with Resin Architecture
How do you personally stay up on the latest market trends? Like how do you are you guys tracking these numbers solo as far as Mountain West or is there information that's out there generally available?
00:22:59 Dustin Mortimer with Mountain West Commercial Real Estate
In general, there's quite a bit of information out there again, I think I talked earlier about national trends, right? So I keep an eye on national trends, see what people are doing in what they call primary markets. You know, the big markets, New York, LA, you know, those big markets that have nothing really to do with us, but there's a trend there. And so we'll follow that. You know, headlines the big, you know, New York Times, Wall Street, those all have articles that will come out you keep an eye on them, right? Kind of see what's going on again. I take those with a grain of salt regarding Idaho Falls because we're a different market. We're definitely a small time market compared to those guys.
00:23:38 Dustin Mortimer with Mountain West Commercial Real Estate
But that's one way I'll do it. I'll look at podcasts. I haven't been really good about finding something commercial related podcast, but there's residential real estate podcasts that you can pick and choose and kind of take some of the wins that translate over into commercial real estate. I try and find books pretty regularly. The last one I bought was the Encyclopedia of Commercial Real Estate.
00:24:00 Dustin Mortimer with Mountain West Commercial Real Estate
It sounds real fun, but every now and then you just flip a page you'll learn something new, right? Just anything like that. How else? Obviously, as a real estate agent you have renew your license. The state of Idaho requires X amount of continuing education every year. And those are usually pretty good. State of Idaho doesn't educate too specifically commercial. It's more directed towards the residential real estate. You know, kind of a numbers game; there's I think last I heard there were 600 plus residential real estate agents in southeast Idaho and I think full time commercial there's 12.
00:24:35 Dustin Mortimer with Mountain West Commercial Real Estate
So you don't necessarily learn a lot about commercial real estate, but you can pick what they're winning and losing in residential and use those in commercial, make sure you don't make some of those same mistakes. The other thing is associations. There're national associations that you can be a part of and they have continuing education classes. Things like that.
00:24:57 Jamee Moulton with Resin Architecture
You mentioned that one of the changes that you've noticed, one of the trends that you've noticed, is that a lot more businesses are working from home. What are some of the other changes that you've seen in the market over the five years that you've been in the field?
00:25:17 Dustin Mortimer with Mountain West Commercial Real Estate
What have we seen over the last five years? Trending or obviously everyone's aware of the financial or the lending market or environment we've come into over the last what year and a half now. It's been a little over a year or so since the markets turned in regards to lending rates.
00:25:36 Dustin Mortimer with Mountain West Commercial Real Estate
What other trends? It's been a sellers' market for the most part as I've been in it. I can't say it's turning because it's by the numbers we're still in a sellers' market, right? There's only so many properties available per capita. And so we're still in a sellers' market, but it has changed because it's been a sellers' market with hesitancy.
00:26:00 Dustin Mortimer with Mountain West Commercial Real Estate
People don't know exactly what to expect. Are the rates going to go up next quarter? Should I buy now or are they going to go up and stop and then come back down in two quarters, right. So we're in that flux period of do I make a move right now? Do I go by 40 acres and develop for industrial space? I know that we have a need for industrial space.
00:26:20 Dustin Mortimer with Mountain West Commercial Real Estate
But do I make that investment at this interest rate or will it come down? So we've got a lot of hesitancy in the market right now as we move through this. Where is the true reality of nationwide and Southeast Idaho market?
00:26:37 Dustin Mortimer with Mountain West Commercial Real Estate
In regards to other trends, what are we seeing? We're on the map. Southeast Idaho's on the map. Everyone's well aware of who we are. I've got a client right now that they just decided to leave Reno, NV. They're out of there, right. They moved to Swan Valley, ID and are going open a business in Idaho Falls. And so I expect that trend to continue. I expect Idaho Falls and Southeast Idaho to continue to be a place where we get a lot of in migration, people continuing to get away from the big cities to get away from what that life is to a little slower, a little easier.
00:27:13 Dustin Mortimer with Mountain West Commercial Real Estate
Maybe easier is not the right word, but just a slower. I'll use the term rural lifestyle, so I expect that to continue and I expect that to continue to keep pressure on the market, meaning we have, I use the term maybe a little bit in jest, but California funny money, we still have some of that coming. That puts pressure on the market, keeping prices high because when they can sell something down there versus what they can buy here is a pretty big discrepancy.
00:27:44 Dustin Mortimer with Mountain West Commercial Real Estate
I continue to see that. I'd like to say for the foreseeable, but that's that could be a long ways out. You can't really see that far, but for at least the next twelve, 24, 36 months, I expect to continue to see people move here.
00:27:56 Jamee Moulton with Resin Architecture
You talked about how this area is lacking some retail space, how those occupancy rates - there's not much space available. Do we have trouble finding space and land to build new projects? Are the sites available?
00:28:17 Dustin Mortimer with Mountain West Commercial Real Estate
It's probably a mix, so we are a unique town and I'll just specifically say Idaho Falls in that we built our retail row away from our highway, away from our Interstate. If you go to most cities across the country, their retail row is usually near the Interstate or near the highway for transportation, for logistics, et cetera.
00:28:42 Dustin Mortimer with Mountain West Commercial Real Estate
We built ours by the mall, 4 miles away from the Interstate, and doubled down, if you will, on that and I won't call the mistake. It's just what it is. And so that corridor has become pretty congested - we don't have a ton of land left there. And so land is a little bit sparse in that specific space.
00:29:08 Dustin Mortimer with Mountain West Commercial Real Estate
National retailers have a good and bad habit of only being near other national retailers. And so it'll take some risk on a developer or some risk on a national retailer to say I'll go to another space that's not quite the perfect spot, the Class A spot that's right by all the other ones and make sure I can do the business. You know there's some great projects coming along the next one that's big that Mountain West is working on is Riviera.
00:29:35 Dustin Mortimer with Mountain West Commercial Real Estate
It's right next to Costco. You should see a grocery there. You should see a big entertainment center there - not Dave and Buster's, but a type, something like that, banks, eateries that will feed, specifically feed and entertain that northeast side of town that's underserved. And so I'm pretty excited about that.
00:30:01 Dustin Mortimer with Mountain West Commercial Real Estate
It's still on that Hitt Road corridor, which is kind of interesting that's still there, but they realized, hey, there's a need in the northeast side of town. That fits that normal national metric. There needs to be a grocery store about every three miles. That's kind of the normal drivetime convenience time that grocery providers have realized. If you go across the country, you can map out about every three miles you'll see a grocery store and this is that next one that will be up there.
00:30:27 Dustin Mortimer with Mountain West Commercial Real Estate
That's some risk on their part. They went and purchased, the developer went and purchased I want to say 60 acres, and I think about 30 of that will be a retail grocery anchor center. And then there's some multifamily and then there's some offices and stuff in there. So cool side, I'm excited for that to come to town in the next year or two. It'll take a little while to build all that out.
00:30:51 Greg Croft with Resin Architecture
As a commercial realtor are you guys actually out there I guess having these conversations with people that you're trying to pull in saying, hey, I've got this project available. This is what we're targeting. You're the perfect grocery store or you're the perfect...
00:31:07 Dustin Mortimer with Mountain West Commercial Real Estate
Exactly. Yep. Absolutely. Yeah. And that's the good and the bad, right? That's the fun and the hard part is educating. Idaho Falls if you look at the city it's 70,000-72,000. Where we at? I can't remember the last time.
00:31:22 Greg Croft with Resin Architecture I don't know either. That's about right.
00:31:25 Dustin Mortimer with Mountain West Commercial Real Estate
If you look at a national metric, that's nothing right? For example, for Trader Joe's to come to town, they have to have like 150,000 people within like a mile and a half like never going to happen here, right? But we get to do is try and tell the story. Yes, you're right. Our per mile, our ring of demographics doesn't meet your national standard, but hey this is the why you should be here and this is a little hearsay on my part, but I've heard our Costco is one of the if not the best performing Costco in the country.
00:31:53 Dustin Mortimer with Mountain West Commercial Real Estate
I've heard that and I wouldn't be surprised because Costco feeds Jackson, right? We all super bulk. They'll come to town, go to Costco and then go back to Jackson or they'll go to Driggs. They're heading back out.
00:32:09 Dustin Mortimer with Mountain West Commercial Real Estate
There was another performing store that they considered to be the best. Was it Chick-fil-A? It was one of them that that was considered or is the best in the country and so like right in our little market a lot of things can really work if you look past those numbers, those initial numbers, and so that's absolutely what we do is say, hey, developer or national retailer, this is why you should be here.
00:32:33 Jamee Moulton with Resin Architecture
Commercial brokers usually represent either a seller or a buyer. Because I know that in the residential market sometimes they can specialize. Is that is it that way in commercial or do you do a little of both?
00:32:44 Dustin Mortimer with Mountain West Commercial Real Estate
It's the same. Yeah. It's the same. So the state of Idaho has a requirement that you have to let the customer or the client choose how they want to be represented.
00:32:57 Dustin Mortimer with Mountain West Commercial Real Estate
For the most part, most clients are OK with dual, meaning you can represent both sides of the deal, but there's some and I've got one right now that [insists] you will represent me as the seller and me as the seller only. So it's an education piece and there's good and bad of it.
00:33:13 Dustin Mortimer with Mountain West Commercial Real Estate
Now, there's certain duties you have to do as an agent that if you're representing both, you know for example, you cannot give them specific number advice. Let's say it listed at $1,000,000 and you represent both. You cannot tell the buyer any number advice, right? Because you'd be going against your other client and so very similar residential. You just have to really navigate that and be very sensitive to both parties.
00:33:38 Jamee Moulton with Resin Architecture
But it sounds like you do represent both sellers and buyers in different transactions that you're not specialized to only represent sellers or only represent buyers.
00:33:46 Dustin Mortimer with Mountain West Commercial Real Estate
Correct. Yeah, correct. Yeah, our market’s still small enough that I'd love to specialize on a few things, but it's still small enough that I wouldn't go hungry, I'd say, but not as much work as you'd want. And so, yeah, listing agent, buyers rep, tenant rep, landlord rep. Those are the four kind of categories and I specifically or most agents will do all of the above.
00:34:12 Dustin Mortimer with Mountain West Commercial Real Estate
You get into the bigger markets, Salt Lake, Boise, you'll have some agents that will just be listing agent or you'll have some brokerage that's split up their agents that maybe a seasoned agent is a listing agent and the newer agents are all just buyer rep agents. You’ve got to go cut your teeth learning how to represent this before you do this. Each brokerage is a little different. The I'm set up is that I do it all.
00:34:36 Greg Croft with Resin Architecture
What do you see as the future of commercial real estate and how do you see that evolving over the in the coming years?
00:34:44 Dustin Mortimer with Mountain West Commercial Real Estate That's a good question.
00:34:45 Greg Croft with Resin Architecture
You think it's going to stay the same? Is there more technology that's going to shift things? 00:34:48 Dustin Mortimer with Mountain West Commercial Real Estate
I think that the first thing that came to mind was technology/digital. Yeah, a lot of things like I've done deals where I've never met clients. Right. You know, you wouldn't think that something is important as real estate or these sizes and types of transactions you would probably meet and shake hands. But I've done deals where you just haven't.
00:35:08 Dustin Mortimer with Mountain West Commercial Real Estate
And so I would see it to continue to go that way. So for example, DocuSign, you don't have to meet to sign documents anymore. So I think that will get easier and easier to do things from afar. In regards to other things that will change.
00:35:27 Dustin Mortimer with Mountain West Commercial Real Estate
I think we'll see less little guys playing. You know, I think you see this in a lot of industries. You know the eyes that are on Idaho Falls are bigger than the guys that were developing before. You know we're seeing a lot of, I call it I-15 creep, right? We're getting developers and builders creeping up from Salt Lake City.
00:35:47 Dustin Mortimer with Mountain West Commercial Real Estate
And so I think that will continue to be the case. Where before it was, you know, some local developers that knew that they could do this with little competition, and now there's more competition. I will expect similar to continued immigration in residential stats and demographics we will continue to see that in in our commercial developments. There are more I'll say outside developers coming to town.
00:36:14 Jamee Moulton with Resin Architecture
So that being the case, has the market already pushed out the smaller developers, the first-time developers, or is that still something that will work here?
00:36:21 Dustin Mortimer with Mountain West Commercial Real Estate No, no, they're still there. Yeah, they're still there.
00:36:23 Jamee Moulton with Resin Architecture
That’s good.
00:36:32 Dustin Mortimer with Mountain West Commercial Real Estate
The advantage of being a local is, you know, the people. You know oh, and I'll say this a little bit in jest, you know, Farmer Joe down the road. I know he's 62 and I know that he's probably ready to sell and I know he doesn't have kids. If you're a local, you can usually say, hey, I know that this and you could go make a deal and transact and risk and then develop. It can happen for sure.
00:36:53 Dustin Mortimer with Mountain West Commercial Real Estate
But we're just seeing bigger numbers, bigger people, bigger players coming to town, so they will fight more for the on market stuff than the off market transactions. So there's always an opportunity for the little guy. You just might have to punch above your weight Class A little bit.
00:37:10 Greg Croft with Resin Architecture
Have you? I guess as those bigger developers come in, it seems like one of the things that we'll start to see is as we go down in the I-15 corridor, the further south we get it seems like as soon as you hit into that bigger - probably starting in Ogden, anything that's going up just seems like they're spending a lot more money on it to make it look the way that they did.
00:37:38 Greg Croft with Resin Architecture
I don't know, I mean, maybe there's a good ROI on that. That's probably a good question. Is that something you've seen? As these higher quality or higher design type projects come in, do those also yield a higher return for the developer, the owner of those properties? Or is that? That’s kind of an off the cuff question. Sorry.
00:38:04 Dustin Mortimer with Mountain West Commercial Real Estate
There's a couple avenues that I kind of think of. So I immediately thought when you think about I-15 creep, if you will, I think of the office buildings, right, the high-rise office buildings that that they're we're seeing all the way up and down the Utah Valley. Could we support something like that here?
00:38:23 Dustin Mortimer with Mountain West Commercial Real Estate
It'd be tough. It'd be tough right now. So for example, the Knowles Ball Ventures big building. It's still not completely full. It’s very close, but with the pandemic and with the change in costs and rates, it's taking longer to fill than they expected.
00:38:39 Dustin Mortimer with Mountain West Commercial Real Estate
So would we support or would a developer try and do something else like that here? Probably not right now. Build costs are going to prohibit probably. Because we know that you've got X window for lease rate, and I don't think the build cost on that would get there, or at least in a comfortable level right now. I think our build cost needs to level a little bit.
00:39:01 Dustin Mortimer with Mountain West Commercial Real Estate
And I say level, meaning either level completely so that we know exactly what we're working with rather than continue to appreciate or come down. And that's part of the hesitancy in the market right now is we don't know exactly where build prices are. Labor rates are continuing to go up. And so until that really levels or we know where that can be for an extended period, 6 month to a year that might be tough, but then I think the second avenue is residential apartments for example. I think they're building higher-end and they're knowing they can get a little bit of a premium because we don't have that here. We don't have really high-end apartments. We don't have some of those amenities that you see consistently in other markets.
00:39:46 Dustin Mortimer with Mountain West Commercial Real Estate
And so I think they know that they can get a little bit better rent and so they're building to a little bit higher class.
00:39:51 Greg Croft with Resin Architecture
Based on your experience, what is the one thing that you would recommend to somebody that is a business owner who is looking to buy a piece of land?
00:40:08 Dustin Mortimer with Mountain West Commercial Real Estate
Completely biased answer, but call me right? No, but again biased answer get a hold of the professionals, right? Whether it's commercial real estate, whether it's architecture, whether it's engineering, you really should get the best advice you can get when you're going to get into these kind of projects. Just save yourself the headache, right? Make those calls first.
00:40:32 Jamee Moulton with Resin Architecture
Is it similar to residential also that the buyer is not going to pay for your services? 00:40:38 Dustin Mortimer with Mountain West Commercial Real Estate
Correct. Yep, very standard, very similar to a residential. 00:40:42 Jamee Moulton with Resin Architecture
So it only makes sense then to have an expert on your side.
00:40:45 Dustin Mortimer with Mountain West Commercial Real Estate
Yeah. Yep, Yep. Absolutely. So I have not witnessed that yet where a buyer has to pay a buyer agent fee, but so for example in our listing agreement, there is the case that if they move forward on a project that the seller chooses not to pay for some whatever reason, but they still choose to move forward. We would ask the buyer to pay. But I don't see that. I haven't seen that yet. Knock on wood, where's the where's the [wood]? So yeah buyers' agents, tenant reps, the landlord or the seller cover that fee, right? I mean, it's always the nuance of who's really paying for it. Is the buyer paying for it with their funds or is the seller paying for it out of the...?
00:41:24 Jamee Moulton with Resin Architecture
Thank you so much for your time. We really appreciate you helping us to understand this better. 00:41:31 Dustin Mortimer with Mountain West Commercial Real Estate
Absolutely. Hopefully you learn something. 00:41:34 Greg Croft with Resin Architecture Thank you, Dustin.
00:41:34 Dustin Mortimer with Mountain West Commercial Real Estate Yeah, you bet. Thanks guys.
00:41:36 Greg Croft with Resin Architecture
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00:41:49 Jamee Moulton with Resin Architecture
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