Can Real Estate Really Predict the Economy? Insights from Property Expert Barry Williams

Can Real Estate Really Predict the Economy? Insights from Property Expert Barry Williams

Kelly Kennedy: Welcome to episode 184 of the business development podcast. And today it is my absolute pleasure to bring you Barry Williams. Barry is an assistant professor with Grant McEwen University. And today we are chatting all about real estate and how real estate can be an excellent economic indicator. Stick with us.

You are not going to want to miss today's episode.

Intro: The Great Mark Cuban once said business happens over years and years. Value is measured in the total upside of a business relationship, not by how much you squeezed out in any one deal. And we couldn't agree more. This is the business development podcast based in Edmonton, Alberta, Canada, and broadcasting to the world.

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Kelly Kennedy.

Kelly Kennedy: Hello, welcome to episode 184 of the Business Development Podcast. Today we're bringing you Barry Williams. Barry is a seasoned property management professional with over 25 years of diverse experience in both residential and commercial real estate. Currently serving as an assistant professor at Grant McEwen University in the School of Business.

He brings a wealth of practical knowledge to his role. Barry has been a full time faculty member since March of 2023, after spending several years as a seasonal instructor. His teaching portfolio includes courses such as Introduction to Property Management, where he combines his extensive industry experience with academic insights.

Barry's previous role includes managing office towers for Epic Investment Services, overseeing office, research, and lab facilities for BGIS, And serving as a senior property manager for Ayer and Oxford Inc. His tenure at Bentall Kennedy saw him managing 2 million square feet of office, laboratory, and research space, further solidifying his expertise in property management.

Barry's journey began with Boardwalk REIT, where he honed his skills in residential property management. Known for his skills in negotiation, budgeting, site management, and a unique knack for delivering bad dad jokes, Barry's approach to education is both engaging and comprehensive. His academic background, featuring a Master of Science in Bionucleonics from the University of Alberta, adds a unique dimension to his teaching.

Barry's commitment to excellence and a passion for real estate development are evident in every aspect of his work. With a career marked by leadership and innovation, Barry is not just teaching the next generation of property managers. He's inspiring them to redefine the industry. Barry, it's an honor to have you join us today.

Barry Williams: Well, it's an honor to be on your podcast. You're really good at doing introductions.

Kelly Kennedy: Well, I, everybody loves a good introduction and we all deserve one.

Barry Williams: It surprised me when we talked earlier that you said you didn't really have anybody from the property management field or, or. Or actually professors either because if you think about it, and this is what I talk about with my students in the introductory course is everybody, if you look around wherever you are, like, are you in your home right now?

Or. I am. Yes. So if you own your home, then you're the property manager of your home too, right? Yes. Because you have to take care of everything, pay the bills, that kind of thing. But everybody has to have a place to live. As far as residential yeah, you either own your own house or if you live in an apartment building, then somebody has to run that.

And it has to be managed. If you just let it go it wouldn't be long before it'd be falling apart. And then there's also, or you could live in condos. There'd be a condo board and they usually would hire a property management company to take care of the condominiums but it's at the discretion of the board.

And then if you think about it, well, where do you work? If you're working in an office building or downtown, or even if it's in the suburbs, those buildings have to be run by somebody. So that's another area of commercial property management. And then I know a lot of people are doing online shopping now, but people still go out to stores to buy things West Edmonton Mall or so going to retail spaces.

So that's another area of property management. So those, those buildings, they need to be taken care of and somebody's got to run them. The when it's 40 below outside and you come in to say a shopping center, you expect it to be nice and warm in there. And not 40 below in there, too.

Kelly Kennedy: Yes, absolutely. And you know, that was why I really wanted to spend some time chatting with you today, because actually what really intrigued me, we connected on LinkedIn, and I know I'd kind of just message you and we started chatting and I just kind of said, you know what, like, we actually haven't had a university professor come on our show yet, especially not one from a faculty of business.

And so that would be a really unique A unique conversation and then I kind of mentioned once we started chatting and you told me your property management background was like, holy cow, like Business owners all over are buying property and they may or may not even know what they're getting themselves into.

And we might be able to give them some tips today on kind of how to better handle that. And then we got into property and real estate as an economic indicator, which I was like, Whoa, okay, now, now we really have to chat because Any type of indication that we can have as a business is going to give us an edge.

It's going to give us an opportunity to make choices, maybe ahead of a point where we don't have options anymore. And so I feel like there's a lot I want to chat about with you today. And this is really fun, and I'm really looking forward to it. But before we do, Take us back to the beginning. How did you end up on your path?

Barry Williams: Well actually I started off in residential with a boardwalk and while working there, I got my CPM that's a certified property management designation which I'll get into a little later as far as What it's worth for you and, and why, why someone would want it. And then then I switched over to most of my commercial career has been with Bentall.

They're a commercial property management company one of the largest in the country. And when I started working there, they were Bentall. And then then they bought out a company that was mainly based in the States called Kennedy. That had some residential Properties to it. And then, then they teamed up again with a European company, Green Oak.

So now they're Bentall Green Oak. So I had to keep changing my nomenclature on my emails. So I managed well, I was a property manager with them and then a general manager. And the main contract I had when I was with them was the Alberta infrastructure contract that we had with them. So I was managing properties Alberta infrastructure properties here in Edmonton.

Quite a diverse selection of them too there's some office component to it, but also a laboratory, like, I don't know if you're familiar with Neal Crawford Center.

Kelly Kennedy: No, I'm not.

Barry Williams: Yeah, so they, there's seven buildings there, but one of them is the Alberta Infrastructure Building, which is all the offices for Alberta Infrastructure that, where they run the province from.

And then JGO which has to do with agriculture, and then OS Lawnman Building, which has all the provincial, has provincial labs, so they, they, they do testing there things like if you're they'll you've heard about some diseases going around to different like a muscle wasting disease in deer, things like that.

Sure, sure. They do the autopsies in, in, in there to monitor what's going on as far as disease being spread in an agricultural sense, but also in the wild too. So that, that was my main experience. Now I've also been on the real estate Institute of Canada chapter board here in Edmonton off and on since 2003, I believe.

So it's been a long time. And doing that, when my second last term as president Grant McEwen was looking to start up a property management program. They had funding from a company called Widener. Quite a generous donation. So the the Dean at that time, a lady by the name of Dr.

Dr. Elsie Alford, she she actually got a hold of a friend of mine. He's president of Midwest. And she asked him, who do you think would be good to, to maybe give a presentation to us? So he suggested myself. So I gave a presentation to a group of people that were going to be involved in setting up the property management.

And I guess it went well because they offered me a position to teach Sessial. So I started teaching Sessial in 2016. And when I started it, I thought, you know if I was a student taking this course where does it get me? Like, is it just some credits, some easy credits, maybe hard credits? I, I think I've been known to be fairly easy though.

And I thought it's got to get you somewhere. So then gradually we developed more courses and I worked under a chair by the name of Mike Annette and with another professor, Chris Hancock, and we ended up developing five property management courses, and that's enough to get a minor in your bachelor's degree, but at the same time, I was still thinking, okay, what, what good does that do you?

Where does it get you? So being that I've been involved with Real Estate Institute of Canada for years I tried to marry the two at the Grant McEwen University and, and gradually it took about seven years to reach an agreement. And I'm happy to say just in the last month, we've signed an agreement with between Grant McEwen and REIC to give the students that the property management courses I'm teaching to give them credit for those courses towards some of the courses needed to get your certified property manager certification.

So that'll save my students a lot of money in the long run, because if you're paying for all the courses. And, and getting your experience for the CPM, I think it run total, it would run around twelve or fourteen thousand dollars, somewhere in there so that hopefully will save them some money. They've already paid for the courses at Grant MacEwan.

No kidding. No kidding. Wow.

Kelly Kennedy: You know, you've spent an incredibly long time in property management, and one of the things that I kind of wanted to chat with you about. Because, you know, we may have a lot of entrepreneurs listening who are like, yeah, property management, like, what does that even mean? So can we maybe just explain, like, obviously you can go out and you can buy a building, but that's really just the beginning.

Barry Williams: Yeah. Owning a building and running it are two different things. In fact, usually, usually the people that own the buildings especially really big expensive ones, they, they might have onsite staff to run it, but they usually hire a property management company to do it. Just like the infrastructure buildings that we were running, they were ones that the Alberta government used to run themselves, but then they contracted it out to, well, at the time it was Bentall.

Yeah, if you think about how to run a building, There's a lot of things involved in that. First of all, there's all of your physical systems, like your heating, your chillers. You have to make sure all of those things are maintained and, and run properly. Then you have to, so as a property manager, you're going to have staff that are going to be doing it.

So you have to be able to manage people. So there's a human resources component to it too. And believe me, there are times when I would spend the majority of my time dealing with people and not the building. Yeah. And then of course you have to have some accounting skills because you'd be doing reports to.

Like say you have someone that owns the building and they want to know what's going on. So once a month, you'd be giving them a report of revenues, expenses what your net operating income is. So all of the financials, so you'd have to do that. Normally you do it once a month. And then at the end of the year, you would do a year end statement and, and actually that depending how, how big your operation is, usually it's audited.

So it would be audited by a third party, you know, unless it's just your, your own house.

Kelly Kennedy: Well, that's still audited by a third party. It's just called your wife.

Barry Williams: And monitored closely.

So, yeah, you have to have you have to have some knowledge of how buildings run you you need to, like I said, you have to have some HR skills and and you have to have financial skills and you have to be able to communicate well. I also teach some, just some management courses, not, not just property management.

And in that course, I try to emphasize, I make them do a group projects and do presentations because as a manager, you're going to have to be able to get up and talk in front of people to run meetings, to chair meetings, to learn how to move them along.

Kelly Kennedy: Yeah, no, for sure. For sure. And you know, like that's such a.

That's such a challenge for most people. It's so funny, you know, like on this show. We do obviously these expert guest interviews, but we also do a lot of business development shows. So I do one business development show a week where we touch on a wide range of topics. But you know what? Like situations like performance anxiety, imposter syndrome you know, fear of public speaking, things like that.

They come up quite regularly because there's something that we all struggle with. And so what I always try to do is just like normalize that with people and let you know that like, if these are things you struggle with, so do like 70 percent of the population, so you're not alone.

Barry Williams: I was listening to your imposter syndrome podcast.

When did you do that? Last week?

Kelly Kennedy: Literally Wednesday. That came out on Wednesday.

Barry Williams: Okay. Well, I guess I was right on top of it then.

Kelly Kennedy: You were right on top of it.

Barry Williams: But I know my, the management course that I teach is first year students and yeah, I think they have a lot of anxiety in having to give presentations, but at least them getting some experience in it in school, then it won't be so hard when once they get out and realize, you know what, that's part of the job.

You have to be able to do that.

Kelly Kennedy: Yeah, yeah. Well, you know, I don't know. It's like I've struggled with it my entire career and like I still get nervous sometimes, right? Like there are still interviews I do that make me nervous. There are still public speaking things I got to do that make me nervous.

There's a lot of things in life that make you nervous, but what I find is the more that I face those things, the more that I just challenge it. Usually the nerves go away fairly quickly. Like I would say within the first two to five minutes. Your nerves are usually completely dissipated. Like people seem to think they'll feel like that forever, but that's not the case.

You only feel that way typically for a short period of time. And I always like to think if I'm feeling nervous, it's really just because it just shows I care.

Barry Williams: Well, true. I mean, if you don't get nervous at all, then do you really care about what you're doing? That's right. Cause even this morning before the podcast, I was thinking, well, I wonder what this is going to be like.

But it's just like a zoom calls.

Kelly Kennedy: That's right. Yeah, it's, it's like, it's like a zoom call for the most part. The nice thing about this zoom call though, is that we edit it and make it sound really, really good before it comes out. So whenever we make a jumble, we can always fix it. That's the best thing about a podcast.

Barry Williams: Well, you, you mentioned in your introduction about bad dad jokes, when I've been doing public speaking, especially when, like, when I was president of REIC we would have luncheons once a month. And I would be the master of ceremonies for it. And I somebody told me that you should always start off with a joke and, you know, that gets people involved.

But apparently there were times when I told some off color jokes that weren't appreciated,

I got asked to stop doing that.

Kelly Kennedy: Oh, goodness. That's okay. A good, you know what? I feel like I give bad dad jokes a lot of the time, but it's just my kids who get it. So they just tell me I'm being corny and let me move on with my day, but I get it from my dad. So I feel like it's a badge of honor.

Absolutely. Absolutely. Barry, you know, you are working like, You know, right on the ground level of all the newest business students. And I really kind of wanted to pick your brain a little bit because I think there's a lot of fear in the business community with, with the latest generation, the Gen Z's of the world of, you know, what can we expect from them?

Are they going to be able to, to be able to have, you know, interactions with other people and not struggle with those things? Because it's such a digital world now. What is your, what has been your experience in working with them?

Barry Williams: You know, I was concerned about that too, cause I was, I was teaching before COVID and after, and when COVID was, was going on for about a year and a half, I didn't have any in class teaching.

It was all like we're doing right now. And I found that not very effective. You need the personal interaction between people. And when you have like. You and I right now is one on one, so that's fine. But when you're giving a lecture and it's 35 students and they're all supposed to be logged in, there's, there's no personal interaction there.

But so that's one of the things that I was worried about. Once we got back to teaching in class was how interactive are the students going to be? And actually, I've seen them coming along there, there you know, I was worried that, well, maybe they'll forget how to, how to interact with people face to face, which I think is really important, especially in business in doing some of these assignments, they gradually come out of their shells.

They get to know people in the class because they divide them into groups. So they have to, they have to interact with the other people in the group. And I give them a chance to do that in class, and then gradually they put together their assignments, and most of them do a pretty good job. So I think, I think we'll be okay in the future.

Kelly Kennedy: Okay.

Barry Williams: Yeah. They're actually more, when I think back to when I was in my late teens going to university, they're a lot more diligent than I was. I was a troublemaker sometimes.

Kelly Kennedy: Well, we were all troublemakers at one point. You I. I look back at it though, and I, and I do see a very different world, right? Like, you know, my boys are pretty young.

Our oldest is 10, my youngest is six months old. So it's a pretty big wide range, but you know, I look at the world that they're growing up in. Like even hanging out at friends houses is happening less and less and less. It's not something that they're typically asking to do. And I look at myself, it's like when I was 10 years old, all I wanted to do was go and hang out at my friend's house or have my friends over and we'd go ride bikes and, you know, play Sega, right?

Different, different world, different video games. You know, they are living a lot of their life online. They're interacting with their friends online from school and video games that they're playing or whatever else that they're doing. You know, we have, our boys have brothers, so like they can kind of hang out and have that brotherly interaction in person.

But I feel like for some of the kids that maybe are, you know, are single kids, like they don't have brothers and sisters, they're an only child. It might, it might affect the way that they are able to interact with the rest of the world. And so I kind of think like, as we move forward. It is going to be the responsibility of the next generation to really help them to establish those interpersonal connections and to communicate one on one with other people.

And I think the onus is, is more on us than it ever has been.

Barry Williams: Yeah, I believe so too. And part of, part of the job that I'm doing now is There are certain organizations, I don't know if you've heard of BOMA, that's Building Owners and Managers Association. But there's different professional organizations than the REIC, which is Real Estate Institute of Canada.

And what I try to do is, is, Get my students involved with them like BOMA has lunches once a month, and with different professionals, like they might have contractors at one lunch just think people in the, in the industry. And so we will buy a table, I'll take You know, 10 or 11 students and have them interact with people that are already in the business and the same with with REIC.

I bring them to luncheons that REIC is putting on, but we also set them up with, um, like a short term work integrated learning. And what that is, is I have several companies that I have developed relationships with. I asked them, okay, do you need a student for say three months? Give me a job description.

I'll put it out to my students. They can apply for it. And then you do your normal hiring process, interview them, decide who you want to hire and hire them for usually it's a term. So that would be, say, if it was in January, it'd be January to April. If it's in fall, it would be September to December.

And. Right now we have a program where yeah, those employers pay them at the end of the term, then they invoice us, the school of business, and we pay the employer back. So it's a win win situation. Oh, wow. Wow. That's a really great program. Is that? Yeah, it gives them experience at yeah, right in the field.

And at the same time, they get paid for it. So that's good. And the whatever company they're working for has the benefit of having someone work for them for three or four months and, and then get paid back for it.

Kelly Kennedy: Wow. Yeah. No, that's a, I can see a lot of companies listening right now thinking, Hmm, that sounds like a great plan.

Oh, am I going to speak into that though? We are talking to, like I said, a lot of entrepreneurs, whether they're new entrepreneurs or longtime entrepreneurs or business development people or executives of all levels are listening right now. And one of the things that I really wanted to talk about that really intrigued me, Barry, when we started chatting was you spent a lot of time in commercial real estate.

And one of the things that you had said to me was, You guys can use real estate as an economic indicator. Can we spend some time on that?

Barry Williams: Oh, yeah. And actually that a lot of that is residential also, like one of the, you know, we always hear about okay, the interest rates unemployment. Now there's several things that, that indicators that you could look at to see how the economy is going, but one of the biggest indicators is housing starts.

So what you look at is the permits applied for and issued in a certain year, because there's a a time gap between when there's when people apply for permits and when they can finally do the construction. And that'll give you an idea about a year ahead of time, what the economy is going to be like, because the biggest economic driver is housing.

And because everything revolves around that. You, you have the labor to build the houses, you have the, the suppliers of the, say, lumber and all the things that you're going to use to build the house. Then there's also, well, when someone moves into a house, they have to have a fridge and a stove and, you know, so it's that industry benefits from it too.

And the transportation industry, because they have to get these goods to the places where you're going to use them. So housing starts to me, I think, is the biggest indicator of how the economy is going to be in the next year. And right now, unfortunately government programs and, and maybe the cost of money has slowed down housing starts and we have housing shortage right now.

Kelly Kennedy: Wow. Okay. I, I never really looked at it that way. You're absolutely right though. It really does all tie around how many homes are, are, are out there that need all of these services, isn't it? Yeah.

Barry Williams: And, and all of your jobs depend on supplying those services. So it's yeah, to me, that's the biggest economic indicators.

Housing starts.

Kelly Kennedy: Wow. And how can people, how can people find out how many housing starts there are? Is there an easy way to find this information?

Barry Williams: Yeah. With CMHC, they track that kind of data. And it's, it's not, it's, it's not secret.

Kelly Kennedy: Wow. Well, you know, it's not secret, but I bet you there's a lot of people right now thinking, Hmm, I'm going to go back and check that correlated data just to see.

But that sounds like it's a, it's like a full year ahead indication.

Barry Williams: And, and right now, just the way the market is right now. Yeah. And it is fairly unique throughout my career. I haven't quite seen the scenario that we have right now. And that is, is that we're really short on how, on residential, but commercial real estate is suffering.

And in Edmonton, in particular as far as office space, we kind of overbuilt and it takes a long time to plan those sorts of projects because they're huge. They're hundreds of millions of dollars, and the ice district was, was lucky. They were planning it when the economy was running really, really well, but by the time they finished building it, there wasn't the requirement for office space.

And so the combination of us having too much office space and then COVID hitting what happened when COVID hit everybody had to work from home. Right. And people got used to that. And they found out, you know what, there are a lot of jobs you can do from home. So not as much office space was needed for a lot of companies.

So that it changed the way businesses were run. There's still, I mean, there's still you know, where you have to come into the office, but it's not like it used to be and so Edmonton and Calgary both have, still have. A fair amount of vacancy in the commercial spaces, so I wouldn't recommend buying an office building at the moment.

Kelly Kennedy: Well, I guess that was my next question is like, what do you think is going to happen to all this space like. If we just have a whole bunch of empty offices because everybody's working from home, do you think that this, this work from home shift is going to be a permanent shift? Or do you think that over time we're going to start all slowly migrating back to that office life we once came from?

Barry Williams: Yeah, I think gradually there will be a migration back to the office, but not everything. I mean, there are probably a certain percentage, Will be working from home. They just found that you know what it works works for the person. It works for the business saves us money. So let's just keep going that way.

But yeah, there will be there already has been a certain shift back to working in office spaces, but it's, it's not it's, it's not pre COVID. We still haven't got the people back to the degree that we were before COVID.

Kelly Kennedy: Yeah, no, no. And I'm not sure that that's a bad thing. Like, you know, I've worked from home since COVID and I've enjoyed it.

Like we do office days at client offices and some of the clients that I work with actually only have employees come to the office a couple days a week. So that was kind of the compromise that they ended up going with. And I think that's a really nice mix because you get that time at the office to work directly, be able to get that thing done.

We also recognize we really don't need to be there You know, five days a week either. And so I think, I think the answer is somewhere in the middle. Although I can also see the other side of it for a company, right? Like, like, you know, commercial office space, it's expensive. Maybe not as expensive right now with it, with, but it does.

It gets very, very expensive, especially when it's in high demand. I can see a lot of companies just saying, do we really need that office for whatever, you know, 30, 40, 000 a month we're paying on that lease?

Barry Williams: Well, yeah. And Kelly, it's, it's a balancing act. I mean, there were, there's I imagine some kind of equilibrium will be reached at some point and unless there's another pandemic or something like that but you know, there's, this is one of those shifts that is semi permanent.

Because if you think about yeah, people going back or the way that people have learned to to do the job in a different way. And probably one of the big ones is shopping. Before the pandemic, I would never shopped online. I, I didn't trust it. I felt like if I put my credit card out there, I'd get, I'd get robbed.

But in our family probably do at least 50 percent of the shopping is done online because you ordered the next day, it's on your doorstep.

Kelly Kennedy: It's, it's crazy. It's like, it's almost a little bit hard to believe, actually. Although, I went with my boys to Best Buy the other day, and we walked around, and like, honest to God, they'd never really had that, like, store experience before, and they're like, we need to do that more often.

And I just kind of laughed. I was like, man, like, it's kind of like the video store, right? Nobody in this generation will ever understand the joy of going to a video store like a Blockbuster on a Friday night, you know, it's, it's just a, it's just a dead thing. And I do wonder at some point if that's literally the store shopping experience.

Barry Williams: Oh, yeah, we used to take my kids into the video store and we'd probably spend a couple hours in there picking out movies for the weekend. And we'd usually come out with food. At least five or six movies. And then then we'd watch them all weekend and then take them back. And, you know?

Kelly Kennedy: Different time.

But honestly, there was something really special about that time. Like, I do think there are certain things that they need to stay just because there's something magical about them. Like the convenience, it, it doesn't outweigh the joy of just being able to go and do that activity.

Barry Williams: Yeah. Yeah. Oh, for sure.

Kelly Kennedy: Yeah. But we're a convenient, we're a convenient generation. What do you do? Yeah. Barry, I wanted to, you know, chat with you about purchasing or leasing real estate. We are talking, like I said, to a lot of entrepreneurs who at some point will be either purchasing or leasing real estate or dabbling in it.

But what are some of the things like what are some of the tips that you would give people if they're kind of gonna go out and get their first office, whether they're gonna be be buying a warehouse or buying office space or leasing office space? You know, what, what should they consider and what should they watch out for?

Barry Williams: Well, first thing you should be considering what your needs are going to be. If you're just starting out now, that's probably a good thing because you're not, if you were established, you probably rented more space than you needed and now not everybody's coming back. So establish your needs first and then What are you going to need to, to function in the space?

For instance, if it's if it's say something like Amazon and they're gonna put in a distribution center. So that would be an industrial space. But you not only need a big space to be sorting things, but you need you need to be able to have communication as far as trucking air access, train access.

And good road access. So all of those things, because you're, you're going to be getting stock in, sorting it, filling orders, sending them out in trucks. So you need access to all of those things. If you're thinking about say an office downtown you'll want to think about okay, how much space do I need?

And then what you do is do a comparison of what you're going to get for how much you're going to pay per square foot. So basically what we call a market survey. So you do a market survey, you figure out okay, how much are you, what is the normal rate, what's a good deal. And then what am I getting there?

Do I have transportation for my people that are going to work in the office, like LRT or buses, or if they want to drive a car in, do we have parking space for it, which if it's downtown. Isn't cheap. And then what sort of things are going to be offered to me by the landlord? Like data drops.

So is all of the upgrades that you need to run your office you know, your audio video components All of the, the technical stuff, is that going to be supplied? A lot of places do that's what they call data drops. So when they're setting up your office for you they'll want to know what your requirements are.

I, I'm not really technical, but I know that, you know you need maybe optical you know, electricity phone lines, things like that. That kind of thing. So you'll, you'll want to know that you'll be able to get those in the space that you're going into. And like I said, then you do it. So part of the market survey, you'll compare the amenities.

One of the ways that downtown offices are getting people there now is they're putting gyms like exercise spaces in. And it's part of, okay, because you work in this office, you can go down there anytime you want and work out. It's just one of the perks. They used to use swimming pools, but Swimming pools are expensive to maintain, and nobody ever uses them.

Kelly Kennedy: Oh, goodness. Okay, so it makes sense. So what they're kind of trying to do is create spaces that have perks and benefits that people actually want to come to. That actually makes a lot of sense. When you are going into the negotiations, I know that one of the things that you have a lot of experience in is negotiating the pricing on something like this.

Can you maybe give some tips on how to get the best price on either your lease or or your property purchase?

Barry Williams: Well, like I said, you should come in informed, so with your market survey. And know what other providers are charging and what they're, what they're supplying for it. If they're not in today's market, it's, it's actually a renter's market.

When it's a landlord's market, then there's not much space available. Lots of people looking that would be the opposite of what it is right now. So you'll want to know any Any renovations that you want done will they, will they get your offices ready for you, or is it going to be your responsibility once you move in?

So you'll want to compare all of those things with, with each with each. Person that you're looking at maybe renting from. And so it's not just the square footage. And also there's a thing called common area costs. So your 2 main expenses are are your rent per square foot is usually how it's worked out.

And then That pays for your space. However, most buildings have the lobby, the, you know, all the other things that that go with the building. And those are what are called common area costs. So that's, that's usually divided up to each of the tenants. depending on their relative square footage to the rest of the building.

So if it's an expensive building to run, maybe your square footage rent isn't that bad, but maybe the common area costs are pretty high. And for that, you'd be looking at a building, you'll want to know how energy efficient it is. Like you have different classes of office space, there's A, B, and C. And the class A spaces are most of the newer buildings.

And they're built to standards of really stringent controls on energy usage, like heat recycling like recovering heat more efficient chillers more efficient lighting systems. All of those things can save you a lot of money in the long run. Whereas say a building that was built in the 1980s, if it hasn't been renovated your, your energy costs are going to be way more.

Per square foot than if you're in one of the newer, more energy efficient buildings.

Kelly Kennedy: There is actually a lot to consider on the age of the building that you choose to purchase.

Barry Williams: Yeah. Because up to. Things like the two scariest words in. In property management are, are asbestos and mold. Those are mediations are really extensive and expensive.

So you don't, you don't want to have to do that in buildings built in the eighties, there's a possibility that there might be asbestos. So it, it's only a problem if you if you make it what they call friable. That's where it gets into the air. If it, if it never, if you're, if you're not doing any work on it, it's unlikely that it'll be in the air.

But if you have to do a repair on something that has asbestos in it, it could be dangerous.

Kelly Kennedy: Yeah, it's so funny that you actually brought that up because not long before this episode is out, We'll have actually done a show with a guy named Craig Williams with A& M Abatement. Oh! And he was literally giving us a 101 on all of those things friable asbestos and stuff like that.

So it's, and then what else is kind of funny is literally the show right before you, I was actually talking with a gentleman who's creating Like essentially a marketing program for commercial real estate in the U. S. So it's, it's funny how all of these things have kind of tied together, just completely random, but they, they definitely tied together.

Yeah, they're all interrelated.

Barry Williams: Well, yeah, because, Okay. Asbestos or mold abatement, those are pretty specialized things. And there's, there's certain regulations you have to follow and safety things that you have to use. And Because it's so specialized, it's not like you have somebody on staff that's going to do it.

You hire a contractor for it, which is probably the guy that you're coming in to give you a presentation.

Kelly Kennedy: No, it yeah. And it was very interesting and kind of left me thinking like, holy cow, I don't think I want a house built before 1990 ever or a building for that matter is definitely one of those things that put some shock value in for sure.

But you know, okay, let's lead into that. What I want to ask you now is that companies, I think, aren't sure whether or not they want to buy a building or lease a building. You know, how does a company know whether to make the buy or the lease decision? In your opinion, like, obviously, you've worked in property management, you know how high the costs of owning property can be.

When is it more valuable to own the property versus just lease the property?

Barry Williams: Well, you know, like when you're evaluating your business and seeing how, how well it's doing, you're looking at the biggest figure is the, what they call the net operating income. So you're taking your revenues and subtracting your expenses, just to put it simply.

However, in that calculation is your financing isn't included in that. So you have to think about you'll also have to think about financing costs. Now, whether you buy it or not, I guess, are you going to be in the building long term? Is this something that you're, you're, you know you're going to be there for 30 years or or do you just want to open an office for a short period of time?

And you see, this is an important thing right now. I know that the, the decrease, the, um, the interest rate, the primary by the 25 points, that's nothing. I mean, it's still got to go down a long way. If you're financing a building, that's a hundred million dollars. That's a lot of interest. So that's a big factor and it depends on do you want to are you going to make, are you going to rent out half the building and make money on, on those suites?

And will it be enough to cover your financing costs and the expenses in the building like your heating, electricity water, that kind of thing. It's a bit of a conundrum. But you'd have to do a case by case comparison. Yeah. There's no simple answer.

Kelly Kennedy: Well, like you were saying right now with, with it essentially being a renter's market, it would also be a buyer's market, wouldn't it?

Assuming. You could probably get the best price right now. However, you'd have to finance it at a, at a less than desirable interest rate, but long term, if we think that everybody's going to end up coming back to offices, it means that the demand for offices will likely go back up. So it's kind of a gamble.

Barry Williams: Well, yeah, because no, because of the way the market is right now building of commercial units is, Is probably coming to a standstill for a few years anyway, until the spaces get filled up. I know that personally, I just, you'd have to be a fool to invest in building a huge new building with a lot of office space.

right now because you're not going to fill it and the interest rates are pretty high. So unless you have a private investor or unless you're independently wealthy and you got a hundred million dollars lying around and you don't know what to do with it.

Kelly Kennedy: Yeah, I don't think there's too many of those people kicking around.

Oh goodness, Barry, this has been awesome. I I think we've given a lot of insight. Like I said, what I really wanted to deliver with this was just some insight for business owners who are looking to buy property, who are investing in property. And I think you've given a lot of good insight in that.

We've actually had some people come on who actually own quite a large amount of commercial property and kind of were chatting about that. Mind you was, sorry, not commercial property, residential properties, and they're doing incredibly well right now. It's amazing. Apartment buildings and, and townhouses and things along those, those lines.

But I think it is just one of those spaces that until you're in it, it's very hard to know, you know, what challenges you're going to face or what you're gonna end up in. And I know for a fact, like I, I work with a large maintenance company here in the city, so I know how fast the costs of maintenance can go up and, and by what dollar amount.

And it's, it can be not cheap. Owning a building can be. A very, very costly endeavor.

Barry Williams: Yeah. Oh, for sure. And actually, so if you think about it now you mentioned residential, well, there were times when I was working for a boardwalk that, uh, vacancy rates would go up and up around 10 or 11 percent sometimes.

And in, in residential real estate, you, you think. Anything 3 percent or below is almost zero vacancy. So you want to get down around there. So 10%, yeah, you know, it's not a great investment, but the way it is right now, there's a shortage of housing and, and the vacancy rate in most areas right now. Is barely above zero.

I mean, there's always somebody moving at some point, so you'll have a sure an availability. But it's, it's considered, you know what, there is no vacancy. So it's a good investment. If you're going to build the same building, but build it as an office tower, you're not likely to make money that you would if you're going to make it a residential property.

Kelly Kennedy: I wonder how many of these large office towers are just going to convert into residential.

Barry Williams: Yes. Funny that you bring that up because. Yeah, they're considering it some are, the only thing is there's, there is a lot of cost to doing that conversion. It's, it's not cheap. So there again, you would have to evaluate, okay, I make this capital investment.

How is it going to affect my net operating income? As a general rule, if any change you're going to make, if it, if the capital investment on it, isn't Rick is takes more than seven years to recover it. Then it's don't do it. And actually even seven years is a little long. You, you want more of a a return on your investment, maybe of three or four years, and that applies for any renovations you're doing.

If you, if you have an older building and you want to convert what they call relamping. So going from, let's say it is really old and it's got incandescent lights. I don't think they make them anymore. Yeah, I don't know. And you want to go to I remember the hum though. And you want to go to LED lights.

How much is it going to cost me? How much will that save me each month on my electricity bill? And how long is it going to take to pay back the amount of money I had to put in to convert it? So, I mean, that's just a minor example. If you're converting a whole office building into an apartment building, it's there's a lot of considerations.

It would be very expensive.

Kelly Kennedy: Yeah. No, I imagine I imagine so, you know, we're getting to the end of our show today, Barry. And I really appreciated this time with you. But I do have, you know, just one final question for you, because I think you're the right man to know if you were going to invest in a commercial property at the moment, or sorry, maybe a better way to phrase this would be,

would you invest in any type of commercial property at the moment?

Barry Williams: Probably not. Not until the vacancy rates start to turn around. Only if, if the cap rates have gotten to a point where The purchase price of the building would be way down. Like, let's take for example, a building that, um, that we had in one of the portfolios of a company that I worked for.

They purchased it for a hundred million dollars if today that same building was selling for, and, and it's a a high B building, let's say if. If you could get it for 40 million now, then I'd probably do it, but I wouldn't pay the a hundred million for it. So it depends how much you're going to pay for it and your financing.

Kelly Kennedy: Yeah, no, that makes sense. That makes sense. Like basically what you're saying is it has to be a damn good deal. Doesn't make any sense. Oh, Barry, this has been amazing. Thank you so much for joining us and thank you. Thank you for your work with Grant McEwen, you know, the future generations really do need leaders like you out there helping them.

And you know, I'm doing my best. And I'm happy that people like you are out there doing your best as well.

Barry Williams: Oh, thanks Kelly. I appreciate

Kelly Kennedy: that. Until next time, this has been the business development podcast, and we will catch you on the flip side.

Outro: This has been the business development podcast with Kelly Kennedy.

Kelly has 15 years in sales and business development experience within the Alberta oil and gas industry. And founded his own business development firm in 2020. His passion and his specialization is in customer relationship generation and business development. The show is brought to you by capital business development, your business development specialists.

For more, we invite you to the website at www.capitalbd.ca See you next time on the business development podcast.