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-My name is Clay Clark and I am amazing at business coaching and the CEO ofT hrive15.com, an alternative to Lynda.com . And today I am joined with the semi-retired commercial real estate guru, Braxton Fears. At the age of 35 this guy has been able to achieve something that most Americans never do. He's a semi-retired guy with no house payment. He has achieved financial freedom, and today Braxton is going to be teaching us about how to find the right home for our business.
I know when I first started my DJ company, or when you start your company, or maybe if you have a company, we all have to eventually find an office space. We have to find a place for our business to call home. And it's really hard to know what the right space is. Should we do retail? Should we do industrial? Should we do a strip center? Should we do it on a floating island? It's really hard to know if we don't know all the options that are out there.
In today's lesson, we're going to deal with some of the fact, some of the fiction and providing you with great business coaching advice. We're going to be dealing with the ins and the outs and all the things you need to know about finding the right home for your business. Remember, at thrive15.com we are here to help you move from where you are to where you want to be. And we believe that knowledge without application is absolutely meaningless.
So as you're watching today's episode ask yourself specifically, what can you do to apply these principles in your life and business? Otherwise, today's episode might just turn out to be more meaningless than Enron stock.
-Braxton Fears. How are you doing, sir?
-Great, how are you, sir?
-Doing great. Doing great. I want to say real quick before we get into this, before we dive right in here, you are a commercial real estate broker. Is that right?
-You started doing this how long ago?
-I started doing this in 2005, so about nine years ago.
-OK. And so you've had almost a decade of experience in this industry. You've actually-- the biggest transaction I believe that we've ever been a part of, that you were ever a part of, would be, basically, a former mall, turning that into a call center. You've represented at one point, I think, almost 20% of the listings in downtown Tulsa.
-Yeah, 30. Yeah.
-30% of those?
-So 30% of downtown Tulsa represented there. You've done some big transactions for big companies, small companies. You know a little bit about it. So we're going to learn a little bit here about how to find a home for my business coaching, if I'm a business owner out there and I have a business. And really, the different types of properties that are out there.
-All right, let's do it.
-So we're going to get into it.
-So Braxton, we have 13% of the United States, the American population, as self-employed. Which means, really over 1 out of 10 people in our country at any given time are going to find themselves owning a business and looking for a place to put that business.
-And yet there's a lot of misinformation out there. A lot of confusion about how you lease space. I see business owners all the time that are in crazy, upside-down leases. Situations where it's a really bad deal for the tenant.
-And we're going to get into some of these-- just kind of understanding the different kinds of properties that are out there. So here we go.
Property number one. It's industrial property.
-This is the type of property where basically it's the main office of an organization that specializes in maybe something related to warehousing, production, manufacturing, distribution. Could you give me a little more business coaching? Could you clarify what industrial office space looks like?
-Well I mean, industrial offices, the office is going to be fairly small compared to the warehouse. It's going to be anywhere from, like you said, manufacturing and the cranes or just to warehousing, where you're storing stuff. It could be as small as 2000 square feet where you've got a little 200 square foot office space with a garage door in the back to really large, multi-tenant or single-tenant properties that are hundreds of thousands of square feet with dock doors and trucking room and all that.
Even if you're not in the industrial business you've seen these on the highway. Sometimes they're metal buildings. Sometimes they're big nice stone structures in the front with-- we've got the party in front and the business in the back with the industrial properties. And so you're gearing more towards that warehousing type of business.
-Now just a question for you. This building that we're in right now.
-Would you consider this to be an industrial building?
-I would not consider this to be an industrial building. You do have some storage space, but this is in an office environment. It's in an office area.
-There's even a little retail down the street. But this is not an industrial area. It's not zoned industrial, so you're not really dealing with trunking. But you've got office space. Mostly office space with a little bit of storage. But it's not an industrial building.
-When trucking gets involved, and dock doors and bay doors, that's when it becomes industrial?
-And really, when you're dealing with consistently more than 50% it's warehouse. And really, really even that can sometimes be a mixed-use type of building. But when the majority of it is warehousing you would consider that an industrial building.
-Would your wife be open to the idea of living in an industrial building? If you got a good deal?
-Man, if we decked it out like a loft, a New York loft, she might get behind it.
-I might be able to convince her of that.
-OK. Well, I'll try to convince my wife, too. So we'll talk about that later. Now what kinds of businesses am I allowed to put inside an industrial business? Could I put a pet party business in there? Can I put an ice cream shop in there? Can I put an iguana retreat center?
-I mean, an industrial building is going to be much more flexible than, say, a retail or office. You're going to be able to do more because in industrial building they care less about noise and care less about what's inside than, say, a retail property. A retail or office property's going to be much pickier on what they allow, so keep this business coaching in mind.
-Can I put a bakery inside an industrial space?
-You could. You could put one inside of industrial space, yeah.
-Can I put a cheerleading gym? I coach cheerleading.
-Yes. Yes, you can.
-Can I put a place where dogs that I'm wanting to put up for adoption? I'm collecting dogs that I put up for adoption. Can I put that in?
-In some cases. When you're dealing with animals it's going to be a little bit case by case. But yeah, you can do a lot more in an industrial building. And many times it's your best bet unless you need that frontage. Business coaching tip: Industrial buildings are obviously going to be a cheaper per square foot per year environment for you.
-Would you recommend that any business that does not need to have walk-in traffic might consider industrial building?
-I would say they should consider it,
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-This is totally counter intuitive to what I'm thinking. I'll just give you an example on the business coaching board here. I had one guy I worked with years ago and he had a business where it was a consulting firm, OK? So on the sign in front of his building he had the name of the company and he had this sidewalk out front and you could walk.
He had this major thoroughfare here, major traffic, coming both ways. And cars would pull up in front of his building and they would walk in, people would walk in this front door, and they would say, hey, could you help me out? Well, he's an appointment-only business.
BRAXTON FEARS: Right.
-And he used to tell me, I'm so frustrated that people are always walking in my front door here and asking me about my business.
BRAXTON FEARS: Yeah. You'd be surprised how many people do that. They really don't need that, they don't want it, they don't need that extra marketing and advertising, street advertising, but they're still there. And they're paying, in some cases, quadruple of what they could be doing somewhere else.
CLAY CLARK: He was paying four times more, at the time, than what I was paying. He had this major frontage on a major thoroughfare in Tulsa, major intersection. And he was frustrated. He's like, I can't get a meeting done, I can't--
BRAXTON FEARS: Yeah.
-So a lot of businesses, if you own a business out there and you want to save some money, if you're going I don't have money to lease some of these spaces, maybe look at industrial, which is great business coaching advice.
-Go to that industrial park. There's some nice ones out there. And really, lot of industrial areas, they're not really high on crime and any of that kind of stuff. And with Google Maps and things like that, people, when you do make an appointment, they'll find you.
-One of the clients I work with is in New York City and she takes her kids to ice skating and to gymnastics practice and all that. And all of these abandoned industrial buildings has become the Renaissance of where gymnastics is taught and ice skating. And I thought that was amazing, but she's like, it's the only place you can afford in New York City to lease.
-Yeah, just to give you frame of reference, a nice retail in Tulsa, in the 20s per square foot, so $20 to $30 a square foot per year. Listen to this business coaching tip: And you can get a good industrial building in a good area for $5 a square foot per year.
CLAY CLARK: Let me just throw an example real quick. I want to make sure that makes sense, in case I maybe don't know what these terms are.
BRAXTON FEARS: Uh huh.
-If I had 1,000 square feet that I was leasing and it was retail, you're say maybe $20 to $30 a square foot?
-Let's say it's $24, yeah.
CLAY CLARK: So it's $24 a square foot. So how much does that come out to per month?
-That's going to be $2,000 a month.
-So my payment would be $2,000 a month, per month, if I was in retail.
-That's correct. And you've got to keep in mind too-- we'll get into more detail about this later-- but you're also going to pay utilities, and you're going to pay the taxes and insurance, and some other fees on top of that.
-Now if it's industrial, it would be times $5?
BRAXTON FEARS: Safe to say $5. Let's say $5, yeah.
CLAY CLARK: OK, boom. So then that would come out to a total of how much per month?
-So that's $5,000 a year, instead of $24,000 a year. So $5,000 divided by 12 is--
-$4,000 a month roughly.
-No, no, $400 a month.
-Sorry. $400 a month.
-$400 a month, per month. I was testing Braxton to see if he was paying attention. I'm glad he was. Always testing. So you could cut your bills from $2,000 a month to $400 a month for the same amount of space by going industrial.
-Yeah, and get 10,000, it's obviously it goes $20,000 and $4,000. Business coaching hint: So you're saving a lot of money with industrial.
CLAY CLARK: I just want to make sure that dollars and cents, because some people think in percentages, some people think in terms-- you could save a ton of money by going industrial. Somebody here right now just saved a bunch of money by watching this business coaching lesson.
-So now we're moving on here to the next kind which is office space. Probably type number two. Office space. Now this glorious, sanctimonious type of building can come in all different shapes and sizes, from small, little houses that have been converted into office use, to shipping crates that have been super modified to serve as a building, to skyscrapers in New York City. The options are really endless. However, office buildings are rated A, B or C. Is that right?
-A, B or C. Yeah.
-OK. So let's get into the ratings a little bit here.
-OK, so an A building would be that top-level building, you know, Rockefeller Plaza in New York City. Or here in Tulsa we've got the Geophysical Building or the Southern Hills Building. They're typically the nicest that you can find.
And what I call these buildings and what a lot of professionals around the country call this type of lease is a full-service lease. So compared to your industrial lease, your industrial lease you pay a base rent, and then you're going to have to take care of the lawn, you're going to have to pay your own utilities, you're going to pay your portion of the property taxes and insurance.
Business coaching advice: In an office lease, your rate is going to include everything. It's going to include common-area maintenance. It's going to include utilities. It's going to include janitorial. And it's a full-service lease, so when you pay that monthly bill, everything's included. You don't have any hidden charges.
-So if I'm in this mega skyscraper, this A class business coaching building. That's the best it gets in this city, I mean it's the best building.
-And in Tulsa the top A class building, and this is a medium market, it's going to be around $22 a square foot per year. In markets like San Francisco or New York it's going to be much, much more, maybe $50. I don't even know, I'm not real familiar with those markets, but $50 to $75 a square foot per year.
-Kind of a side note, but I want to make sure we're on the same page here. The whole point of opening a business and deciding to thrive with a business, is you want to make money. Business coaching real talk: It's not about how much money you make, it's not about how much you make, it about how much you keep. And I see a lot of business owners-- I had one lady I talked to, awesome story.
-This lady had a business that served coffee, and we did the math and we realized that no matter how much coffee she sold, because of the location she was in, it was not mathematically possible for her to ever pay for her lease and make profit. I sat down with a restaurant that they're only allowed to have 100 people in the restaurant at any given time, it's a very sizable restaurant, and they would need to serve a 200 people at any given-- during their peak hours just to break even on their lease.
-So when you look at a lease you need to ask yourself that hard question, do I need an A class retail? Do I need an industrial? You have to ask yourself.
-Some people need that for their image for what their clientele are, and it makes them money to have that top A class building. For the majority of businesses in America that isn't necessary.
-I won't even talk to a man who is not in an A class building. I'm just kidding. Just ask yourself these tough business coaching questions.
-OK so now we're moving on to B class. B classes. As a general rule, what does a B class building look like?
-A B class building would be nice, but it's not wowing anyone. It's probably a garden office or a 20-year-old building that's in decent shape, but in our market here, if an A is $22 a square foot, B you're going to be able to get for $16 or $17 a square foot. $15 maybe. And this is a medium market that we're in here at the studio. It's going to be a little cheaper and you're going to have a decent environment. It's usually a little older building.
-You might have a tree in front of your building here, and you might get a sidewalk and stuff. But it's like A class is up here, B is down here.
-Yeah it's not necessarily-- there can be some pretty nice buildings that would still be considered B class. A is going to be that the top of the line, the best two or three buildings in an area.
-I often get told that I'm a B class human. Do you get that same--
-I don't get that. I don't know what's wrong with you.
-OK. So we're moving on here. We're just going to keep on going through the notes-- who wrote that, by the way?
-So C class buildings. What does a C class building look like in your mind?
-A C class building is going to be cheap. It's going to be something that maybe works for a call center if you want lots of space and you want it cheap, you want to get into that C class building with lots of parking. Business coaching hint:The C class building is going to be older, the finishes are going to be fairly old, the lobby and things like that aren't going to be real prestigious. However, when you get in a C class building, just make sure you got a good property management company. That if you got old air conditioning, and old systems that they're going to come out and maintain those things because a C class building, typically things tend to go wrong with them more often, and they're a little harder to get taken care because the owner of the C class building sometimes will do that on purpose and you want to be careful of that.
-Would you recommend that somebody steers away from C class, maybe focuses on B class if they have to be an office building?
-Business coaching advice: I think B class would be a good idea for the majority of people. Now, C class would be hey, I'm trying to get by with as cheap as possible because I don't have a lot of people come in to see me. I have a lot of, like I said, a call center type environment.
-Yeah, so real quick I want to break this down. When you have an A class building, a B class, and a C class building, one thing you have to think about is the kind of people that that attracts to work there.
-Because I have noticed there is people who, as an owner-- like for me, just being real-- I could operate in Beirut. And I could operate in Costa Rica, I could operate in Tulsa, I could operate in any city, in almost any weather condition, and I'm going to be fine because I don't care about my aesthetics around me. I just care about having a place to work that's safe and secure. That's about it. I want to have my accoutrements and my decorations, but I don't really have to have A class, B Class, C class.
-But some employees-- I would say some, almost all employees, make this thing called the first impression. When they walk inside your church, your building, your restaurant, or whatever it is, they think that first impression. And so sometimes we see people who have the C class building who are trying to attract A class employees at it's--
-It very hard for them, yes.
-So again, just be thinking about none of these things are in a vacuum. Business coaching tip: If you have a C class building it does affect who you can attract there a little bit.
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