Central Florida Retail Real Estate Trends with CoStar’s Lisa McNatt. (S3E20)

The Crossman Conversation is brought to you by our friends at Advent Health, AvCon, First Horizon Bank, RB Marks Construction, Baker Barrios, Maynard Nexon, and Novosol Energy. The views and opinions expressed by the guests on the following program do not necessarily represent those of Mark Radio, the Shepherd or its advertisers. Welcome to the Crossman Conversation CEO edition, offering insights. Wisdom and Council from the most respected CEOs. Here is the host of the Crossman Conversation, CEO edition, John Crossman. Hello, this is John Crossman and welcome to the Crossman Conversation, CEO edition. I have a wonderful guest here with me today. My dear friend for many years, Lisa McNatt, who's the director, market analytics with co-star. Lisa, thanks for being here. Thanks for having me, John. Well, Lisa, listen, I don't know that there's anybody I know that's a greater expert on what's going on in the market today. Do you mind just opening up just giving your thoughts on today's real estate market? Well, that's very kind of you considering you're the one that asked a question. I've always thought of you in that regard. With regard to the Orlanda retail market, our market is really an outperformer compared to most markets in Florida, compared to most markets across the country. We have an incredibly low rate of vacancy and the segment of the market that really is the product that tenants are looking for. So your higher quality, class, a retail space, we really don't have very much of it at all. We're talking maybe 5% to vacancy within retail products that have been built since 2020. So of all the product that we've built in the last five years, there's really not much of it to lease. And so we've got this brisk pace of tenant interest in the market from new and expanding retailers, from new to market concepts. And there's really not any place for them to go without coming out of the ground with new build construction. So we're kind of in a situation where in order for a tenant to expand in this market, a vacancy has to come available in the market. And we have seen some churn. So it has created some limited opportunity. But we still have a lot more end bound interest in expanding in Orlanda than we have the ability to provide space for those looking to expand in Orlanda. And so that's kind of a quandary for us right now. As we remain in this really this this mode where we're not developing, land's not getting any cheaper, financing's not getting any easier. We did have the one rate cut that just got past the quarter point. And we are expecting we've led, you know, we've been led to expect you more rate cuts by the end of the year. But you know, the fear there is, are people going to wait and hold to buy homes to build, you know, what have you until they can maximize all the rate cuts that are coming. So it's you know, it's going to be another probably three months or so until much happens in this market. Because of that, why would you buy today or secure today if you wait three months and you can get a better deal. So but with regard to that, we've got one of the highest rates of rent growth in Florida. We have got an incredibly brisk pace of inbound population growth into Orlando, even though it is subsiding, it's decelerated quite a bit from where it was a couple of years ago. And we did just have the recent employment growth revision that placed Orlando first among all MSAs in the country for a downward revision in what we thought and the employment growth that we thought we had. Gotcha. So but that aside, we have we have more activity within that segment of the market that we can accommodate, then we know what to do with right now. You know, for people who don't know this, you and I were doing retail reports together, maybe 25 years ago or something like that. Right. And I think when you and I were doing those reports together, it was more of a traditional market, meaning like there were these things being up, things being down and you and I could both look and say, well, that's what's happening. It's been really weird, right? So you've had first off, you had the retail apocalypse, which was kind of a thing, not as big as people said, but it's still kind of a thing and what it was, then you had COVID and with those two kind of backed it back, you had this complete lack of new construction and then retail did come back, but then there's no space. And so it's no one could have predicted how this went the way it went because, gosh, if you were never sitting just hanging out talking about this in 2020, we might be saying, man, it might be super, super bad. It's the exact opposite in a way that no one could have sold it coming. Is that right? That's absolutely correct. I remember the retail apocalypse and it never materialized, it never transpired, certainly not in Orlando. And the same as being said right now about the office market and I'm of the opinion that that's not going to occur either. We have to take a long-term view of things. But our retail market, like I said, it's an incredible lot of performer even in the sunbelt. So I mean, the things that bring people to Florida, our quality of life, our job growth, those things, maybe job growth is slowing in the near term, but we have a lot of things working in our favor. And it's kind of hard to close the door on Florida where business friendly state, commercial lease tax is going away. So there are a lot of things that the state is doing to encourage business development and expansion here. And that's going to keep people coming. Population growth is going to continue to surpass the US at large for the force to be able for you to do so. That's going to result in a lot of pent up demand for retail. Listen, don't you feel sometimes in life people have trouble thinking very binary things are either good or bad and not understand nuanced things. And so like during the whole era of retail apocalypse and things talking about it, I would say to maybe a reporter, I'm like, so you think retail is really bad. And they'd say, yes, I say, well, what about public-santered centers? They're like, oh, no, not those. And I want to like, but I want a restriot. No, those are doing pretty good. And I would name like eight categories and everyone like, well, they're pretty good. So I'm like, so you're talking about malls. Yes, malls. So mom, I'm letting it well know, like, okay, so you're really talking about these specific things. And that's when you mention office, that's how I kind of feel about office too. There's certainly some office product that's doing very well. There's some of them going slow, but kind of think about it in this catastrophic way. You and I've been through enough of these cycles that it doesn't really go that way that often, right? And even when it does, there's opportunity that gets created throughout those experiences. Well, do I get that right? Absolutely. Yes. And so any of the things I want to we're going to take a break in just a minute. Any other other big thoughts when you're looking at the retail market today, central floor, or even nationally, do you think people need to be thinking about them? Honestly, I think that you mentioned malls. And I think that's a big transition is more so away from malls. I mean, two of the biggest land deals this year were two big retail sales, I should say. We're actually values for the land for two mall products that are going to be redeveloped as mixed years. So we're going to see more and more of that. We're going to see that with office product as well. But there's really been the advent of the interest in the power center. The costs are significantly less compared to that enclosed product. And you've got the proximity to major, major transportation corridors. You've got accessibility and you've got really an incredible tenant mix in many of them. Like, for example, one of our in village that just traded in one of the biggest deals of the year. I mean, that is one of the strongest retail products that we have in Orlando. And that was demonstrated by its sale price. That's right. Well, what I was thinking about that is like, it still comes back to the fundamentals are strong. I used to say this, you know, as long as people are moving here and vacationing here, the market's going to be fine. And you're saying essentially saying the same thing. Right. That's like, they're people are moving their vacationing retail is going to be keep doing okay. Yeah, absolutely. And I mean, we have a work specding in near term decline in migration. But that's going to be a short term scenario as well. So again, looking back to taking that longer term view, Orlando's retail market is incredibly well positioned. Yeah. Well, listen, we can do stuff the year round. That's a big deal. Well, listen, I love that. If you don't mind, I'd like you to stay there. I want to take a quick break. And then my next thing, I want to ask about your advice for young professionals, okay? Absolutely. All right. We'll take a quick break. We'll be right back here at the Crossman Conversation CEO edition. I'd like to thank Mayter Nixon PC for being a sponsor of our program. Mayter is a full service law firm with over 600 lawyers in 24 offices nationally to serve with professional excellence in everything from corporate and business matters to day-to-day legal issues. The office in Central Florida focuses its practice in real estate corporate transactions and organization banking and finance along with trust and estates. To learn more, visit mayternexon.com. You don't have to go far to find the highest level of health delivered with uncommon compassion. Advent Health has been recognized as the number one hospital in Florida and ranked among the top 20 hospitals in the nation by US News and World Report. Advent Health is your trusted destination for care. Your best care is here Orlando. Visit besthospitalflorida.com to learn more. This is John Crossman and when I am looking to purchase a new property, upgrade one of my existing properties, perform routine maintenance, tenant improvements, or developing a full scale project. I reach out to my guys at AvCon. They are planners and engineers that can meet all of my needs, they can meet all your needs too. If you're looking for assistance with site improvements, mechanical, electrical, plumbing, and even structural issues, reach out to my friends at AvCon. They are turning today's ideas into tomorrow's reality. Once again, here's John Crossman. We're back here at the Crossman Conversation CEO edition with Lisa McNatt. One of the people I always return to when I'm looking for information and data, the backbone of what we're looking at in different projects, the properties in the market, prickly and central Florida. With this, Lisa, you've had over 20 year career and a lot of your career has been interacting with C-suite level people. I would imagine in the CEO space and your research and data. You've had the perspective of working with young professionals and then working with these CEOs. If you're talking to a group of college seniors or people that are first year in the real estate market, and their goal, they want to become a CEO, what's your advice? What are the traits you think they need to be grabbed into is to make sure that they're successful. This is a great question, and I know this is very specific for each person in the experience they've had, but I was once a young professional. I actually worked with you when I was young professional. We were young. You were younger, but we were young and cool. You were cooler, but yes. Well, thank you for that. In my opinion, where I come from, I think one of the biggest things that you can do in this business is remember that it's a relationship business. You've got to do a few things in order to succeed over the long term. Number one, you've got to put in the time and the effort. You can't expect quick success. You can't expect the good times that we had just several short years ago when the market was so strong. All you had to do was pick up your phone and you were making money. It's not that way anymore. This is a market for people who hustle and for people who are in it to win it, so to speak. So I think that the best thing you can do when you first start is number one, learn everything you can. Just absorb as much as you can. I recently sent somebody to you that you could be a mentor for. Somebody who is incredibly impressive to me for all the right reasons. And she does the things that are the hallmark of that person I'm talking about. She listens more than she talks. She takes a lot of notes. She absorbs. She's present. She shows up. She puts in the time. You've got to put in that squat equity, so to speak. But more importantly, even than the work you put in, it's the relationships that I think that you build. They start from the time you enter this business. And they grow over time. And over time is you nurture those relationships that you have with dealmakers who may not be dealmakers when you start, but you're going to grow together in the market. And you're both going to become bigger than you are at your beginning. And those relationships are what sustain you along with that hard work ethic over the longer term. So for example, I mean, I'm again, I met you and I was, well, much younger. We won't give an age, but I'm much younger. And that's why we're sitting here talking together now. Right. So for me, I remember when I got into the business, everything had to be hunted down. I didn't take no for an answer. If I was asked to get something done, I found the answer. It didn't matter if I had to make one phone call. If I had to make 20 phone calls, I was going to get that answer because somebody's business was relying upon it. Well, and can I just say this? The other thing was back then and people people, so those, you drove markets. Right. So if you called a bunch of brokers and they didn't return your phone call, you would just drive around and at least you have an eyeball view. And I want to highlight on this because a couple of things. First off, you talked about relationships. I want to make sure people are here in this. Most people hear that and go, well, sure. I think what they're really not so to say. So what some people are thinking is about transactions. And there's a difference between transaction and focus and relationship focus. Transaction focus is, hey, Lisa, what can you do with for me? Oh, you can't. Well, then I'm not talking anymore. As opposed to being relationship focus, where you're like seeking to win win. And so people here don't understand this. When you reached out to me about that young lady that you believed in, you could have just sent her over to me. You didn't. What you did was you contacted me first and said, is it okay to? Which was very kind because you're, of course, you can always send people to me, Lisa. But after all these years for you to ask first, like you're thinking about me in that context, then with this young lady in particular, one of my new policy things is that I just am so busy in the week. If a student wants to talk to me and say, call me Saturday morning, this young person you sent to me, she reached out and said, can we talk start morning? I said, sure, and I happen to say, I can see it's, I'm available at 7.30. Lisa, she called me at 7.30 AM on that day. And then to make your other point, so she's doing hustle, she's a relationship focus. But listen to this, she then later that day sent me an email highlighting all of her notes of her meeting. And then she was following up with me, like, hey, what can I do for you? And I gave her some assignment to do. And she did it. So she went from somebody I never knew that I now would be a job reference for her. Right. And so every single thing you see it, like, she, by the way, she's a 10, like a tell-of-wise, she's a 10. Yeah, she is. But you saw those things that she was doing, which was hustle, listen, follow-up, connecting, giving value, receive value, giving value. She's every single one of those things. Is that right? She's very impressive and that's why she's going to make it. Yeah. Because she's putting in the sweat equity. Yeah. And when you say sweat equity, what I hear you saying with that is like, it's getting up early and staying late. You don't have to work like a total crazy person, but it's being flexible. And you know, it's hard for me to meet with the college student at Nine-ing-I'm on a Monday. That's very hard for me to do. But when they call me in a Saturday morning and I'm walking my dog or whatever, I have more time, but I'm also more focused. I can go to a deeper topic. And that's what you're looking for to people. Because I have to imagine you have seen somebody you're like, gosh, that person was the top broker, that company, that year. And then 10 years later, we could pick on like a David Murphy. He's still that person that's a top broker. And some of them kind of flash in the pan. I think that's what you're saying. Like when the market's white hot, there's some that are top performers. But you're really saying, hey, when the market's down, you're trying to curious who is that top performer. And the top ones are pretty consistent with that, am I right? Absolutely. And when the market is down, that's when those relationships that you've built over the course of your career really come into play. So I can't overstate enough how important it is to maintain and build, always continue to build relationships. This is a very small community. And people will remember the people who did right by them. They will remember the people who performed, who who stand out. And that's that's what you have to do. Well, I always talk about what I want to do is be a giver. And I need to ask for help sometimes and do. I was recently on an event with Shailar Marketingperson. And we always try to have some copies of my book to give away. We have our guide to commercial real estate. We give away. Our podcast, obviously, is free. We give it away. And then there are times where I'm like, I need help. But I want to make sure that I'm staying in that balanced space. And I think that's what you're talking about. Bill Moss used to always say, there's me, people, and we, people. And I think in our industries, very much aware of who the we people are. And people may not know this, but a lot of the we people get opportunities. The me people never even know are aware. Is that right? I have the same opinion. Well, Lisa, I really appreciate being a guest. We're going to take a quick break and be back here. A final segment. Lisa Magnatt, who is the director, market analytics with co-star. Thanks for being here with us. Thank you, John. This is John Crossman. And in my career, I've worked for over 30 years in the commercial real estate industry. And in that time, I work with a lot of vendors. And I'll tell you one of the ones that's my favorite, is my friends over at RB Mark's construction. They are one of my go-to guys when we need tenant build out. Construction Services Design Build, Ground Up, and Project Management, just absolutely one of the most professional best people on there. They're all about on time and under budget. If you have a construction need in Central Florida, make sure you check out my good friends, RB Mark's construction. Here's a twist on your typical banking options. What if instead of choosing between a big bank or a small bank, you had one bank that's the best of both. That's first to rise in. Big bank muscle with small bank hustle, big bank convenience and small bank connection. 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These guys can work with rooftop solar energy that can reduce energy expenses around 30%. That's pretty strong, guys. That's been on their most returned GNA play sales. By working with our friends at Nova Soul Energy, they provide clean and affordable renewable energy solutions for both commercial and utility users. Make sure to check them out, novicellenergy.com. All right, we're back here at the Crossman Conversation COD. Mike Gillen, how are you? Hey, my friend. I'm doing well. Listen, you know, if you go to NASCAR or something and you watch this race and there's the drivers and these cool cars and all these exciting things happening and you're like, "Man, this is it. What if none of them had gas?" That's right. They wouldn't go fine. They would be nothing. That's right. Lisa McNatt and the worksheet she does is data. If you don't have data, you got nothing. So I don't care how big time the company or the broker or the producers are doing the deals. I mean, you can talk a good game. You can be a salesperson. But if you want to buy things or sell anything, at some point in appraisal is going to get done. A lender is going to get involved. An attorney is going to get involved and they're going to ask the hard question. That's right. And Lisa maintains the hard data that answers those questions. And so I really liked what she was obviously very bright. But she also was just having really fun amount of wisdom. And so for somebody who's a data person that then highlight the value of relationships, wasn't that interesting? That was so good. At the end of the day, we have to have both of those things for success. But I think the relationship aspect is so often almost lost in the process. Yeah. And it was funny too because when the data person gets asked what's the advice of professionals and she immediately goes to relationships. She didn't say, "Triple down on your research and become a master of AI." A bunch of humor numbers. Yeah. She didn't say that, which is clearly a huge part of what she does. She was talking about the relationship component and it's really giving and receiving. This young lady that she sent to me, ridiculous Mike, called me 7th or 3th morning on a Saturday and followed notes day to exact same day. And again, it has just kind of leaning in asking questions, but had this instinct like, "Hey, I'm bothering John and I'm Saturday." It's not really a bother. What can I do to be helpful to him? It's so we stay in balance. And that's where like, listen, if Lisa asked me to help some young lady in real estate, I'm going to say yes. That's kind of transactional in a way it's charitable. And not to Lisa, because we're buds, but to that person. I don't even know them or asking them helping. But that young lady has now become a relationship because I feel like I could counter her. I feel like now, this young lady is a, she's getting her MBA at USF. But if I were to reach out to her today and say, "Hey, I really could use some information." Do you know this about Tampa Marker, whatever? I think I would have it tomorrow on Saturday after you go. Right? And so that's really kind of the heart of what she's talking about. You know, obviously, the information you cover out there, Atlanta Market and uniqueness of it. Excellent. I just think for someone to be so bright and so data focused to have such great humanity skills about what it's really about. That was pretty cool. That is great. And again, you've got to have both of those. I think that we're finding out in this day and age how important the relationship really is. Well, you know, you come from a background in a musician. Right. And I want to imagine you've known, known, known, or known of people that work great musicians and they make it the instrument phenomenal. But if they don't know the right people, how they ever going to want to stay, if they want to hear us them. Yeah. Right. That's exactly right. And it takes both even in any form of business. You've just got to be able to quote the word you used about Shaila. You've got to market it. You've got to somehow get it out where they are. Right. And sometimes when it's data, you've got to make sure people understand the value of it. And listen, when you're buying properties, if you think the tents are currently paying 20 bucks a square foot and they're going to do it 30. But it turns out something's happening. They're going to renew it 12. That is a problem, right? And so that being in front of that wave, absolutely critical. And those kind of problems often will show up in data, right? Oh, absolutely. Because something like if it's going against a trend line, you know, understanding historic data. And the other thing too, and make sure I hit on this, what I love what she is choosing to touch on is that we tend to sometimes be catastrophic. It's like back in the day, the retail pop is all retail was going to go down. And she's saying the same thing in office market right now. There are people like, oh, all office buildings are going to torn down and, you know, ridiculous, right? It doesn't mean there's not a problem. There are problems or our challenges. But there's also opportunities. That's right. There's kind of like a, there's a punch and then there can be a counter punch. It doesn't just go one direction like that. That's good. And I thought that really came out of that of like a fair imbalance. And listen, we need people who are information-based that are giving us fair and balanced news, not catastrophic, not freaking out. I mean, can you imagine if the weather person got on to start screaming, you know, like, "Hurray!" You know, like, you know, like, you know, I mean, that could cause, you know, chaos. And so it's the same thing hurt with her data of like even when it's like, "Hey, the office market is down." Well, how does that compare historically? How does this number is going to work? You know, I've talked about interest rates before, right? That's right. You know, you and I have seen, you know, mortgage rates at some people can comprehend the number. 21% yes, yeah. Yeah, right. And so when people start talking, oh, they're going high, like, dude, historically, it's not freaking us out. That's where data matters. That's right. All right, my friend. Mike is always good to see you. As always, it's been the Crossman Conversation, the CEO Edition. This has been the Crossman Conversation CEO Edition with your host, John Crossman. Tune in next week for another talk with an experienced CEO that will help bring clarity to your business endeavors. The preceding was a Mark Radio production.