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Show Summary
In this conversation, Dylan Silver and Logan Freeman delve into the complexities of commercial real estate, discussing market trends, the importance of local knowledge, and strategies for new investors. Logan emphasizes the bifurcated nature of the market, where different asset classes and locations can behave very differently. He also highlights the significance of long-term investment perspectives and the rising demand for industrial real estate, particularly due to onshoring trends. The discussion wraps up with insights into emerging projects and the importance of staying informed in the ever-evolving real estate landscape.
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Investor Fuel Show Transcript:
Logan Freeman (00:00)
Industrial outdoor storage is just land that you can rent out and people can store things on. It is zone locked, meaning they’re not making any more of it. It’s actually the supply is dwindling and rent since 2020 are up 123 % withvacancy, I’ll say that again, rents it from 2020 to 2026 are up 123 % in that asset class. So being able to find a five to 10,000 square foot building with four acres of yard that’s fenced in, you can probably get somewhere between 3,500 and 6,500 a month per acre just for the yard space.
Dylan Silver (00:23)
Yeah, more than double.Hey folks, welcome back to the show. Today’s guest, returning guest, Logan Freeman is a commercial real estate expert. He’s done 400 million in transactions across land, multifamily, retail, and industrial assets. He leverages a proprietary data set and insights from the 18.6 year real estate cycle to help clients remember the future and stay ahead of market trends. He’s passionate about creating value, driving innovation, and shaping the future of commercial real estate. Logan, thanks for taking the time today.
Logan Freeman (02:37)
Good to be here again, Dylan. And hopefully I’ll be able to add some value to the listeners in the audience today, but super stoked, man.Dylan Silver (02:44)
Now…One of the things that’s interesting about the commercial space specifically is you do have to have the ability to stay on your feet and it’s not, you know, the type of thing where you can just set it and forget it, especially right now that we’re seeing so many operators enter into the space, particularly where I’m licensed in Texas. You have so many people, teams like who putting up multifamily all over the place that this is also creating, you know, lot of competition in multifamily and
also it’s driving people into some other asset classes like industrial, right?
Logan Freeman (03:22)
Yeah, absolutely. You know, I think that the trend is your friend is something that I like to try to focus on and always remember. And, you know, the story of 2025 was really of a rebound for commercial real estate. But in 2026, what I believe to be happening is we’re gonna have a bifurcated market. So let me explain what that means. Like, some asset classes in some areas may actually were, you know, be going through a recession or a mild recession.in other areas, the same asset class and the same sub, you know, the same sub market inside of that asset class could actually be having, you know, a really good upswing in this. And it’s by asset class, and it’s by geographic location, which makes it more complicated, right? Like, you can’t just say, you know, for so long, we heard commercial real estate office, everybody’s getting crushed. Well, I don’t know if you’ve checked Manhattan office leasing numbers, they are back beating
pre pandemic levels now. So like you can’t really say that right? There’s a flight to quality in office for sure. But to say like multifamily or industrial or office or retail and lumping them together is like, you can tell the novice of someone if they start talking like that, like they’ve just read the headlines because more now than ever, even inside a same area, even inside Kansas City, you will see certain asset classes
inside of multifamily doing different things, right? And so it’s really complex to kind of break down one framework that I always tell people to just look at is what’s the new supply coming online for whatever asset class? Obviously, industrial,
Dylan Silver (05:05)
Yeah.Logan Freeman (05:54)
you know, millions of square feet, or hundreds of 1000s of square feet multifamily is how many more units are being developed.And then what is the demand? What’s the absorption? What’s the 12-month absorption rate? So in Kansas City, we deliver somewhere between 4,500 and 5,500 units per year, and we typically absorb around 5,000 units. So our vacancy is very low, and our rent growth continues to be between 2 and 4%, depending on the sub-market. It’s not because more than 20,000 people are moving here a year.
That’s staying extremely steady. It’s just supply and demand. And then you have this other tailwind on the multifamily side of the psychology of renters. I mean, look, again, the younger people are, they get it. They do subscription models. Think about it, like the car wash model, the streaming model. mean, everything has a subscription now. Apps, they all have subscriptions. So they’re used to renting. ⁓
The first time homebuyer age, I think is close to 40 years old now in the United States. So that’s a big tailwind for multifamily just in general. Now, what happened was multifamily starts a couple of years ago were extremely high and then deliveries were at all time high, almost double the historic average. And when you put a glut of that,
on the marketplace. And then you have syndicators buying Class B properties trying to raise them up to Class A, but they also don’t need to get $3 per square foot. Now you’ve got all this competition, right? And so now, and now the benefit goes to the renter. So now you start, that’s why you’re seeing concessions and you’re seeing rental declines in some of these markets. I think most of that supply problem in the Southeast and, and, and the Southwest actually gets absorbed this year and it’s probably taking care of.
there will be some losers for sure. But like, I think most of that gets taken care of because if you look at the supply coming online for the last two years, it’s starting to kind of get back to historic averages. So, you know, capital chases opportunities, right? But like when everybody floods into that same market, we’re seeing in data centers right now, it can get really inflated really quickly. So, you know, it’s a real bifurcated commercial real estate market, right?
Dylan Silver (08:13)
Now, one of the things that you touched on is just how local.this can be. And it shocks me to hear that it’s that local in the commercial space. I’m thinking from my single family lens, you know, if you’re doing a flip and you are, you know, force, appreciate, force improving the property, appreciating the property by adding, you know, top of the line finishing where the comps don’t show it in your neighborhood. There might be three streets over, you know, not that far, very much walking distance, but that’s a different neighborhood. But it’s interesting to hear that.
some of the same logic applies to the commercial space as well.
Logan Freeman (08:52)
Absolutely. mean, the fundamentals of the supply and demand Sam Zell talks about in his book, Am I Being Too Subtle? One of the best real estate investors of all time. so understanding that at a hyper local level is a phenomenal way to stand apart from all the other investors outDylan Silver (09:10)
Now, when folks are looking to get into the commercial space right now, let’s say that they’re coming from single family. You mentioned, you you really have to have that local market knowledge. Do you think that that’s probably where people should start is look in their backyards because that’s where they’re going to have the most information. That’s where they’re going to have the most experience.Logan Freeman (10:06)
Yeah, you know, I think it depends on if somebody is going to be an operator or just an investor, right? So if you’re just a capital allocator, then, you know, hey, get into the best markets with the most demand, right? Nationwide. If you are an operator and you’re truly going to be putting those deals together, I think it is difficult to manage stuff from afar. It can be done and it is done very, you very good. But if it’s your first time and you know, you’re you’re trying to manage a propertyfrom start to finish, I think having it in your backyard ⁓ is a better way to go. Now, people in California or New York City and things like that, that can be really difficult. And so I always tell them to try to find pockets of what I call kind of the path to progress, right? Like where is it cool to hang out but maybe not live yet? And like, where’s infrastructure going? Because if you track those two things, where people are hanging out and where infrastructure is going, usually there’s a confluence of those two.
And that’s likely where people are gonna wanna live in the next two to three years. So then you can go in and you can make offers and people are like, what are you doing buying over there? And then in two to three years, they’re gonna say, my gosh, you’re a genius. How did you know? Right? But you just track business openings. You track, you know, get out in the car and drive around where people are going, where are the new restaurants, you know, popping up? You know, where’s a industrial area, but also has this little arts district that is kind of cool and…
Dylan Silver (11:23)
Yeah.Logan Freeman (11:32)
and hang out maybe some some co working spaces going there, you can find those little pockets even in those really, you know, expensive sub markets and make some bets if as long as you have a long term perspective and probably do pretty good.Dylan Silver (11:46)
You know, one of the things that people often miss, and you mentioned this, is that they might be missing the gold that’s right in their backyard, right? You know, if you’re in any major city that’s not, you know, New York or Los Angeles, and you’re tracking the urban sprawl, that’s typically a good indicator for where things are going to. Now, right now, it might be, you know…Logan Freeman (11:54)
reason.Dylan Silver (12:10)
very sparsely populated, but you can see where it’s going to. And so if you can afford to hold on to that property for a couple of years, you five to 10, you’ll probably be in a good spot, generally speaking.Logan Freeman (12:15)
Yeah.Yeah, absolutely. You know, I think that more money has been made in real estate by a long term perspective. you know, Dr. Peter Lindemann always says, if you have capital and courage and a long term perspective, it’s hard to lose. Now, we have to get out of this psychology of like, buying a property and flipping it, right? That’s that get rich, quick scheme, you know, and in 2021 and 2022, you could do that, you know, but when debt is where it is, and
You know, NOIs are being crunched by higher operational expenses and insurance costs and taxes. know, true value, meaning actual improvements to the property or operational experience comes into play. Or you just go get the crappiest property in the best area and just do something to it and wait. And you’re probably going to do OK as well. Is it going to cash flow? I don’t know. Maybe not. Maybe not as good as you would like. But like, if you have a 10-year time horizon,
and you know that area is being developed, you’re going to get an offer that, you know, somebody’s going to come to you and say, Hey, I want to put my business right here. And I don’t care what per square foot I need to pay. I want this building, right? And so there are some of those things that I think that people just need to look at from their portfolios and kind of have a diversification, right? Have your cashflow place, but also have kind of these opportunistic plays that are in areas that are up and coming. And you’re going to get a big appreciation boom and do very well. I have many investors.
Dylan Silver (13:34)
Yeah.Logan Freeman (13:50)
that I have worked with over the years over the last 10 years that have, you know, bought for, you know, the area, and the cash flow wasn’t all that great. But man, they have 1234 $10 million of equity in that property in very little debt. And that allows them to take the next big leap, which is to do a 1031 exchange into a larger property. I’ve seen it be life changing many times.Dylan Silver (14:13)
Now forfolks who are investing in the commercial space, I’ve heard, you know, five year exit seems to be typical, but are we also seeing people maybe looking at longer timeframes now as well? Is it seven years that that could become more typical?
⁓
Logan Freeman (15:10)
Well, I thinkmost of the time it’s five years because a lot of the debt that you put on these properties has a five-year fixed term, right? So that’s just tied to kind of the debt that you’re putting on that property. So you definitely want to look at where can my NOI be in five years, right? But when you get that loan, usually it’s a commercial bank, regional, local bank, after five years, they don’t just call the note, right? If it’s operational and you’re paying your mortgage, they’re not going to say, hey, you’re done. No.
you just reprices at that time, right? And so we try to look at things on a quarterly basis and our portfolio to say, you know, where we where’s where rates at right now? What’s the capital markets look like for this asset class? And where are we at in our business plan? And if you do that on a quarterly basis, you’re in the know, because you’re talking to brokers, you’re talking to them to mortgage brokers, you’re talking to your bankers, ⁓ you know, who’s buying what what’s moving, what’s not, and you get a really good idea, hey, maybe I should go and list my property right now.
You know, and that’s the job that we do at our company Midwest Commercial Real Estate Advisors is just help people navigate that conversation and that decision framework on a regular basis.
Dylan Silver (16:20)
I would liketo ask you specifically about the industrial space. I know that we had mentioned earlier that you can’t just say carte blanche like, this is what’s hot right now everywhere because it’s going to be very specific even within a city to what is the right strategy or the right asset class to be involved in. But for folks who are in the industrial space, is there one main driver for why we are seeing maybe more industrial and warehouse than previous years?
Logan Freeman (16:48)
Yeah, America first. I mean, that’s the agenda from this from this administration, right? And so the on shoring and nearshoring of jobs is driving all of this this transaction velocity in this space. So small bay industrial and industrial outdoor storage.Industrial outdoor storage is just land that you can rent out and people can store things on. It is zone locked, meaning they’re not making any more of it. It’s actually the supply is dwindling and rent since 2020 are up 123 % with
vacancy, I’ll say that again, rents it from 2020 to 2026 are up 123 % in that asset class. So being able to find a five to 10,000 square foot building with four acres of yard that’s fenced in, you can probably get somewhere between 3,500 and 6,500 a month per acre just for the yard space.
Dylan Silver (17:26)
Yeah, more than double.Logan Freeman (17:40)
And then you’re probably 10 to 12 bucks per square foot on that building, right? So think old tirewarehouses, salvage yards, trucking companies that are phasing out. So one of the strategies that we’ve got is really trying to figure out these businesses that own these properties. And they’re 65, 70 years old. And it’s like, what are they doing with their properties? Because they do not know what they are worth. And so our job is to educate them on that front. But if you go back 10 years, we were on-shoring about $45,000 jobs per year. You fast forward 10 years to 2025, it’s about 400,000 jobs.
per year, right? So that is a huge tailwind in regards to the industrial asset class. Now, industrial, right, you’ve got huge logistics and warehouses that are 500,000 square feet to a million square feet. That’s not really what I’m talking about, right? There’s been some pain in that space. Some of those markets have been oversupply because there was such a craze of that asset class. But if you have space under 50,000 square feet, specifically around 1500 to 5000 square feet, you know, maybe a multi tenant building,
man, the vacancy on that is sub 1 % in Kansas City and rents are up like 14 15 % in that asset class. So huge tailwinds on that product type.
Dylan Silver (18:55)
That’s incredible. And, you know, it’s interesting to watch from afar because you see it. And I think, one of the other things, I don’t know how much this plays into it is online purchasing and, you know, people need a place to store that type of thing. I’ve heard that as well, but all of that goes into the arithmetic, right? ⁓ We are coming up on time here, the Logan, any new projects that you’re working on and then as well, what’s the best way for folks to get in contact with your team?Logan Freeman (19:13)
Mm-hmm.Yeah, I mean new projects. I would say that last year there was a new entrance into the marketplace. It’s it’s really a big trend, which is data centers and understanding the utility power for building. So we’ve kind of got two strategies there. We’re aggregating land for data centers and hyperscalers and then additionally looking for buildings that already have allocation from a power standpoint, you know, four or five, six megawatts and then finding smaller co-location users that want to buy that. That’s or at least that space.
⁓ on a regular basis. So that’s a big trend that we’re focused on. It is a specialty kind of niche that we do here in in Kansas City. You know, want to learn more I post on a regular basis about the capital markets about the 18.6 year real estate cycle about Kansas City on LinkedIn every single day. So you can follow me on LinkedIn Mr. Kansas City Logan Freeman, I should be all over the place. Love to connect with you there.
Dylan Silver (20:15)
Logan, thanks for coming on. Thanks for taking the time today.Logan Freeman (20:18)
Thanksfor having me again, Dylan. This was a blast.
