April 19, 2022

JF2786: 8 Ideas for Increasing Your Office Building’s Occupancy ft. Scott Haskin


Scott Haskin accidentally became a commercial real estate investor, landlord, and property manager after purchasing a set of old cannery buildings. It was a heavy lift project from a value-add perspective, and Scott handled much of the work himself. In 2011, he 1031-ed the property into an office building in the central business district of Lincoln, NE. In this episode, Scott and Ash discuss what actions can be taken to increase the office building’s occupancy after a recent decline:

 

1. Work with your leasing broker to come up with a new marketing plan. Scott’s team is currently working on forming a plan to better target specific potential tenants, reach out to them, and offer the right incentives to acquire them.

 

2. Consider converting the building into a residential space. Scott says that for his situation, this might be more capital intensive than simply selling the property off as is to potential owners. However, it could be a viable option for other property owners.

 

3. Find a broker who has a good track record. Scott selected his current broker based on his resume and how he performs in the market. Choosing someone with recent wins in the office space is key. 

 

4. Get other top office brokers in the area on board to lease the property. Ash suggests finding the top three brokers with office wins in the area and offering a bonus to those who bring you tenants.

 

5. Reach out proactively. Don’t simply wait on inbound inquiries from people who see your sign or listing. Make sure there is lots of outbound communication, and make sure your brokers are taking action and reaching out proactively to potential tenants as well.

 

6. Look for tenants outside of your city. Reach out to companies in surrounding cities up to 50 miles away that might be looking to expand into your market and let them know about the great opportunity in your building.

 

7. Take advantage of community message boards like Facebook and Craigslist. It’s amazing how much buzz you can build by getting on there, Ash says. You can even offer referral bonuses to community members who help bring you new tenants.

 

8. Don't underestimate little signs. Ash advises using big banner signs, but he says the small “For Rent” signs property owners place in front of their buildings work incredibly well. 

 

Scott Haskin | Real Estate Background

Greatest Lesson: Taking the time to properly screen and select tenants.

 

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TRANSCRIPT

Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and I'm with today's guest, Scott Haskin. Scott is joining us from Gardnerville Nevada. He is the founder of Has Properties and Scott focuses on asset management and property management. Scott is a GP on a warehouse, office, and residential properties. Scott, thank you for joining us and how are you today?

Scott Haskin: I'm doing fantastic, Ash. How are you?

Ash Patel: I'm very well, thank you. Scott. Before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?

Scott Haskin: Sure. Well, I grew up in Santa Cruz, California, a great place to grow up. Spent a lot of my early years working in and around construction, and eventually doing everything from foundation up. I have a lot of experience in electrical, plumbing, framing, concrete works, rock; you name it, I've pretty much done it. In my mid-20s, I had an opportunity to help start a recycling waste management company in Silicon Valley. After a couple of years, I was made the president and CEO of that company; did that for about 15 years.

During that time, I also started another business that did parking lot sweeping and high-pressure spraying, and ran that for about eight years. During that time, that business, the recycling business, I ended up buying two different commercial properties as we expanded. That's kind of how I got started in commercial property, and then residential. I just always had an interest in owning real estate and what a good investment it is in the long run, and the tax advantages etc. I moved into some real estate investing on my own, alongside that other stuff. That's how I got started in real estate.

Ash Patel: Scott, what epiphanies did you have when you purchased commercial property for your companies?

Scott Haskin: Epiphanies... I don't know about epiphanies, but a nice thing worked out on the first property that we got - it was very poorly advertised, and this was obviously pre-internet days. The sign was overgrown, the broker was from the Central Valley, so he wasn't quite up on to Silicon Valley pricing and stuff... That was advantageous for us. That property worked out pretty well, but in pretty short order when we realized it was too small. We needed a larger piece of property, so we ended up buying what was an old cannery building, or buildings, multiple buildings; it was on about 4.5 acres, the second property.

There again, I would say, that was a big value-add property, it was probably the biggest thing there. Being an old cannery building, there was a lot of roofing issues, and demising walls that needed to be done between these separate spaces to be able to legally rent them separately, and all that kind of stuff. That was a heavy lift from a value-add perspective, and I did a lot of the work myself.

Ash Patel: On that second building, did you subdivide it and lease out part of it?

Scott Haskin: Yeah, we did. At one time, we were using half or more of the entire warehouse space, which was almost 70,000 square feet of warehouse, for ourselves. But yeah, then I divided five different spaces over time and rented those all out separately.

Ash Patel: And you accidentally became a commercial real estate investor and landlord.

Scott Haskin: And landlord at the same time, exactly. And property manager.

Ash Patel: Did you keep the first building?

Scott Haskin: The first building - we eventually sold that one.

Ash Patel: [unintelligible 00:05:37.21]

Scott Haskin: [unintelligible 00:05:38.21] because we've got it for several hundred thousand under market value at the time we purchased it. Obviously, the appreciation took place over several years and we did some value-add to it, poured over some large concrete slabs and renovated the smaller office that was there etc.

Ash Patel: Scott, do you still have the second building?

Scott Haskin: The second building, no. Actually, it was about 2011, we 1031-ed that into an office building in the central business district in Lincoln, Nebraska.

Ash Patel: Tell us more about that property - numbers, and number of units.

Scott Haskin: As far as the office building?

Ash Patel: The office building.

Scott Haskin: Yeah, it's a 12-story office building, with just shy of 5000 square foot floor plates, and a large old safe/vault area down in the basement which is used for a data center now.

Ash Patel: Alright, so you did very well with warehouse, commercial space. Why would you go into an office building?

Scott Haskin: Good question. [laughs] It seemed like this was probably the only property that I had moved into up to that point that was a more stabilized property and didn't have much in the way of value-add. So I was looking at more return on effort versus return on investment, and it hasn't quite turned out that way. I thought I had learned by doing my research and reading etc, on the office space. I thought I knew it decently well. But yeah, there's a lot to learn there. Obviously, the TI's are a lot more than you would experience on, say, any other kind of space or whatever. I've never had a residential tenant come and basically demand that they want new carpet, paint, yadda-yadda etc., before they'll move in. Yeah, it's different; you have to be better capitalized etc.

Ash Patel: What was the purchase price for 60,000 square feet of office space?

Scott Haskin: I think that was 5.8.

Ash Patel: And in 2011 what was the current occupancy?

Scott Haskin: Unfortunately, it's gone down a bit. We did have some effects of COVID and stuff. Unfortunately, all of our tenants paid, so we didn't have collection issues... But we did have a bank occupying two floors and banks are downsizing space a lot of times and stuff, and so we lost them recently. I'd say more recently, we're at just above 50% occupancy. When we purchased it was closer to 90%, so we've lost a fair amount. It's a slower market, stuff doesn't lease up there nearly as fast. I was used to Silicon Valley leasing times, and that was literally days versus, now it's months.

Ash Patel: What's the turnaround plan to get this asset functioning again?

Scott Haskin: Well, actually, we're going to sit down with my leasing broker out there and stuff and come up with a new marketing plan and stuff. But something else we've been considering, if anybody has done this and wants to reach out to me, we'll give you the information at the end of the program here. But I've thought about condoizing it and potentially selling off individual floors, because that seems to make sense for me. Maximizing its value to me. But also offering value to people who run businesses and stuff. I know having run businesses myself, I'd rather own the property I'm, in versus leasing it.

Ash Patel: I love that idea. Would you convert any of it to residential?

Scott Haskin: That is probably another play that would potentially make sense. Depending on how things go, I've thought about reaching out to some contractors, developers out in that area and see. I think it would potentially make sense, but my take is that it would probably be a lot more capital-intensive than simply selling it off as-is basically to potential owners.

Ash Patel: Yeah, that's usually a very heavy lift. Adding a lot of plumbing, showers, kitchens, ventilation. Is this amongst a number of other office buildings, or is it more standalone in terms of surrounding areas?

Scott Haskin: It's in the CBD, so there are a number of large buildings, bank, title buildings, and stuff in the areas. It's amongst a number of other large buildings.

Ash Patel: How did you choose your leasing broker?

Scott Haskin: Actually, we had some other leasing brokers over time, we thought they were doing a fine job, but the leasing wasn't happening nearly as fast as we'd hoped. It seems that they ended up retiring shortly after we got rid of them. Unfortunately, they may have retired on our watch. But the leasing broker that we're currently using is associated with the same company that handles the property management side of it for us, and stuff. Basically, just reviewing his resume and seeing how he performs in the market is mainly why we went with him; he seems to be pretty good. He's done much better than the other leasing agents we've had to date.

Ash Patel: Pretty good track record in recent times for office space.

Scott Haskin: Right. That's all he does. Yeah.

Ash Patel: And is there a way to get more than one leasing broker on this?

Scott Haskin: It seems to me that everybody wants an exclusive. We obviously made sure that our arrangement with them - we'll split the commission with the leasing broker on the other side of the deal. That is about the best thing we've been able to figure out this far.

Ash Patel: Where's this again? What town?

Scott Haskin: Lincoln, Nebraska.

Ash Patel: Okay. What if you get like the top three office people, and not the tenants that do retail and industrial and office? I'm talking about the guys that have just had a lot of wins recently in office. Get all of them on board to leasing this property. Can you offer a bit of a bonus to them if they were to bring you tenants?

Scott Haskin: Certainly. That would be something we would certainly consider.

Ash Patel: Yeah. I would reach out to them individually and let them know you're aggressively searching for tenants; you'll do what it takes to get somebody in there, you're liberal with TI within reason, and you would love to give them an additional bonus if they can bring you a tenant. The reason I throw that out there is if you're in the central business district, there's a number of vacancies in all the surrounding buildings as well. You have to differentiate your building from everyone else's.

Scott Haskin: Agree, certainly.

Ash Patel: Yeah. How else can we differentiate this property?

Scott Haskin: Good question. The size of the floor plate - it's smaller than some so it fits really well with certain industries, I'd say. We've had a lot of legal firms in there over the years, insurance firms, things of that nature. That size floor plate goes in offices or so, or whatever. So it's not ideal for really large businesses; they probably need multiple floors. I think it's really about figuring out exactly who we want to reach out to. That's why I'd say working on the marketing plan and better targeting some specific folks, reaching out to them, and I'd say potentially offering the right incentives to get them in...

Ash Patel: Yeah. I would make sure there's a lot of outbound communication, not just waiting for people to see your sign or your listing, and dealing with inbound inquiries. I would also make sure that your brokers are taking action in reaching out proactively to potential tenants.

Scott Haskin: Agree. That's why I actually put together my own little bit of the marketing plan that I want to go over with their in-house division, and really tighten it up and be proactive. Especially coming out of COVID, it seems like things are starting to warm up, if you will, a little bit more leasing activity. I think now's the time to pounce.

Ash Patel: Yeah. Scott, one more thing. I would look at the surrounding cities that are close by, but not too close, and look at companies looking to expand into Lincoln. It's easy to think, "Alright, I'll take this law firm that's two blocks away." But why not go to a city that's 40-50 miles away?

Scott Haskin: Omaha.

Ash Patel: I'll say, "Hey law firm, hey manufacturing company, hey accounting firm, if you guys thought about opening up in Lincoln, there's a great opportunity in this building."

Scott Haskin: Yeah, agreed. I'd like to reach out to these folks in Lincoln in the same industries that we decide to target and see if they'd like some expansion into the Lincoln markets. It's a gorgeous building, it's beautiful. I think if I were running some of these businesses, it's the kind of building I would want to be in.

Ash Patel: Yeah, that's awesome, man. Don't underestimate little things like Facebook and Craigslist. If you can get on to the Lincoln Nebraska page, the Facebook page, the community page; not the official government page, but the community page that has 20,000-30,000 members, and they talk about everything from neighborhood crime, politics, schools, they complain, they brag about the greatest restaurant in town... Just that community forum - it's amazing how much buzz and traction you can build by getting on there and saying, "Hey, I'm the owner of this building; looking to get some additional tenants in there. I would love to answer any questions. Do you know anybody that has a business or that's looking for office space?"

Get the entire community behind you. If you don't get a lot of traction on that, offer referral bonuses to community members. You'll be amazed at how quickly your post is shared. It'll go viral, because if you offer up to a $1,000 bonus, depending on how many square feet or whatever that they take, it's free money to all the Facebookers, so why not share your post?

Scott Haskin: Sure, right. Yeah, that's a good thought. I've used it for residential leasing, but I've never thought about it for the commercial side.

Ash Patel: Yeah. Again, when that whole community knows that there's a really good guy behind this building, that's the building that's going to stand out.

Scott Haskin: Right, I appreciate that, Ash.

Ash Patel: Win the hearts and minds, man.

Scott Haskin: There you go.

Ash Patel: And I've been through this. I know how difficult it is to lease office space. I think my first office building was in 2014, and it was fully vacant. It was half-constructed even. So yeah, it's a challenge, man. And don't underestimate the little signs that you have. Get the big banner signs, but the little sign that says "for rent" by the street in front of your building. As silly as it sounds, those things work incredibly well.

Scott Haskin: Like a sandwich board out in the corner kind of thing.

Ash Patel: Yeah. Again, it sounds stupid but, man, they work.

Scott Haskin: Okay, good to know. Yeah, I'll definitely try.

Ash Patel: Alright. Sorry for diving real deep and giving you a whole bunch of opinions on this.

Scott Haskin: Sure, no problem. That's the one I need the most help with right now, so perfect.

Break: [00:15:09]- [00:16:56]

Ash Patel: What else man? What else do you have going on?

Scott Haskin: Well, I also own a fourplex back in Santa Cruz, I own a duplex up here in the Gardnerville area, as well as a single-family home which I lived in for a while, and then moved to my new residence about three and a half years ago. Probably the most recent thing I did was just mid last year, I sold a duplex that I had down in Silicon Valley that I lived in while I was working down there. I 1031-ed that into a commercial piece of property up here outside of Carson City.

Ash Patel: What kind of property was that?

Scott Haskin: It's almost 33,000 square feet of warehouse space, and then another 7500 square feet of office; so it's a multi-tenant.

Ash Patel: All in one building?

Scott Haskin: No, it's got three separate warehouse buildings, one large office building, and some of the warehouses have a small office component to them.

Ash Patel: Kind of like flex space?

Scott Haskin: Yeah, exactly. The nice thing about this, for both sides of the deal - it's a gentleman who owns a very large contracting outfit in the area. He wanted to remain there and basically control the tenants there, because a lot of them are friends of his etc., who rent space and whatnot. It's an absolute triple net, set up for five years. Not that it's fantastic with 2% increases and stuff, but it's one of those zero headaches for me, and I think we're both on the same page as far as maintaining the property and taking care of it. He's a fantastic guy, so both of us are really happy.

Ash Patel: That's a win and I love hearing these stories where people from the west coast have made so much money on residential properties. They literally will sell a duplex or fourplex and buy a giant shopping center in the Midwest. Or like you, warehouse and office buildings. Awesome. Talk to me about dealing with commercial tenants versus residential tenants.

Scott Haskin: I've always found the commercial tenants to be a lot easier to deal with. They run businesses, they handle themselves professionally. I've never had a late collection issue; not that I've really had many of those on the residential side either. I think good tenant selection is key. But like the gentleman with the strip on their property - he's got accounting folks, he's got a comptroller that checks cut on the 20 something of each month; it's never passed the first. It's mailbox money as close as I've ever had. I think it's easier, and the less tenants and toilets and all that good stuff.

Ash Patel: Yeah. Scott, the residential investors, that fear commercial - what would you say to them?

Scott Haskin: I think if you look at the right type of commercial, there isn't really anything to fear. I would say the biggest thing from my perspective would be to look at multi-tenant space, just like a single-family home versus a fourplex, or whatever. If you lose one tenant or whatever, you're only X amount down, not 100% unoccupied. And again, finding the right location and the right type of space that has the demand. I would say if I was looking on the retail side, which is a little scary to me, because we are, in my opinion, a little over retailed in America. But I think if you're buying the right space that has the tenant who has to have a space, someone who does haircuts, nail salons, those types of things where you can't outsource that or buy that on Amazon. I think those kinds of places will do well.

Ash Patel: Yeah. I agree with you. 100%. The same thing with office space in suburban downtowns, instead of central business districts, because now people are wanting to get an office closer to home. Even if they weren't from home, they realize the kitchen table is not ideal, the dogs running around, the kids, the spouse. Suburban offices are hot as well. What's the hardest lesson you've learned in your entire real estate journey?

Scott Haskin: I don't know if it's a hard lesson, but I learned pretty early on when I first got the fourplex in Santa Cruz there that no one's going to look up to your property as well as you do. I called the property management company that was in place probably two months in to ask them a question, simply about whether someone was paying for a utility or not, or something of that nature, and they had no clue what was going on. They didn't know what they were talking about, so they were instantly gone. I pretty much self-managed my properties. I found no one's going to care about your properties as much as you do. No one's going to take as much time and effort in selecting good tenants as you will. So I would say the biggest lesson is good tenant selection, that is good property management, those two. Obviously finding the right asset, but after you've done that, it's all about keeping the right people there and keeping them as long as you can.

Ash Patel: Scott, I want to make sure that Best Ever listeners know what TI is. You mentioned earlier that it was a learning curve, learning about TI in the office space. Can you explain how that works for our Best Ever listeners?

Scott Haskin: Sure. TI is short for tenant improvements. If you have a firm that wants to come in and take over an entire floor, they might come to walk the space and say, "Okay, yeah, the space would work fine for us. However, we would like LED lighting instead of the lighting you have. We would like a brand-new carpet versus that carpet that's already there. Oh, those walls that are that color, we'd actually like them bright green." Whatever little things that they would like, they try to get all that done before they move in. Now granted, from a landlord's perspective, let's say you just make it simple. You're asking $10 a square foot, and all those TI's add up to $2 a square foot, you're going to try to amortize that over the say five or 10-year lease or whatever you signed with these folks. But it's money, and you have to come up with it up front to do that work.

Ash Patel: Can you get loans?

Scott Haskin: [unintelligible 00:21:38.17] well enough to do that. What's that?

Ash Patel: Yeah. Will banks give you loans on that?

Scott Haskin: I haven't specifically gone out and looked just for a loan for that. Now, the lender that we have right now, they would probably work with us if we had the right team coming in for a long enough time. Yeah, we could probably get some money from them. So it is certainly something that you can, but there again, it depends on how well is it cash flowing, how much debt do you already have on it etc.

Ash Patel: Scott, you’re GP on a lot of these properties, right?

Scott Haskin: All but the commercial office building that we were talking about in Lincoln. That one I'm a 50% owner. All the rest, I personally own.

Ash Patel: Okay. All the rest of them you have investors on?

Scott Haskin: No, I own 100%.

Ash Patel: Oh, you own them? Got it. What is your best real estate investing advice ever?

Scott Haskin: I think it comes down to... If you're managing your own property specifically - which I would recommend other than the larger commercial spaces; sometimes it does make sense to have that outsourced - is to learn the laws. Manage your own properties, learn tenant law, and keep really good tenants in place, and then be really proactive when they have issues. I'd say on the residential side that the biggest thing that tenants have complaints about is a landlord who is non-responsive. When my tenants get a hold of me about something, I get right back to him, I get someone on the phone and I get it taken care of ASAP.

Ash Patel: Do your tenants have your contact info?

Scott Haskin: They do. Yeah. Just here's a small hint for people who are doing this... When I'm interviewing my tenants, I'm just a property manager. Because you will hear every whine and headache and story... It's unbelievable the stuff you will hear. People are very honest and direct with you, unbelievably honest and whatnot. So I always mention I'm just a property manager, and that seems to handle things much more smoothly as I'm going through the interview process etc. Now, as soon as I sit down to sign the lease with them, I let them know, "Hey, by the way, I actually own this property. You're basically living in my 401K, if you will, and we need things to go smoothly."

But that's worked out really well. I think people respond to me, they know it's not just some corporation or somebody who owns their place, it's Scott. They want to treat me well, and I want to treat them well.

Ash Patel: Scott, do you do that with your commercial tenants as well?

Scott Haskin: Commercial tenants, most of the time, they're always clear that I own the property and stuff. They're a little bit more professional, they really don't care who owns it. They're going to treat it the way they're going to treat it, and be usually professional and responsive.

Ash Patel: Yeah. I love that.

Scott Haskin: Less issues.

Ash Patel: Thanks for sharing that.

Scott Haskin: No problem.

Ash Patel: I do the same thing. Every tenant has my cell phone number, email address, they know where I live. Somebody said, "Why wouldn't you get a P.O. box so your tenants don't know where you live?" I'm like, "Why do I have to hide? Why am I worried about them knowing where I live?"

Scott Haskin: Yeah. I'm not going to do anything that's going to want them to come [unintelligible 00:24:04.15] my house, right?

Ash Patel: Yeah. Scott, if you can go back and talk to your mid-20s self, what would your advice be, as it pertains to real estate?

Scott Haskin: Sure, right. I would probably try to move further, faster. I've probably bought something on the average of every four years or so or something like that. But looking back on it now - geez, with the internet and the ability to raise money, I would probably look at doing syndications and getting into going bigger, faster.

Ash Patel: And are you going bigger and faster now?

Scott Haskin: I would say, going about the same speed. I am going bigger; the deals keep getting slightly larger each time around. But no, I would say being just myself mainly. I mean, I bounce ideas off a lot of folks I know and whatnot, and I have an unofficial team, other realtors and stuff that I've worked with, generally speaking and whatnot. But no, I would say I'm just kind of [unintelligible 00:24:52.17] along, and to be quite frank, I'm not so sure with the economy the way it is right now, whether I would be diving into buying a ton of real estate at this moment in time.

So I'm more about kind of getting all my ducks in a row. I'm working on finishing up a refinance of a property now and stuff. I'm thinking we might hit some slower times here ahead, and I would rather be prepared to hop on some deals.

Ash Patel: I love it. Scott, are you ready for the Best Ever lightning round?

Scott Haskin: You bet.

Ash Patel: Scott, what's the Best Ever book you've recently read?

Scott Haskin: I'd like to give you two. I read Making It In Real Estate by John McNellis, who I believe you guys just interviewed here recently.

Ash Patel: Love that book and love him.

Scott Haskin: You do. Yeah. Very personal stories and whatnot, so I enjoyed the read; it was a very good read. The other one was Commercial Real Estate Investing by Mike Sowers, which I've found to be kind of the opposite of this, very oriented towards like warehousing type space and stuff, very practical. With forms and all the kinds of things to kind of help you analyze a property etc. One was really good on the stories and kind of gave you some practical advice, the other one's very hands-on on how to analyze deals and make deals happen.

Ash Patel: Scott, what's the Best Ever way you'd like to give back?

Scott Haskin: I would say probably just working with friends and family and people I meet. Advising them on how to set up LLCs, the right states to pick, tax advice, and things of that nature. I've also recently reached out to Junior Achievement. I haven't been hooked up with a teacher yet or anything, but I'd like to start doing something with college-age folks or something. I know when I was in college, I was very inspired to get into real estate and other things and stuff. But it's kind of hard when you don't have a mentor or someone who has done it and been there before.

Ash Patel: Scott, how can the Best Ever listeners reach out to you?

Scott Haskin: Probably the best way is through LinkedIn. Just my name, Scott Haskin.

Ash Patel: Scott, thank you again for sharing your time with us today. Giving us your background with having multiple different companies under your belt, getting into real estate kind of by accident, becoming a landlord by accident, embracing it, and sharing your whole journey with us. Thank you again.

Scott Haskin: Oh, you bet Ash, it was fun. Had a good time.

Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review and share the podcast with someone you think can benefit from it. Also, follow subscribe and have a Best Ever day.

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