What Residential Agents Should Know About Commercial • Matt McLennan

Matt McLennan with Kidder Mathews talks about how he got into real estate and why he chose commercial real estate as his specialty. Matt discusses the situation in commercial real estate at the moment. Matt describes the systems that he uses and how these help him scale his business. Matt also describes the payment structure in commercial real estate and points out how different it is from the residential real estate payment structure. Matt also talks about the impact of AI in commercial real estate and the importance of utilizing it.

Check out Matt’s profile on LinkedIn.

If you’d prefer to watch this interview, click here to view on YouTube!

Matt McLennan can be reached at 425.417.9566 and matt.mclennan@kidder.com.

This episode is brought to you by Real Geeks.

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Transcript

D.J. Paris 0:00
Have you ever thought about adding commercial into your business? We’re going to talk about that today. Stay tuned. This episode of Keeping it real is brought to you by real geeks. How many homes are you going to sell this year? Do you have the right tools? Is your website turning soft leads and interested buyers? Are you spending money on leads that aren’t converting? Well real geeks is your solution. Find out why agents across the country choose real geeks as their technology partner. Real geeks was created by an agent for agents. They pride themselves on delivering a sales and marketing solution so that you can easily generate more business. Their agent websites are fast and built for lead conversion with a smooth search experience for your visitors. Real geeks also includes an easy to use agent CRM. So once a lead signs up on your website, you can track their interest and have great follow up conversations. Real geeks is loaded with a ton of marketing tools to nurture your leads and increase brand awareness visit real geeks.com forward slash keeping it real pod and find out why Realtors come to real geeks to generate more business again, visit real geeks.com forward slash keeping it real pod. And now on to our show.

Hello, and welcome to another episode of Keeping it real the largest podcast made by real estate agents and for real estate agents. My name is DJ Parris. I’m your guide and hosted the show and I have said that exact intro over 500 times. And I just wanted to say thank you to everyone listening right now because you’re the reason why we made it to 500 episodes. Also, please, please support our sponsors. They also help pay the freight that gets us to allow to have a staff and continue to produce these episodes. So please support the sponsors. Tell a friend about the show. And as always, please keep listening and let us know what you think of the show. If you want to leave us a review on whatever podcast app you may be listening or watching on now. Please do that we read every review and take your suggestions very seriously, because we’re always looking to improve and do a better job for you. But my guest today is Matt McLennan. He’s a commercial agent and he’s going to tell you everything that residential agents don’t know about what commercial agents do so let’s get right to the main event, my conversation with Matt McLennan.

Today on the show our guest is Matt McLennan hitter Matthews in the Puget Sound area of Washington State. Let me tell you more about Matt. Matt McLennan specializes in industrial leasing and sales in South King and pierce counties in Washington. Since joining Kidder Mathews Matt has facilitated this is incredible over two and a half million square feet of sale and lease transactions with total consideration exceeding 250 million. He received Kidder Mathews big hitter award in 2021 and 2022, a coveted recognition given to the company’s top annual producers, we are going to have a link to Matt’s page on kiter.com, which is for Kinder Matthews. And also please follow him on LinkedIn, Matt McLennan, we will have a link directly to his LinkedIn profile. And you can see what he is all about there. But Matt, welcome to the show. So excited to have you. Thank

Matt McLennan 3:41
you for having me. I’m excited to be here. You have a great show here. I’ve been a longtime follower, so I feel honored to be able to get on.

D.J. Paris 3:49
Well, I am honored that you are here because we we never we never talked about commercial. And so I love that you’re here. And it’s funny, we actually we do get pitched a lot for from commercial agents, but commercial is so vast. And you know, you know, and I know there’s so many different sectors. So I really what I’d love to do today, at some point is really give our audience who are mostly residential agents, a better understanding of what is a commercial broker? Do you know specifically what do you do? Because obviously, there may be some opportunities there for our, our audience to maybe interact with you and pass business over. And really just get a better sense of the commercial world. I think it’s very mysterious. I live here in Chicago. We have a ton of commercial firms here. And I know people who work at those firms and I’m still a little confused about how it all works. My brother in law is a commercial agent down in Florida. I’m confused at what he does. So it’s I would love to demystify it a little bit to give our audience better awareness so that they can they can you know, better help their clients when those needs come up. But let’s start at the beginning. So tell us how you got into real estate and what Why?

Matt McLennan 5:01
Great question it for me, it was very much by happenstance, I happen to be working actually for a wine distribution company. So I started off out of college and an entry level sales position and was was selling wine at a retail level wine and spirits. It was it was a big national distributor. And so I bounced around cities and territories moving, I got into some management positions. And it was it was a great job, great industry really cool. And then here in Tacoma, where I live now, I mean, it was literally hanging out with some out of outside of work, friends who happen to work for my current firm, Kidder Mathews. And so I’m just like you mentioned, I knew nothing about commercial real estate, it was very, it was very mysterious. I didn’t, I didn’t know how it worked. I don’t even know. I mean, I understood that there were commercial buildings, but I didn’t really understand that it was an industry per se. And so in hanging out on the weekends with these guys, you know, I started learning about it and understanding what the industry is. And then I saw what working in that industry could look like. And I started to look at what my goals were long term and just kind of my options and decided, hey, if now if I’m ever going to make a switch, I’m going to leave the wine industry seemingly, now is the time to do it. So I just dove right in didn’t really know a whole lot, I found somebody lucky enough to mentor me a little bit and kind of show me the ropes more or less. And, and that was really how it happened. There was no grand plan, I just fell right into it.

D.J. Paris 6:23
You know, it’s funny, I have a kind of a similar background, I was working for Anheuser Busch right out of college in St. Louis, and I was traveling around the country doing marketing things for them, and did that for a few years. And then it just got to be just, you know, too much after two years of traveling nonstop and, and wanted to I wanted to put my roots somewhere. But so and then I just sort of happenstance turned into real estate, you know, many years after that. So I, I know it’s a lot of us enter this market. But I really have so much admiration for for those that go into commercial because with residential real estate there, there’s a pretty tried and true, there’s many tried and true systems to achieve success, that are predictable, and trainable and repeatable. And I don’t know, I’m sure there are systems as well, of course, for commercial agents. But it is a much more difficult path. And in my under my understanding and experience with commercial agents, I’m always impressed because I just find that to be a totally different world and a much less predictable world. And something that I think is just you know, commercial agents really, I think don’t always get their due. Because I think it’s just incredible. I had a client once who this is a million years ago when I was a financial adviser who worked for like Marcus and Millichap, I think, or one of those firms. And I was a financial advisor anyway. And I said, Well, what do you think your salary will? Or what do you what you’ll earn this year? And she goes, Well, if I close this one deal, I’ll make two. This is 20 years ago, she said, I’ll make 250k for the year, I was like, wow, she goes, I’ve been working on it for a year and a half, it may not close. I’m like, Oh my gosh, she’s like other if I do that, I’ll have no income. And I was like, Oh my god. So I have so much respect for commercial agents, because it is a feast or famine, sort of scenario, at least my understanding of it. But tell us about how you got in meaning once you got in? How did you think about growing your business? Or maybe better yet? How did you determine where you wanted to specialize? Because obviously, there’s a lot of different sectors for commercial. Yeah.

Matt McLennan 8:27
So what you characterize I’d argue, is very accurate. I’m very familiar with the residential market, I track it pretty closely, purely out of curiosity for the most part, but it also has some relation to what I do, but I’ll be the first to admit I don’t, I don’t try to go buy and sell houses. Anytime my clients asked me to sell their house, I send them to my buddy who’s a residential agent. He helped me buy my house. I mean, I could have done that contract legally, but it’s it’s they’re different. They’re very different. So that by the way,

D.J. Paris 8:52
I’m interrupting for just a second. Do you hear that everyone? He refers his clients to residential agents and vice versa. So let’s, let’s make sure we all have a matt in our in our network. I’m sorry, Matt, go ahead.

Matt McLennan 9:06
No, you’re fine. I think that’s really important because they are so different. And at the end of the day as agents, whether we’re commercial or residential, our purpose is to serve our clients. And if you’re not an expert in what you’re doing, how can you properly serve the client? That’s something I believe pretty firmly in. So you know, going back to what you’re saying, though, I mean, commercial is so broad, I look at just comparing again to residential, it’s buying and selling homes for the most part, right. And that’s not to oversimplify it, but that is inherently what it is. Right commercial. I mean, you have hotels and lodging, commercial general commercial space, retail buildings, multifamily buildings, office buildings, industrial buildings, outside land and agricultural deal. I mean, it’s just It’s vast right? And that’s a mystery to a lot of people is how does that work? How to different product types work together with each other? They’re, for me personally, I work in the Seattle market. And we’re, by all measures a large market. So picking a niche is really important. That was kind of one of your questions is what did I just How did I decide to specialize in what I do. And I get categorized as an industrial broker because I work on industrial buildings. So think Amazon distribution centers, Boeing, aerospace, manufacturing plants, and really everything in between those two, any any warehouse type building is really my forte. And then within their leasing, sales, ground up development of those buildings, investment transactions related to fully leased stabilized assets for people who want to buy a cash flow, right. So for me, I was when I got into this, I mentioned that I completely fell into it. And I didn’t really know where to start, but I kind of was just reading the tea leaves. And this was back in 2017. And that’s when I got into the industry. And this Amazon thing was already well underway, right? And I thought, you know, these goods being stored in warehouses getting shipped to people’s doors that doesn’t see ecommerce doesn’t really seem to be going away, and it’s probably going to keep growing. So if I can get into that space on the building side of things, that makes a lot of sense. So again, I kind of just took a leap of faith, I didn’t really I didn’t think about it that much. If I’m being honest, I probably should have done my homework a little bit harder. But obviously, it’s it seems like it’s been a good decision. I don’t I don’t regret it at all. So and then fast forward, you know, here I am, seven years later and still making it work.

D.J. Paris 11:33
Let’s talk about your sector because and my I am barely above the level of ignorant in industrial, but from the few people I know, in industrial, they say that it is a booming sector currently, compared to other sectors, like, obviously, office space has changed. And, and so and with, you know, distribution centers, like you’re saying everyone’s shipping overnight these days or two day shipping. And so there are the centers. So yeah, I don’t I don’t think I don’t think we’re going backwards in that distribution method. And, you know, Amazon just gets its hooks India, and then it becomes that’s, that’s my go to and so of course they need big, big center. So is that the case that industrials actually doing quite well right now.

Matt McLennan 12:22
It’s doing quite well, I think if you look across in similar to residential, the commercial markets slowing down, for sure. And it really is all tied to this interest rate rise. There’s other macroeconomic factors that are having their impacts, for example, the work from home, that whole deal going on is having a huge impact on office space has been having a huge impact. But then you look at the interest rate environment. I mean, there’s there’s, there’s, there’s things pulling the commercial market down in general, but industrial specifically, has been incredibly resilient. And I think the reason being if you go back to the Great Recession, and when we were coming out of that, and really things started to pick up kind of in 1314 15 era. That’s when our industrial market specific to Seattle and a lot of the core markets, which typically are like the West Coast markets, East Coast markets, Port centric markets, that’s a big one for industrial real estate, for sure. And all those markets started to take off in 15 and 16. And we kind of had the steady rise, steady rise. And then 17 1819 I mean, the curve really started to inflect. And things got crazy hot pandemic hit, everyone panicked, went right back down. About five minutes after the pandemic hit everyone realize, oh, man, we have to everything’s got to get delivered to our house. We can’t go out anywhere. We can’t do anything. So as quickly as it dropped, it absolutely skyrocketed. I mean, it was unbelievable. Nobody saw it coming until it actually got underway. So about three months into the pandemic, I remember June, from about March to June when everything was shut down. Everybody, including myself was like, what, what, uh, what did we do? I don’t know, I couldn’t figure it out. And then by June, I mean, everything in our market was pretty much just full ramp. And I mean, we ran on rocket fuel all the way up to the moon. And we hung out there literally until that first interest rate hike in early 22. And then that’s when it was like alright, we need to leave the moon let’s let’s come back down to earth. And so all things considered the markets actually very healthy. The the metrics are pointing in any given direction, depending on the day, but it’s been a good resilient sector of the commercial market. It seems like it’s going to continue in that direction with some ebbing and flowing. I anticipate.

D.J. Paris 14:31
Yeah, I had a friend. I have a friend who works at Kellogg and up in Michigan Battle. I think it’s Battle Creek anyway, doesn’t matter. But he he was up there and during the pandemic, same sort of thing. As soon as as the pandemic hit again, they were nervous what’s going to happen to in this case, they do a lot of breakfast stuff. And it turned out that that their their sales just went through the roof and so they were like Go Go Go and all systems like you said to the moon, and then then they had to start pulling back at, you know, once once reality started, you know, normalizing, but it was a it was an incredible run for for, for some some providers during that time. So, you know when it comes to working for so you are you are contracted by companies who are looking to expand or maybe, you know, move move or open new centers? Do you know, do you will you work nationally with a company? Or do you work exclusively just in your area? So if they want to open up something in, you know, the Midwest? Do you come out and participate in that? Or is that more of a referral at that point?

Matt McLennan 15:37
Great question it. The simple answer is yes, I do work on a national basis, I have several clients that oftentimes just given my reach and my network, I work with a lot of Washington based companies, but a lot of those businesses then do business all over the country. And so for me, Kidder Mathews, my firm, specifically, we’re a West Coast based firm, we have 20 offices up and down the coast and five states. But I participate in several networking organizations have strong broker relationships that I co broker with in other markets. So if one of my clients called tomorrow and said, I need help in battleground Michigan, then I call my contact there, typically, we would work it on some kind of probably co broker agreement, or I might share for the deal out to them if it makes more sense to do it in that fashion case by case basis. But yeah, really, I mean, I use your use your 8020 rule 80% of my business, I probably do here in Washington state specifically, but then about 20%, I might go elsewhere out of state, wherever, wherever my client needs help. I mean, that’s, that’s kind of what drives that conversation. Yeah,

D.J. Paris 16:39
and your and your clients are ideally clients that stick around and grow with you and continue to use you. And so maintaining that relationship is, obviously is the one of the most important parts of your business. And that, you know, really isn’t as critical for residential agents, even though residential eights agents certainly want to work by referral, and certainly want their clients telling all their friends to use them. But the commercial world is a little different, you really have to be a relationship manager over time to maintain those relationships. And I’m curious, I bet our listeners who are mostly residential could learn, maybe from you about maintaining those relationships, obviously, you know, when you’re doing a transaction, or you’re working with a client on a particular project, of course, you know, I know you’re, you’re doing a great job there. How do you think about it in between projects? Are you still staying on top of, you know, what’s going on with the client? How do you maintain that visibility? Maybe in between deals with that?

Matt McLennan 17:39
Yeah, great question. So you asked, you know, who are my typical clients? It’s anywhere from a small mom and pop business up to an Amazon, right? And, you know, huge fortune 500 company with massive commercial real estate footprint for their operating portfolio. And so and I actually have it you know, this and I don’t is I don’t know what the average transaction period is for residential real estate, you know, somebody buys a home on average, every I would bet it’s over 10 years, or maybe, maybe it’s five, you know, whatever it is, seven to 10 years. Yep. Yeah, there you go. So if you look at it, keep in mind on commercial, you’re my clients are businesses, and so businesses constantly, I mean, some businesses are steady, Eddie, but a lot of them fluctuate with the marketplace and what’s going on in the greater economy. So on any given day, they might need more space, they might need less space, they might need to expand to a new location, whether that’s in state or out of state. So staying in front of them and maintaining that relationship is really, it’s paramount, because they make decisions a lot more often. Now, I’ll tell you candidly, like that example you gave of your friend 20 years ago, my transaction time, I mean, I’ll be often working on transactions for 234 or five years before I see a payday. This is kind of how it goes. So you gotta keep your pipeline full. And make sure that you you manage that accordingly so that you can learn how to survive. Right. But to your question, I mean, staying in front of them. What a business is care about what’s going on in the economic environment? What are their competitors doing? What’s going on in the neighborhood in the city is in the markets that they’re operating? Right, so that they can make informed decisions, because most of the time these business owners, they are experts on their business, they’re not experts on on their real estate, and that’s why they hire us to help them with that component, rightfully so. So I see it as my job and my duty to just keep them apprised on anything that’s relevant to them. So I’ve built at least just in my personal business, a lot of processes that allow me to track relevant information specific to my clients, ensure that I’m getting in front of them in a timely basis. And also just from a timing standpoint, tracking regular check ins and it’s more than just picking up the phone saying hey, how you doing, you need any help. Right? Has to be a little more strategic than that. But that but that is really the gist of it is is staying in front of your clients and giving them timely information. So then you’re actually truly adding value. Because if you’re not adding value, then you’re you’re wasting their time because they’re their business owners, they’re busy. They don’t have time to just talk to everyone all day. So it’s all about adding value. That’s, that’s kind of the forefront of what I try to do with every touchpoint. And with all my clients. Well, yeah, I

D.J. Paris 20:21
think that makes perfect sense. And let’s talk about some of those systems. So how will you go over some of those with us? You know, how do you think about systems? How do you automate or semi automate your business to be able to scale it, we’d love to hear about whatever, whatever comes to mind there. Sure.

Matt McLennan 20:39
So I’m a solo practitioner, a lot of commercial agents will create teams, a lot of people act solo, too. I think there’s pros and cons to both. So I operate solo, I have a client services coordinator who works for me specifically. So she helps me with a lot of the back of house efforts related to just administrative tasks, getting my clients information on a timely basis, scheduling a lot of the call to stuff that can get lost in the minutia, right, if you’re too busy running around doing 100 things at any given time, which, which sometimes I am. So I think that’s really important. But I think what’s more important is I remember when I got into this business, one of my mentors said to me, Matt, figure out what you’re good at, and figure out what you’re not good at. And anything that you’re not good at, go partner with the people who are good at that part partner, right? Don’t try to do everything yourself. Pay pay vendors pay people to do what you’re not good at, if if it’s a brokerage assignment, that you’re not an expert in, go partner with that person and share your commission, half your commission is well worth getting the job done and getting it done. Right. So that that’s always resonated with me. So I think I take a little bit of a different approach than a lot of brokers, because as agents, I mean, we’re only as good as our next commission, right. And so to a certain degree, I think a lot of us and I’ve been guilty of this at times, too, I’m not perfect, but you’re hesitant to spend money on systems and paying experts in anything, right. And I’ve tried to take more, especially in recent years, the opposite approach of build my business by recruiting and getting all the systems in place. So you know, what does that really truly look like? I mean, these days, there’s a million software systems out there that can help you with deal flow and contact management CRMs, automating processes, I mean, you name it, I could go into way too deep of a dive on that these days that that conversation, of course, is AI, which I’m certainly not the expert on AI. But I firmly believe that it is going to have a massive impact both on commercial and residential real estate, it already is, it’s already happening behind the scenes. And a lot of people don’t realize that. But that’s going to be a big one. But but to sum it up pretty simply, it’s just figure out what your processes are. And figure out you can’t always automate them, but you can at least organize and streamline them so that when you’re working on 1020 30, whatever it is transactions at a time, things don’t get lost in the mud, right? I mean, you can stay organized. And, and really, I mean, if you think about what makes a client unhappy, it’s usually when something slips through the cracks, or a mistake is made or a deadline is missed. If you can build your system and come up with a process that works for you. Great, everybody does it differently. You got to figure out what works for you.

D.J. Paris 23:23
Yeah, agreed. I, you know, I was thinking being that you have business owners as clients of everything from small to enterprise level. And that one of the ways that came to my mind, and this is such, you know, you mentioned LinkedIn. And I was like, Oh, that’s interesting. LinkedIn is, is the primary place where where Matt, you know, puts his social media effort. And I went, Oh, now of course, like, of course it is. Because it’s a business setting. It seems like, you know, you could probably do some fun things on Instagram, too. And I know you’re on all the social platforms. But LinkedIn certainly makes the most sense. So I imagine that is probably a great possible place for you also to prospect or at least do research on companies see what’s going on with clients of yours. And in the news, I imagine LinkedIn is probably a pretty great resource for you,

Matt McLennan 24:15
I would argue, yes, it is. And it’s arguably the best resource because these days in the digital age, I mean, just about any business has a LinkedIn presence. Now, that doesn’t necessarily mean they’re active. But whether they’re active or not, their employees are probably on LinkedIn, too. And a lot of the times my job is figuring out who is the decision maker at that business, right? Because that’s who I need to talk to, to try to get in front of them, or in them as a client, show them how I can add value, right? And so a lot of the times that might start on LinkedIn is saying, Hey, I know this business is down the street from my office. I know they work on a national basis. I want to figure out how to try to earn them as a client. So who’s the person I need to talk to? Let’s go to LinkedIn, see who’s on there. Who’s the CEO Is the President who’s the operations manager, again, business focus, right. And then it’s contacting those people figuring out if they’re active. I mean, it’s, it’s a great resource. I mean, there’s there’s a lot of software these days and other tools and other places you can find some of this information. But LinkedIn has proven to be a pretty good resource. And consequently, that’s where I spent at least on the social media side of things where with what I do, that’s where I spend, arguably the most amount of my time, because I think it’s being seen by these other businesses. And then probably, if I’m not using my clients as the primary source of my business, the other primary source of my business is other out of state commercial brokers, residential brokers, referring their clients to me when they need commercial help. And so if I’m getting my message out, over the social channels, and LinkedIn, specifically, those two shareholder groups tend to see that and then will will see my content. Because I spend a lot of my time I try to make my contact very educational. I’m trying to demystify commercial real estate, I mean, if you if you boil down my content to its most simplest form, I’m trying to teach businesses and my friends, my family, residential agents, you name it, what I do every day, and then frankly, why if you if you look at it on the personal side, why I’m good at it, right, and why people should consider hiring me. So that’s, that’s kind of the driver of it. And LinkedIn has proven to be an awesome resource where because that’s, that’s, frankly, where people are looking for that kind of information versus Instagram, checking your, your, your friends, photos from their family weekend, or whatever it is, right? I mean, that’s not that’s not a bad source for commercial real estate by any means. But it’s, it’s probably not the primary. Right? That’s been my takeaway from it.

D.J. Paris 26:40
So I yeah, that was that’s really interesting. I, it spawned a few questions for me. You know, just because it’s so funny. When we think about commercial, I would assume that when you mentioned that to somebody who’s not in the real estate industry, oh, I’m a commercial agent. I imagine their first thought goes to office space. And so you’re probably constantly saying, Oh, I don’t, I don’t really do a lot of that. I’m sure you probably have done that or do that. But obviously, that’s just one of one of many different sectors. So there’s this reeducation process. So when people hear commercial, just a lot of people probably aren’t as familiar with what that means. Because they’ve probably everyone’s worked with a realtor. So they of course, know, you know, buying and selling home stuff. But this education processes is really, really a really interesting and smart idea. And really the top residential agents I’ve had on the show approached their business very similarly. Like, we want to be the education people. And you know, I want to make sure my residential clients really understand, you know, what they’re doing and why it makes sense, or doesn’t make sense. But I am curious to questions. And I’ve never thought to ask this and I certainly am not wanting to refer you to reveal anything you don’t want to so feel free to, to answer this in the way that makes the most sense for you. But just because residential commissions are so obvious, you know, an average across the country is about two and a half percent or so times the price of a home that’s usually what we see for residential commercial is really wide open. And it depends whether it’s a lease or a purchase or sale. But just to get an idea of what a commission could look like for commercial just to give our audience an awareness of of what you guys are dealing with, you might just sharing sort of how it generally works.

Matt McLennan 28:20
Great question. Yeah, happy to share it. It varies significantly. I mean, it’s I’d argue it’s the wild wild west to it. I feel like I’m living in the wild wild west sometimes fighting for my Commission’s I mean, we all agents fight for commissions. That’s right. But but it there’s so much variability amongst the greater product types and markets those that’s what it really comes down to a certain product types have certain commission structures, and then different markets have different commission structures. So you know, it’s it’s debt, generally speaking, percentage based, so in that regard, not very different than residential. And if you were to look at a typical commercial sale, like in the Seattle market, specifically, it might be a 5% commission split two and a half, two and a half to buyer and seller’s agent. So pretty, a lot of the convert, keep in mind, a lot of the commercial transactions can get pretty large in size, you know, upwards of three 510 $40 million and well above, right? So at some point, everybody looks at it rationally and goes hey, we can pay 5% on a $15 sale. Sorry that you’re good but you’re not that good. So yeah, at the end of the day, a lot of those commissions get scaled back based on the size of the transaction on the sales side of things. Leasing and this is the one that everybody has the hardest time understanding because typically there aren’t unless you live in New York there aren’t leasing Commission’s associated with renting housing most most often. Right, right. And so but on the leasing side of things, and I do a lot of leasing is it’s typically percentage based, and it’s also calculated on the book value of the lease. So if I’m a business, and I sign a lease for five years, and I agree to pay A this much rent per month and let’s say my rent goes up 4% every year to keep up with inflation, everything else going out? Well, I can run that calculation out of what are those five years of total lease payments going to be for that landlord that they’re going to collect? And then depending on where you go, the leasing commission could vary a little bit, but there’s usually a percentage assigned to that. And that percentage is then applied to that total leasing consideration over the term. And then that’s, that’s the commission calculation and what’s paid out. So again, I mean, a lot of times, it’s this kind of plus or minus 5% number, and then that may or may not get split between multiple agents if there’s multiple agents involved. But that’s in its most simple sense. That’s kind of how it’s done. And then like I mentioned, it just kind of varies Market to Market product type of product type

D.J. Paris 30:48
variable, if it’s a 10 year lease, and you’ve you’ve getting a percentage on the entire 10 years of payments. Is that and again, I imagine being the Wild West, it can be structured any which way. But is it? Is it more often we get it all when when they when they move in? Or is it split up year to year? Just in case? You know, the business goes belly up? At some point? I just I do I’m not as familiar with how often you’re paid on something like that.

Matt McLennan 31:16
I probably get that question more often than any other when it comes to figuring out long term lease commissions, right? Because what if the business I put in goes belly up one year into a 10? year lease? Right? The answer to the question is they are typically all paid upfront, which creates a lot of heartburn for a lot of the landlords, because they don’t you’re you’re taking a risk, right. But I think the way to look at it is if you’re a landlord of real estate, looking at it on investment purposes, you own investment, every investment is really risky. I don’t care if you’re investing in real estate, or stocks or bonds, or whatever it is, right? So you have to wait, your risk, right. And part of that requires you and hopefully your trusted broker to look at the lease term that you’re getting ready to sign the tenant, the tenants business, what their viability is. I mean, we do a very deep dive into company financial statements and multiple years of history on what the revenues and their incomes and profits and everything look like because you got to feel comfortable that if you’re going to sign a 10 year agreement with this group that they’re going to pay rent for the next 10 years. Well otherwise, and

D.J. Paris 32:19
also your reputations if you’re representing the tenant, then obviously you want them to succeed as well, because you want that future business. So yeah,

Matt McLennan 32:29
totally. So it varies. It’s a total again, case to case basis. A lot of times I get paid up front, sometimes I agree to take payments over time. Usually it depends on the sophistication of the landlord. So our market, a lot of the times I work with large publicly traded REITs pension funds, life insurance companies that own pretty large scale real estate, and might be based on Wall Street. I mean, they have massive pocketbooks. So for them to pay a full commission upfront on a 10 year lease, they they see the value in doing that, to get the deal and get it all done and make me happy and make everyone else happy and get it done. Right. But if you’re a mom and pop who relies on this income stream, this is the one commercial building you own, maybe you’re you’re already retired, and this basically is this is what funds your retirement, right. And I come in as the broker and sign a 10 year deal and ask for you to pay me everything upfront. I mean, that could be months of their rent payments and months of what they live off of right? Sure. And so at some point they go, and that’s where I see some hesitation, and especially those kinds of clients wanting to work with brokers, because we cost money. And so at some point, if you’re, in my opinion, if you’re a smart, reasonable agent, you can see if you if you’re betting on yourself, you’re betting on the tenant, you believe in the deal you’re doing that tenants not going to go belly up after a couple of years, well, then it probably makes sense to work with that owner and structure a commission that’s paid over time, because that’ll, that does wonders for them and their cash flow and their ability to actually transact, you’ve now theoretically as an agent, set yourself apart from your competition, who maybe would be more greedy, who requires all that commission to get paid up front? So it just it’s there’s a huge variance. It’s just a really, it’s a case by case basis.

D.J. Paris 34:14
You mentioned AI and I hadn’t thought to ask that. And I should just talk to everybody about AI because of course, you know, I use AI every single day more as a place to get answers because I love just now I can very like easily ask questions and get specific answers. I don’t know if they’re always accurate. But I do love the ability to do that. But I tend to think of AI for how it suits my needs, which is creative prompts for different marketing things, asking questions that I want answers to, but I don’t really know how it applies so much in the commercial world. So I’m excited just to hear a little bit about what you’re seeing starting to happen and how you think it’s going to help you guys in your business.

Matt McLennan 34:57
I believe from a Residential and a commercial real estate standpoint, we’ve barely scratched the surface with AI. But so much more of it is happening in the background than any of us realized I was just at a conference actually in Chicago two weeks ago. For SLR, which is society of industrial and office realtors. And so we had a couple of speakers there a couple of industry experts, and the hot topic was AI, which is nothing new. I mean, it’s been a buzzword for for a while now, right? What are majority of if you’re a real estate agent, or really anybody who’s just kind of flirting with AI, what are you doing with it? It’s probably content creation and asking questions, right. But the capabilities of it from what I’ve been able to at least delve in and discover to date is so much data analytics, data interpretation, predictive models. And really also, I mean, a lot of real estate oriented tasks. I mean, they they ran out an example that I saw that basically, from start to finish a real estate of a I sold the real estate property, wow, looked looked up the property created, you know, an offering memorandum for it, got it listed, took in and queries from interested parties answered their questions, scheduled tours, I mean, basically, the only thing they couldn’t do was go meet with anyone in person, right? Because it just was physically impossible. So if you think as much as I terrified at the idea of AI taking my job, I don’t, I don’t think it’s it’s going to happen that way. On the On the contrary, it’s going to allow us to provide better service for our clients and streamline a lot of those more, just really time consuming, basic processes that need to be done. But aren’t the best use of our time, per se, they’re more, you know, $5 an hour jobs. And so if AI can be utilized for something like that, I mean, I see nothing but benefit from it. And that example I used was incredibly interesting. So that’s the direction it appears to be heading. A lot of the at that same conference I was just talking about, I mean, the big mantra that was being preached is that if you can’t figure out how to adopt this into your business in some way, shape, or form, your competition is going to start crushing you tomorrow. So that was kind of my wake up call. I’ve been playing with it a little bit. And now I’m going wow, I need to figure out how to really deep dive analyze this and get it in my business every day.

D.J. Paris 37:16
Yeah, I see a lot of opportunity for commercial where just feeding it the data that that you want to analyze and interpret, you know, used to be a lot more behind lock and key. Certainly, organizations like costar loop net, you know, have a tremendous amount of data. And while they have had a stranglehold and I love costar looking at but they have, they’ve had a very good run. And without very many competitors. I know crack sees a competitor, and there’s probably a few others. But I suspect that AI will allow commercial agents like yourself just access to more information over time when when these little niche services start coming out with AI to allow you to not have to do as much background analytics and more relationship management, which is is what most vendors at corporate or at businesses who you know, work on its relationships, right? It’s that that thing is hopefully never going to be solved by AI? I hope not. I think we’re all in trouble if they can somehow solve interpersonal relationships and do that for us. But the idea that it sort of listed a property took an increase, the example you gave and then sold a property is, is really incredible. But I don’t think relationships are going away. I certainly hope not. I’ll be out of a job too. If that happens. So I can I can appreciate that. That’s, it’s very, very interesting. I was at a conference with Zillow a few a few months ago, and they were talking about a there they were just mentioning, like, like AI isn’t really new at all. They said when we started the Zestimate, which everybody probably knows, they said, That’s AI, they said it was like 2003 or whatever they I forgot when they rolled out maybe it was 2006 or something whenever it was early 2000s. And that’s when they rolled it out. They’re like that, that’s AI are like, okay, so it’s actually been around for a long time. But now with GPT getting more accessible to the to the to the end user. It’s just really, really changing things, and certainly a lot of fun to learn about what the capabilities are. So what is the what are the misconceptions? Or what is it a misconception that residential agents have about the commercial world that if you could wave a magic wand and educate everybody about, I think you may have already said that the major point is, you know, stay in your lane. If you’re a residential agent, or at least consider staying in your lane. Because as much as you want to do every deal for every client, as Matt said very elegantly and simply, I think it’s like simple and elegant at the same time, is, you know, you’re not doing your client really any service if you’re not an expert in that particular area. And that’s just that’s just the truth. So, so there’s that But are there any other misconceptions that residential agents have? Because the worlds are really they don’t intersect that often. You know, commercial and residential agents are very different breeds, and they don’t oftentimes interact. So just what do you wish residential agents understood more about commercial?

Matt McLennan 40:17
I think there’s two things that come to mind. One is if I’m a residential agent, and I’ve been doing this for 15 years, and I’ve sold 1000s of houses, I’m I’m thinking to myself, I know how contracts work, I know how to navigate an MLS. I know my market, I know geographically where everything is, I can do it. And now my, my buddy’s plumbing business needs a 10,000 square foot warehouse space, I can do that. I know how to do it. How many times have you done it? Right. And so I think that that’s the big one. And then the other misconception is, hey, my client trusts me, they trust only me, they like working with me. And I can’t get to a comfort level of sharing them with a commercial agent who doesn’t know them. And we all know how that goes when it comes to sharing referrals, right? I mean, if the relationship you build with your existing client is strong enough, you should have no problem figuring out how to introduce them to someone else you trust, find that that’s that’s critical, right? Find a commercial agent that you believe is an expert, that maybe you know, or that you trust, right, I think that’s the big one. But the other big one is, is I think a lot of times, because the commercial commission structure is mystifying. And sometimes the transactions are large enough where the the commission payments seem much larger and maybe more alluring than your typical house sale. That’s another reason why residential, I’m going to do this myself, because wow, this is this looks like a great payday. And the number of times I’ve seen that, unfortunately, come at the detriment of the client where they overpaid or the transaction never happened, because the residential agent couldn’t figure out how to properly navigate the transaction and get the deal done. That’s what I get concerned about. And that’s what I see as the client, being at the detriment of all that, I’ll tell you candidly, I love sharing commissions, I’d rather do I’m a volume guy. So I would much rather do more deals and share my Commission’s then do less deals and do them all myself. And I like collaborating with people too. So I think that’s that’s really what it comes down to find your commercial agents that are in your market and active network with them make friends, I think you’ll be surprised a how much more you have in common with them than you realize, two, you can teach each other a lot of things. My buddy who helps me on the residential side, I met him at an open house when I was trying to go buy a house when I moved to a new town. And we hit it off. And we just kind of built a relationship from there. And then we’ve since made it a point of regularly getting together and just trading notes on what’s going on in our respective markets, which helps both of our clients all of our clients really so anyway, that’s that’s a really long winded way of getting back to the point of this, which is just don’t be afraid to engage with the commercial agent. Because in a lot of times, I think you’ll realize that like and I’m doing this with that same guy that I just use an example. He straight up called me and was like, Hey, this looks like it’s going to be an awesome, you know, pretty sizable deal. I have no idea what I’m doing. Can I just can I just can I basically ride your coattails and he’s like, will you if I bring you this deal and partner with you on it? Well, you kind of teach me along the way rather than just me referring it to you and you go do everything and then pay me a commission three months later, when it’s all done. I said, Absolutely. I’d love to teach. And that’s me personally, I just like to teach I actually enjoy the mentorship component of what we do. But that’s a big opportunity for residential agents, if you have any interest in commercial and don’t even know where to begin, refer that deal out and as a condition of referring it out, asked to be a part of the entire deal and get taught. And I would be willing to bet you nine times out of 10 that commercial agent is gonna go Yeah, okay, fine. You can be she can be part of it the whole time.

D.J. Paris 43:55
Yeah. Yeah, that is a really great suggestion. And you know, you were just going back to one point that you were making that happens, I’m sure a lot like you were saying with a residential agent has this relationship with a client who maybe is a business owner, so they help them on the residential side, and all of a sudden, there’s this commercial opportunity. And they go, Well, the client knows me like me, trust me. They don’t know you, they, they want me to do this deal. And I’ve always thought, obviously, there’s exceptions to every rule. But I mean, I don’t really understand the difficulty in saying to the client, you don’t want me on this one. And here’s why. I love you. I would love to do this. You’re my favorite client. And I’m not the right guy for this, but I got the right guy for this and I’m going to bring them in. We’re going to get you comfortable with them. I’m going to be on the deal. I’m going to be you know, watching it overseeing it, you know, however, whatever language you want to use. Yeah, I’m always shocked when I hear people say those kinds of things. I’m like, I don’t what kind of relationship do you have with with this client? If you can’t tell? The truth. And I

Matt McLennan 45:01
literally say that all the time, all the time, I probably more often than I should say, I’m not the guy for the job, thank you for wanting to hire me, I am not the guy for this job. And I tell this to my clients, I tell this to my friends, I tell this to my family, literally anyone within my network, what I know, I know my market area really well. I know real estate really well. And part of my job is being very visible and present in my community. So I know business owners, I know what’s going on, right? But I’m not always the right person for the job. But one thing that I try to tell everyone within my network is if you have a question on anything of Who do I go for this? Who is a good plumber for my house? Who can who can sell my house? Where do I move my business? What’s a good rental car company in the area? I mean, I’m I’m joking, but I’m dead serious. As far as how deep some of this goes, I say just call me. Because I’d be willing to bet you nine times out of 10. If not more that I can point you in the right direction. I’ll either tell you Yeah, I’d love to work with you on that I’m, I’m the guy to help you. Or I’m not the right guy. But these guys that share this wall with me, they’re the downtown office brokers, you want to go lease an office for your law firm. They’re the guys to call and I’ll make an introduction. They’ll they’ll work TEDx harder, because I have a good working relationship with them. So if I make the introduction for you, they’re going to move mountains, because they want to make me happy. I mean, it’s it’s truly a win win. But that’s, that’s really what it comes down to is find your expert. And then don’t don’t try to go on Google. And, you know, oh, how do I how do I do this? Or where do I find this person? Save yourself the time and effort and just call me? I mean, that’s, that’s I consider that part of my job. So yeah,

D.J. Paris 46:38
it’s it’s a really important thing for all of our audience to hear. So if there was anyone in our audience that has opportunities for you, maybe in your in your local area in Washington, or elsewhere in the country, you know, what’s the best way that someone should reach out to you to say, hey, I have this opportunity, I’m not sure if it would fit with what you do. But I wanted to run it by you. And by the way, Matt knows, lots of people in lots of different sectors in the commercial world, Mac can certainly find the right place for you. If if he it’s not him, as he said, he turns down a lot of business because he feels like it’s better to refer something that he’s not an expert in. But what is the best way someone should reach out to you if they have an opportunity?

Matt McLennan 47:22
Simply put email and phone and so I may be opening the floodgates a little bit on this one, but I’m sure you’ll you’ll have my website and the notes and everything like that. But if you go to kinder.com or search Matt McLennan Kidder Mathews you’ll you’ll find my page all my contact info, phone and email is public. And seriously, please call email me I like I mentioned I, one of the things I actually truly probably enjoy most about this business is demystifying it educating mentorship. And so I mean, I don’t care if you’re selling houses in Cincinnati, Ohio, and you’re curious about how Boeing builds airplanes in Washington and just what is it manufacturing center work? Call me email me. I’m happy to donate some of my time to just do exactly that. Because I think it said said guy in Cincinnati who or who is interested in the Seattle market, who knows, maybe moves out here one day, and I mean, you get where I’m going with this is also a good yes,

D.J. Paris 48:20
Cincinnati is a great example. Because I went I went to college near there, and Procter and Gamble is there. So that’s a great example of somebody in Cincinnati, you might still have an opportunity to work with Matt, because of course, p&g is there everywhere in the world. And you know, there are these you know, I’m from Peoria, Illinois, Caterpillar is there, right? They have factories all over all over, not just factories, but industrial, all sorts of, obviously real estate needs. And so this is a real opportunity, guys. So even if your business isn’t in the Pacific Northwest, don’t let that stop you from reaching out to Matt, because he works nationwide, number one, or at least he can connect you with the with people who he is happy to work. And I just had one last question only because I don’t know why this is occurring. To me. Maybe it’s only interesting to me. But I’ll ask it anyway, in the residential world, we’ve seen in the last, I don’t know, five years, or specifically the last couple of years, this growing trend for individual practitioners to really either join a team or build a team on their own. There’s sort of a strength and numbers mentality, which seems to work pretty well on the residential side, depending on how you set it up. Is that also happening on the commercial side, too? I know you’re an individual practitioner, but are you starting to see more commercial teams? Or is it still, you know, kind of a more individual type of business?

Matt McLennan 49:40
I haven’t seen the trend really switching in one direction or another here. Here’s the big thing with commercial, I’d say here’s I’ll try to break this down. Probably on average on any given year, I probably do somewhere between about 30 to 50 transactions a year. And I would argue that let’s let’s again, use the 8020 rule. With 80% of those transactions, I’m probably actually partnered with another broker. So while I don’t have a defined team, you know, the Clinton Anderson team and McLennan Smith team or whatever, right, I mean, as far as people that I’m jointly partnered with on every transaction that I work on, a lot of the times I’m reaching out, depending on the assignment, depending on the geographic location, especially if it’s out of state, right, I am partnering on a team basis to complete that transaction. And the strength and numbers mentality. I mean, there’s there’s obviously efficiencies on prospecting and business development and all that. And then the real big thing is like, we all try to be humans and live our lives too, right? So to a certain degree, if I want to go take a vacation for two weeks, and I’ve got a busy listing, well, hopefully, I am partnered with someone who was gone for two weeks can go show that building, get people through their answer email, and queries and calls and all that, right. So there is, I do see a lot of benefit in the team environment, and I’m certainly not against it, there may be a day that I go down that road. But at least on the solo side, where I’m at right now, I actually have the ability to create my team for each individualized assignment or client, however, I best see fit, which to me, actually, I kind of feel as a strategic advantage, because I’m not locked into just this one team dynamic with 234, whoever those individuals are, and that’s who we are. And that’s our team. And that’s how we work on every transaction. Because I again, I try to take the client first mindset with everything I do. So build a team that’s best for the client. That’s pretty much what I asked myself before I take on every assignment.

D.J. Paris 51:35
Yeah, I guess, you already you basically always are on a team, or almost always on some sort of team that you’ve facilitated to help sort of cohesively, you know, meet the client’s needs to close the deal. Get the specialties in place. So yeah, that makes perfect sense. I, I probably should have thought of that, that. But that makes that makes perfect sense. So, Matt, this has been really incredible. By the way, I’m just going to reiterate what Matt said at the very beginning as he chose a residential agent for his own property when he was buying a home. So guys, this is this, these are not people to fear, they’re not looking to take your deals away. But they’re also encouraging you to not necessarily jump into an area where you’ve not done it before, at the very least certainly partner up with somebody who’s done it before I would, there’s an Kai no two industrial agents here in Chicago. And they love it when residential agents attempt those, because they almost always fail. There’s almost always a screw up. And they come running to the commercial agent down the road anyway, and they learned their lesson, hopefully. But it is, it is certainly something that, you know, again, to stay in your lane thing is a good idea for most of us. So Matt has connections to all different sorts of sectors, certainly in the industrial space, he knows a lot there. But he also can assist you. And he’s got a lot of resources at his disposal to point you in the right direction, his email and phone will be in our show notes. Please reach out to him. He’s He’s a heck of a nice guy. And he’s very, very professional. That’s the one thing I will say I love about commercial agents is the commercial agents I know are there is still this sort of old, older school professionalism that I still like to see in real estate. It’s not as common on the residential side as much anymore. But I love the fact that commercial agents tend to come off as more of a corporate presence because they are dealing with a lot of corporate clients. And I’ve always really appreciated that about that industry here. I’m sitting in shorts, by the way. So I’m telling on myself, Matt is

Matt McLennan 53:39
I don’t wear this jacket every day. This is well he’s dressing going on later

D.J. Paris 53:44
today. But no, for sure. Got it. No, I just appreciate that. I think you can’t ever overdress I really don’t believe in over present, and there’s a certain polish to successful commercial agents that I’ve always appreciated. It’s a very, it’s a very difficult business. We think residential is hard. Guys, commercial is a lot harder. It just is. And you know, to make it in the commercial world, you have to have nerves of steel. And you have to really have have a lot of intelligence and a lot of sort of organization, and just great skill. So commercial agents, I’ve always been, they’re always some of the smartest best people in this industry. I’m so impressed with them. So for all of you that are listening, let’s find a good commercial agent to partner with reached out to Matt, if you have any. And by the way, if you know, people moving in and out of the Seattle area, well, I’m sorry, the Puget Sound area, which is sort of Seattle down to Tacoma, and everything in between, you know, also you can reach out to Matt as well, right? He’s got connections in that area, and he’s got people that he’s got clients that are moving and opening in other locations, too. So let’s, let’s make a great connection with Matt and let’s reach out to him so his email and phone number are in the show notes. I will post his Is social in there as well. And then his website or we’re sorry, his firm is Kidder Mathews, we will have a link to his direct page with all of his contact info. But Matt, really, on behalf of our audience, thank you for coming on a residential podcast and talking about commercial because I’m always once a year, I try to do a great commercial episode. So you met my goal for the year. And you did a great job. And it was really, really informative. And I am super ignorant to commercial. So I appreciate you coming on and sharing that with our audience. Guys, again, reach out to Matt, he’s just a heck of a nice guy. And, and a really, really a solid professional. So reach out to him for any commercial needs that you have. And if he can’t help you, he’ll likely point you in the right direction. And also, maybe you guys can share some business back and forth. So please consider reaching out to him. On behalf of the audience. Matt, thank you, we know how busy you are in the commercial world. And, and thank you for your time today. And on behalf of Matt and myself. Also want to thank everyone who’s listening right now and who made it to the end of the episode, we appreciate you please, just before you sign off, everyone listening, do one one or two favors you could choose ideally to but one one would be fine with me just tell a friend to think about one other agent that maybe would like to hear a little bit more about the commercial world, send them a link to this episode. Because of course we all know agents that are trying their hand at commercial, this might give them some some understanding of maybe how to best proceed if they’re on the residential side and maybe confused about where to go next. And then also let leave us a review wherever you’re listening to this. If it’s on an app, let us know what you think of the show. You know, let us know and we read all of those. Those comments. We want to continue to make the show better. So thank you for that. Matt, thank you for again for this great conversation and we will see everybody on the next episode. Thanks, man.

Matt McLennan 56:46
Thank you, DJ, appreciate it. I really appreciate the opportunity to be on and love what you’re doing the podcast and with your business. Keep it up.