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In this episode, we're joined by Tyler Cauble, president of The Cauble Group, where Tyler helps bring together buyers, sellers, landlords, and tenants in office, retail, industrial, and multifamily real estate in Nashville, TN.
He's also author of the book Open For Business: The Insider's Guide to Leasing Commercial Real EstateOn this show, we discuss office and retail real estate, the current state of the market, and what Tyler thinks the future holds for these asset classes. We also discuss what he is currently investing in and what tax strategies he uses.
Why Office and Retail?
Tyler really enjoys working with entrepreneurs and small business owners. He enjoys seeing other businesses and building relationships while handling the real estate side of things. Tyler feels comfortable with the logic of commercial real estate and decided to focus his efforts there.
The great thing about commercial real estate, especially compared to multifamily and residential, is that you can set up the leases to where tenants have to pay all the expenses. This is called a triple net or an absolute net lease, where you charge a base rent and the tenant is responsible for any additional expenses, such as cleaning, taxes, insurance, and utilities. Thus, the base rent minus commissions is the owners' net.
Market for Retail Properties in 2020
Retail isn't going anywhere, but the industry is certainly changing. Online ordering and eCommerce has obviously changed the industry, but from a real estate perspective, these locations are still necessary for distribution centers, restaurants, and places of entertainment. Tyler is seeing the growth of mixed use buildings, such as a ground floor of retail with office or residential spaces above. The development of large shopping malls and complexes is likely phasing out, but the smaller retail will continue to thrive - Tyler has seen sub-6% vacancy rates for these retail spaces in Nashville.
Market for Office Space in 2020
The trend is moving towards affordability. Nashville has the largest speculative office construction pipeline in the country. This means, per capita, Nashville is building more office space than anywhere in the country. By the time these spaces are close to completion, many developers are seeing they are pre-leased to about 80% occupancy. All the new construction has driven rent rates through the roof in Nashville, so Tyler is looking at how he can make these properties affordable for small business owners because many are driven out by the increasing rents.
Tyler's Favorite Investments
Tyler has invested in a lot of Class C office spaces in Class B areas. He likes to go and buy cheap, renovate, and still bring the property to market at a below-market rate. There is an affordability factor here where the properties are still in great areas.
It's risky to dive into these asset classes without expertise. It's worthwhile to connect with someone experienced in these investments to see the process in real life and learn from the experience.
Tax Strategies
Accelerated depreciation. Tyler believes there may be no better wealth building tool than cost segregation studies and bonus depreciation paired with the real estate professional status.
Learn more about Tyler and his work: https://www.tylercauble.com/
