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Running a Commercial Real Estate Brokerage with Eric Kuhn

Running a Commercial Real Estate Brokerage with Eric Kuhn

Podcast published: October 6, 2023

We chat with Eric Kuhn, Managing Partner with Pillar Real Estate Advisors, LLC, a local area commercial real estate brokerage firm. We learn about the current state of the local commercial real estate economy. Eric shares his professional experience on what entrepreneurs should consider with respect to their workspace needs as their business grows. This wide-ranging conversation is an important listen for any business or nonprofit leader in or around Chester County, Pennsylvania.

Links

Pillar Real Estate Advisors

Previous conversations about housing

Additional Links

 Intro: Welcome to Start Local, where we talk with business owners, leaders of nonprofits, and other members of our community focused on doing business in and around Chester County, Pennsylvania. Each episode will provide insight into the local business scene and tell you about opportunities to connect with and support businesses and nonprofits in your local area.

Erik Gudmundson: Hello, and welcome to Start Local, where we connect local leaders to support local businesses and nonprofit organizations in and around Chester County, Pennsylvania. I’m Erik Gudmundson, and I’m here with my co-host, Liam Dempsey. Liam, how are you doing today? 

Liam Dempsey: Really well today, Eric. Really well. How about you Eric?

Erik Gudmundson: I’m doing well too. I’m excited because today we’re chatting with Eric Kuhn. Eric is a managing partner at Pillar Real Estate Advisors, a commercial real estate firm based in Westchester. Eric, welcome to Start Local. Thanks for joining us today. 

Eric Kuhn: Oh, thank you. Thanks for having me. 

Erik Gudmundson: Well, I want to start by asking what does a managing partner do and how long have you been with Pillar Real Estate?

Eric Kuhn: So, managing partner just oversees the day to day functions of commercial real estate brokerage. I act in the brokerage capacity myself. I’m constantly working deals in addition to just overseeing the administrative and financials of the company. 

Erik Gudmundson: So, I spent some time reading your bio on your website, and it makes it clear that you have significant experience serving a wide range of, frankly, notable brands and property holders. That was pretty interesting. How long have you been in commercial real estate? And if I can go there, why did you want to get into this field in the first place? 

Eric Kuhn: Wow. Great question. And if I was smarter, I’d have a better answer. But, I would say that, plus minus 20 years, if you’re looking at development and brokerage, 100 years ago was in the nightclub bar industry. And some of the partners in that, et cetera, started getting into commercial real estate. And I segued with them into that not capacity was development essentially doing entitlement work. So you are the quarterback between the municipality, the engineers, the attorneys, getting the zoning changes done, land development, that sort of thing. And while getting into that, we developed a commercial brokerage arm to handle our own deals. And when 2008, 2009 came and all these property owners were throwing their keys back to the bank because it was just getting tough, I say grade a hundred percent into brokerage. 

Erik Gudmundson: Well, the conventional wisdom during the pandemic lockdowns talk about times when people were throwing keys back at people, was that commercial real estate would never be the same after the lockdowns were lifted. And now we’re seeing company after company recall their workers back to the office, even the company that makes zoom curtailed their remote work policies. So what’s the commercial real real estate reality that you are seeing here in Chester County now with the pandemic lockdowns have been lifted for over some time. 

Eric Kuhn: Yeah. There was a lot of doom and gloom coming out of that, coming out of that period, and understandably. So people, you know, really had to take a step back and they were handcuffed in a lot of ways to move forward. But, we’re seeing tremendous growth in a few sectors. Retail is very strong. Food, bar, very, very strong, obviously. The multi family industry is really strong right now. That being apartment buildings, Buying and selling apartment buildings as investment properties is probably at all time highs. It’s driven a lot by rising interest rates. These younger 20-30 somethings who thought, you know, two years ago, they could afford that three bedroom home. They can’t. And they’re falling back into running. And truthfully, they want to rent where they can live, work and play. So they want to be in the middle of Doylestown, Westchester, kind of square. 

Obviously, office took a hit a huge hit. And the bigger your floor plate, the bigger your office space, the harder it is right now. We’re seeing a lot of activity in the smaller single offices is the people who were working from home during covid after covid and are now realizing that it’s not really effective for them. So they, 1-2 office suite with a shared conference room. 

But we’re also seeing a little bit of resurgence in the probably midsize, I would say, office space at 5,000 square foot office space where these companies are realizing and selfishly I hope this does come true, but I think they’re realizing that it’s time to get the banner back together again, because the companies who do so are going to see greater strides in progress, and moving forward than those that don’t. So, I see that happening. We’ve recently leased a couple of 5000 square foot floor plates to some pretty, pretty strong company. So we’re excited about that. 

Liam Dempsey: Touching on, housing is certainly an issue that we’ve talked about a number of episodes here. And certainly in our show notes, we’ll link to those previous episodes about those conversations. But informally kind of over conversations of coffee and beer, we’ve been hearing people wondering if converting commercial properties into residential properties, particularly in the Chester County area will actually help us address the housing challenges locally. Some of the articles I’ve been reading online indicate that perhaps like a big sky rise in Philly would be a challenge. But maybe with your local knowledge, you can talk about, you know, can we convert local office parks or local businesses into some kind of residential and help deal with that challenge.

Eric Kuhn: Sure. And that is very much a product of the market, because you’re ultimately going to look at what you can purchase in this commercial property for your conversion costs. And what can I realize in rent? You know, in the high market rent areas, it’s going to make sense, but construction costs is construction costs. So the fact that you bought the property cheaper in a lower rent market, you’re not going to be able to realize those rents. It only makes sense at a certain point. 

And also, we got to be sensitive to municipalities and their master plan. They want to see that balance. Again, I alluded to live, work, play, which is what these younger residents want to experience. You got to have the work in the play, so it’s going to be the restaurants and the commercial workspaces have to coincide with the development. So, the answer is, Yes. You’re going to see it, but it’s not going to be as dominant as you might think.

Erik Gudmundson: So, just briefly on that, and I hadn’t really thought about this, Eric, until you shared it, was it’s not just a simple matter of cost, but if this particular area is zoned for office buildings. To keep it simple, they would have to go back and get a different zoning permission to convert that into flat. So it’s not really just somebody coming up with the money, but it’s the work that making sure that there’s the political will to change the zoning. Am i understanding you correctly?

Eric Kuhn: It’s absolutely. That’s absolutely going to be an aspect of it, but it’s also going to be, what building are you starting with? Because some of them lend themselves much better to residential conversion. You know, do you have a large medical space with plumbing is everywhere. And now it becomes a lot easier to do that. You have a large office building, but it’s divided up into smaller suites, almost residential size suites. Now, that’s an easy fix. You get into these larger warehouse stuff that is going to take a lot of municipal cooperation. You’ll see that down in the city of Philadelphia with tax abatements and that sort of thing, but that could be cost prohibitive without it, I think. 

Erik Gudmundson: Some people out there are talking about a recession, and of course we have a presidential election coming next year. What are the impact of those two realities on your business? 

Eric Kuhn: Yeah. So, I’ve sat through too many, too many seminars with economists over the last probably 45 days. And, It’s a total coin flip. Someone will tell you, yes. Someone will tell you No. Most of them heads are back. They don’t want to be wrong. So, it’s almost impossible until it happens. I don’t think there’s a lot of need to dwell on it and it’s better for which to move forward. 

Now, presidential elections, presidential elections on the other hand, are imminent. That’s going to happen. And surprisingly, change is good. Change is good for commercial real estate because presidential elections breed people with concerns on both sides or optimism on both sides. We’ve had election cycles where we’ve had pretty substantial commercial property owners tell us, I want to sell. I want to sell now. I’m worried that the capital gains tax is going to go up. I’m worried that things like the 1031 property exchange aspect will be taken away and I can’t move my money into another commercial property and won’t get walloped by taxes. I want to sell now. 

Transversely, you have the people who look forward to maybe the next regime and how it’s going to benefit them and maybe in a nonprofit wants to expand. Maybe they want to get bigger take on more space companies. Maybe they want to split up and diversify a little bit. So, change is good. 

Erik Gudmundson: Change is good. And it certainly presents opportunities as well as challenges. And speaking of this, I kind of want to go back to the challenges and opportunities that the pandemic created, or enabled, maybe is a better way to phrase it, that economic uncertainty led to the formation of many new businesses as people had the opportunity to test their entrepreneurial spirits. Some of those businesses have grown by leaps and bounds in the years that followed. They may have started from home, but now they need space. What advice would you give to these entrepreneurs?

Eric Kuhn: Sure. Yeah. No, you’re…and you’re absolutely right. You’ve got, and you know, you had all these people jumping out of the corporate America too, because they decided they weren’t going to, that wasn’t going to be their lifestyle. you know, the typical, you know, Vanguard employee after all those years decided to open up a yoga studio and that’s it. That’s what they’re doing now. So we are, we’re seeing a lot of that. And these people, they are usually looking at leasing and they should be. They need to retain their capital. There’s going to be upfront costs. They aren’t expecting. They should be looking to lease. And I would say, get with a commercial real estate professional that has experience doing what you are trying to do. Make sure that they have worked with health care, medical, retail or otherwise in the past and understand it, understand that space. And also, and this is really hard for people, be honest. Be honest about what you’re capable of. What is your timeline? You know, what can you afford? And who’s going to be the guarantor on that lease? You know, it’s fine and well that you’re going to go out there and say, I’m willing to do it. I’m going to say, you know, I want to go, go with part of my job. If I’m representing you is I have to sell you a little bit to the landlord too. So give me the whole picture and then let me run the ball and we’ll take care of you. But, make sure you hook up with somebody who’s done what you’re trying to do before. 

Erik Gudmundson: Well, perhaps this next question could turn into some advice for business owners, but what’s the worst situation you’ve ever encountered in commercial real estate and how did you make it better? Or at the very least, how did you prevent it from happening again?

Eric Kuhn: Yeah. I mean, there’s always challenges and some of them are frustrating, for sure. We’ve had experience with buyers that were just disingenuine and have, you know, tied up a property, wouldn’t move forward, couldn’t get it done. And meanwhile, our seller lost traction, lost time, lost valuable time, may have missed out on that real bar is coming down the pike. 

The one thing I would say is, and we see this all the time is if you’re selling commercial real estate, make sure you get a deposit that is worth chasing. We have owners and sellers who will get into a deal. And if it goes sideways, are you prepared to spend $5,000 in legal fees to chase $10,000? Let’s be smart about this. Let’s be smart and say, okay, I want a $25,000 deposit that holds people’s feet to the fire. And I can afford to go after it, because the reality is this: Once the due diligence period is up, and that deposit goes hard, or non refundable, whatever you want to call it, if the buyer disputes it, you’re going to have to go to court to get that money. So make sure it’s enough to chase. 

Erik Gudmundson: That’s a really good point. And, I would have thought that generally speaking at $25, 00 deposit on a commercial real estate is still a relatively small percentage of that. So it’s probably not going to be that hard to get a buyer to agree to that. So the guy who has no real estate background, but yeah, talk to me, talk to me about that briefly, Eric, if you would.

Eric Kuhn: No, you’re not wrong. And it also is a great way to vet out the validity of a buyer. People that are true players in the game, people that do this, they have access to that liquidity in moments, not days. And those are the guys that are going to go forward. Those are the guys that are going to close. If you need $25-50,000 hard. I need 36 hours, I’ll have it in Escrow, and let’s move forward.

Erik Gudmundson: So you’ve talked about some of the things that people should be doing and maybe they’re stepping up to the plate in ways where they’re not entirely sure what they’re doing. Talk to us a little bit about what you see as some of the more common misconceptions that people have about what commercial real estate broker like yourself or professional can do. 

Eric Kuhn: And we talk about this around the office because it’s a point of frustration is I don’t think people realize the value we can bring. Very, very often our involvement in the deal, our ability to negotiate on your behalf, or help in constructing a unique deal structure, that’s a win win for everybody is going to save you or make you more money than our fee. And it really, and maybe in time is money and we can speed the process along as well. I just don’t think people understand. They don’t know what they don’t know, and they don’t think to ask. So, ask {Inaudible 16:04.8].

Erik Gudmundson: That educational piece is so important. So I’m glad you’re answering our questions here today. And I know that you’re active in several local chambers of commerce. In fact, we met when you were serving on the board of the Southern Chester County Chamber. What would you say is your biggest surprise that you’ve encountered in your roles at these different chambers, particularly when you were on the board of the Southern Chester County Chamber? 

Eric Kuhn: Sure. Yeah. I would say, it was a surprise too. It’s a surprise that some of the biggest players in the largest industries in Chester County are in these chambers and they’re on the board or they’re, you know, otherwise associated at a high level with these chambers, and chamber members have access to these people. If you want to talk to the head of alternative energy for Pico Exelon, he actually will take five minutes out and talk with you. It is amazing, but the other surprising part is how few people take advantage of that. And even members of the chamber don’t, they don’t want to get in that room and get that moment. And it’s such a waste because that elevator pitch could really open up opportunities for you. 

Erik Gudmundson: Eric, let me just ask you a media follow up on that. You’ve talked about that five minutes. You just mentioned that that’s an in person thing, right? So, the formal meeting comes to an end and people are going to grab a coffee or have a glass of wine with the networking side. And you’re just saddling it up next to that person you want to meet, and that’s where it happens. 

Eric Kuhn: Absolutely. And the chamber smart that they structure these events. So there’s a before and an after or one or the other. There’s always time in there where you can just get that moment and just look at the chamber. Look at the look who’s going to be there and you can really understand that there is opportunity for you to again, get the five minutes. And as part of that five minutes, you’re going to make the ask, you’re going to make the ask for the follow up meeting next week. Can we get coffee? Can we do this? And it can make the difference.

Erik Gudmundson: And in addition to the chambers, you’re also active in several local nonprofit organizations. So tell us about one that you’re involved with and why you got involved. 

Eric Kuhn: You make me sound very busy, which is good. Thank you for that. Yeah. I’m a big fan of the community warehouse project. Community warehouse project is based in Westchester. They are a machine and it’s taken a while to get machine life. But man oh man, they got it figured out. They are taking furniture donations. They have warehouse space donated in a large part. Thank you, Eli Kuhn and company, to arrange this furniture so that people in need, and these are people coming out of domestic violence shelters. These are veterans in need. These are, you know, families that have just been able to maybe get their very first housing opportunity with no furniture. And they can go to this warehouse and shop the warehouse, actually pick out the furniture that they want. They don’t have to sit back and take what they can get is given to them. They get and it comes with a moment of dignity. It’s, you know, being able to get in there and make choices on your own. And I’ve been on all sides of that aspect. My favorite is delivering and when you’re walking through the back door of a house, a vacant house, with a couch and a little girl goes, oh, man, is that ours? That’s ours? And by the time you put it down, she’s jumping up down on it. Now you get it. Now you understand. 

Liam Dempsey: Yeah. That must be a great feeling. And, we’ll go ahead and link to the website for the Community Warehouse Project over on our website at [startlocal.co]. We’ll put links to all the things we talk about over there.

I want to change gears a little bit here. And, I understand from my cohost, Eric, that you’re using AI in your business. And Eric, my co-host and I are busy organizing Tech360, a local area tech conference. And this year we’re a hundred percent focused on AI. And as a side note, tickets for Tech360 are still available. Listeners can get the tickets over at [tech360pa.com]. But to the question,  Eric with a C, tell us how you are using AI at your commercial real estate business. I’m really interested to hear your answer here. 

Eric Kuhn: Yeah. I really hope not to disappoint you because we’re not all that sophisticated with it, but it has been really handy and getting creative branding ideas for not only ourselves, but our clients. And also for getting data and content format that we can use when we do post, when we’re putting out information, et cetera, instead of just being raw data to have it come over with actual relatable content attached to it has been really helpful in us, and our postings, et cetera. 

Erik Gudmundson: That’s fascinating how, you know, everybody’s using AI in their businesses and organizations, and whether it’s in a small way or a big way, it’s still a significant way, and it is a way that’s inspiring to workforce to make a little bit more efficient with the operation. So, it’s interesting. But for the workers that are left, all of us, 3D people that are still floating around West Chester, I hear you’re involved in a new restaurant project in West Chester. Would you tell us a little bit about that?

Eric Kuhn: Sure. That’s an exciting stuff here. This is a former bank building right on high street, 20,000 square foot vacant bank building. We sold it to the current owners and we’re given the charge of finding a new tenant, finding a new operator for this space. Well, what’s it going to be? And we were actually able to bring in a top chef food channel, Fabio Viviani, and his organization with multiple restaurants in Chicago and New York. He’s going to be opening up a 20,000 square foot concept in their 1st floor, 130-140 seat restaurant. 2nd floor, small event space, a speakeasy in the basement, super cool. And it’s bringing that executive celebrity chef vibe to Westchester. Well deserved. Westchester is a great, great restaurant food town as it is. And he realizes that, and I think it’s going to be a great bolster for everybody involved. We’re excited.

Erik Gudmundson: That means Westchester star on the map is going to be getting even bigger. So that’s an impressive project. I’m looking forward to trying it out myself. One thing I wanted to ask you though, in addition to this new hotspot in Westchester, is there any other hotspot up and coming business area in Chester County that you think people should be aware of?

Eric Kuhn: I am personally bullish on Oxford. I love it. I’ve met with Pauline, the Borough Manager out there. I’ve met with the Main Street initiative out there. And despite that devastating fire a couple of weeks ago, which is a real kick in the teeth, and they’re still working through that, they are finding responsible and really smart ways to grow. They have flexible zoning areas that allow multitude of uses coming in. I would love, love, love to see a couple of craft breweries come in there. What a great kickstart that is. It’s already a cool little town. I think it’s got a lot of upside to it. And it is another location where if you work in the Wilmington Delaware market, man, you could live here and be 15 minutes from work and what a quality of life you’re going to enjoy. I think, I like it. I like it a lot. 

Liam Dempsey: Oh, I’m excited to hear that, Eric. That’s pretty exciting. Oxford is a place, well, our Oxford. I used to live outside England, Oxford, but our Oxford here in Chester County is a place, I don’t know well enough. I go down to Neuchatel for the chocolate with some regularity, but I am all the more excited to get down to the town now. Thank you for sharing that. 

And kind of along those lines is exciting places to be. And you touched on this a little bit earlier with your live, work, and play. And then talking about this exciting new restaurant coming to West Chester in addition to all the really good ones that are already there. What are some of your favorite things about living and working in Chester County?

Eric Kuhn: Well, yeah. I’ve been in Chester County a long, long time. Not born here, but a long, long time. And I have to say, it’s probably the sense of pride that the people here have in themselves and in their area, you know, from a commercial real estate standpoint and seeing it firsthand, you know, the landlords want to see. And it’s that our career coming in and adding doing a value add to the community being part, you know, they’re coming in and contributing. They’re not, you know, drawing on the resources are actually bringing it in and a sense of pride. People keep their property nice. There’s a sense of accountability in Chester County that carries forward. I think it’s basically, it’s the old rising tide raising all ships really, it’s nice. 

Liam Dempsey: That’s a good answer. I appreciate that. One thing I want to ask as well, before we close out here is, is there anything that you and your company needs including, you know, are you hiring? Because a lot of companies are going through workforce challenges right now. But, what can organizations and people here in the county do to help you?

Eric Kuhn: So there’s a couple parts there. One is, are we hiring? And that answer, short answer is yes. With the caveat that we are hypersensitive to our environment, our work environment and our work community here. It takes a unique person in this industry to be able to be as open and sharing as we are. I would, you know, we are a team effort over here and that can be tough for some people in the industry to to get.

Other than that, we’re very fortunate that we’re not subject to the supply chain issues in our industry. You know, that sort of thing. But I would just say, I would encourage people to really learn what the other businesses in your community do. And I mean, really do. Because once you do that and you understand that, and again, there was somebody said it wasn’t me. I’m not that smart, but I can’t control when an opportunity is going to come to you. But I can make sure you think of me when it does. And so really kind of look around, talk to people, network, understand what’s around you and we’re all going to benefit from that.

Liam Dempsey: I love that. I love that. Thank you. That’s a very strong note for us to end on. Eric Kuhn, thank you so much for joining us on the Start Local podcast. Before we say goodbye, can you share where folks can find you online? 

Eric Kuhn: Absolutely. We’re just, [www.pillowrealestateadvisors.com]. And hopefully, we’re all over the web. Hopefully we’re easy to find.

Liam Dempsey: I know you are. I looked for you in advance of this show. You were very easy to find. 

Folks, we’re going to go ahead and put all the links we’ve talked about today over on our show notes. And,  as a reminder, we publish every two weeks. I prefer to say fortnightly. We prefer publish every fortnight, but that might just be me. 

Erik Gudmundson: There’s that other Oxford coming into play. 

Liam Dempsey: There it is, there it is, there it is. Somebody work out the comma. On behalf of me and of my co-host Erik Gudmundson, I invite you to go over to our website, take a moment to subscribe. We’ll send you the latest episodes of our show right to your email inbox.

And thanks for listening today.

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