A Deep Dive Into Flex Warehousing With Portal Warehousing

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Today s guest are Alex Morrison and Andrew Runnette Alex Morrison has broad experience across real estate capital markets and startups Alex currently is the founder and CEO of Portal Warehousing an innovative real estate operating company in the flex warehousing space Show summary In this podcast episode Andrew and Alex co-founders of Portal Warehousing discuss their innovative flex warehousing business They detail how they provide small industrial spaces to various businesses emphasizing the flexibility and services they offer such as logistics support and community building for their members They share their strategic approach to market underwriting building selection and the importance of location in gentrifying areas Despite challenges in scaling and logistics they highlight their efficient systems and the high demand for their spaces evidenced by rapid occupancy rates The co-founders invite building owners to consider management deals with Portal Warehousing which seeks to expand its unique model nationwide ————————————————————– Intro 00 00 00 Concept of Flex Warehousing 00 02 17 Finding Properties and Plugging Tenants 00 07 17 Membership Perks and Differentiation from Self-Storage 00 12 27 Challenges in Scaling and Overcoming Them 00 17 08 Underwriting Deals and Selecting Locations 00 18 17 Underwriting Markets and Demand Generation 00 18 59 Building Criteria and Location 00 20 12 Real Estate Cost and Client Opportunities 00 21 34 Minimum Building Size 00 23 07 Conclusion and Contact Information 00 23 55 ————————————————————– Connect with Alex and Andrew Facebook https www facebook com portalwarehousing Instagram https www instagram com portalwarehousing Linkedin https www linkedin com company portal-warehousing Web https join-portal com Connect with Sam I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook https www facebook com HowtoscaleCRE LinkedIn https www linkedin com in samwilsonhowtoscalecre Email me sam brickeninvestmentgroup com SUBSCRIBE and LEAVE A RATING Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts https podcasts apple com us podcast how-to-scale-commercial-real-estate id1539979234 Spotify https open spotify com show 4m0NWYzSvznEIjRBFtCgEL si e10d8e039b99475f ————————————————————– Want to read the full show notes of the episode Check it out below Alex Morrison 00 00 00 – They have very limited options after they outgrow their first space which maybe is a garage maybe a bedroom as they get to that next level the options drop off They need to sign a five year lease and there s not a lot of space that s available sub 5000ft So what portal is doing is being an institutional level provider of small warehousing space Sam Wilson 00 00 19 – Welcome to the how to scale commercial real Estate show Whether you are an active or passive investor we ll teach you how to scale your real estate investing business into something big Sam Wilson 00 00 32 – I ve got Andrew and Alex with me here today from Portal Warehousing Andrew and Alex welcome to the show Alex Morrison 00 00 38 – Thanks so much for having us Andrew Runnette 00 00 39 – Absolutely Sam Wilson 00 00 40 – The pleasure s mine I always asked every guest who comes on the show in 90s or less Where did you start Where are you now and how did you get there And Andrew if you don t mind kicking us off by answering that question And then Alex I guess we ll have you be up next after that Andrew Runnette 00 00 55 – Yeah No problem Thanks for having us on we started the company about three years ago we just opened our fourth warehouse and we ve got for Salt Lake Tempe Brooklyn and LA it s been a journey and we re you know we re growing and just moving on to the next one as we go So I ll let Alex take it from there Alex Morrison 00 01 21 – Yeah I mean the the genesis of the company actually came at the start of Covid when the world changed And you know traditional methods of real estate were kind of changed overnight And I was based in LA and the only thing you could you could tour for the first six months of Covid were industrial buildings so we looked at buying a lot of industrial buildings for my last the company I worked for lastly which was a real estate private equity company And ultimately that journey led us to developing an operating company that could plug into vacant real estate and add a lot of value Alex Morrison 00 01 54 – And that and that you know three years later is portal And what we do is as effectively we re a co warehousing flex warehousing operators So we provide industrial space for businesses of all sizes to to use for all sorts of purposes But basically the solution is a flexible industrial product that serves a lot of needs on the logistics side and the warehousing side Sam Wilson 00 02 17 – Okay that s really really cool I love that in the name again of your company is Portal Warehousing going to learn more about it I think it s join-portal com So give me a breakdown on that Like what s a who s a customer What is flexible warehousing I know we talked about this before the show You guys said something along the lines of you feel like where you are now is where maybe self storage was 30 or 40 years ago Kind of give us just a broad overview if you can Alex Morrison 00 02 43 – Yeah Like I d say from a fundamental perspective if you think about an industrial business or an industrial user of space there s a long tail of users that are smaller Alex Morrison 00 02 53 – you know the Amazons of the world take on 50 000 100 000ft plus of spaces but there s a massive amount of companies that just need a couple thousand square feet or less space And their options are super limited So the genesis of portal was actually thinking about our network in the e-commerce space and learning you know their their kind of supply profile as you as you start a company and think about the last company you saw advertising or purchase from on Instagram these companies have products they need somewhere to store them and fulfill them out of They have very limited options after they outgrow their first space which maybe is a garage maybe a bedroom as they get to that next level the options drop off They need to sign a five year lease and there s not a lot of space that s available sub 5000ft So what portal is doing is being an institutional level provider of small warehousing space Sam Wilson 00 03 42 – Got it An institutional provider of small warehousing space Is this kind of I mean we re going to use this maybe not even the right term but I mean we see it happening across Airbnb ten years ago you know hey we re working Sam Wilson 00 03 55 – We re doing you know people are renting out their houses on Airbnb We re seeing it happen in the parking industry where we re you know anybody with a lot that can park a semi and some other things those get you know turned into you know semi parking spaces And you guys kind of saw this I guess same opportunity in again smaller potentially unused spaces And or maybe you re taking big buildings and converting them I don t know I mean it s that kind of am I thinking along the right lines here Alex Morrison 00 04 21 – Yeah exactly The thought is there is a massive amount of of customers out there that need a functional place to operate They don t need the 32 foot clear class A building They just need an industrial logistics environment with a dock door and loading in a commercial address And we can take spaces that range from your class A warehouse to you know our newest location in Brooklyn is actually on the seventh floor of a multi-story you know a true multi-story warehouse that was built 100 years ago with freight elevators and logistics for that manufacturing kind of company Alex Morrison 00 04 52 – We can plug our customer in That just needs a highly functional space and some logistics services and basically fill buildings that you know are antiquated from today s traditional logistics perspective Sam Wilson 00 05 06 – Got it Okay That s really really cool Tell me I guess when you you guys are all over the country you said Salt Lake City Tempe Brooklyn Los Angeles How how do you underwrite How do you even figure out if this model will work where you guys are going Alex Morrison 00 05 24 – I mean we there is an enormous demand We think this product works in in every city We have to be smart on location We re really focused on infill amenities markets If you think about our customer profile which Andrew can kind of jump into a little bit they want to be in a convenient we re really selling convenience as well as space here The core product is space but it s also the alternatives are very slim So our customers are paying for for high quality functional space near where they where they work Alex Morrison 00 05 55 – So generally that means last mile locations that are infill They d rather be in downtown LA than going out to the Inland Empire for example And Andrew one of you you know show Sean some of our story Sam some of our example kind of customers that we work with Andrew Runnette 00 06 13 – Yeah We ve seen a lot of crossover sand between you know people doing industrial work but also doing e-commerce work but also using the spaces where they work out of it as well So you ve got your side hustler you ve got your Amazon full fillers right You ve got all those kind of profiles that come across but also a lot of service industry customers where you know satnav company right They get a contract to do some restaurants in Phoenix for example We ve had this numerous times where they come in and use our warehouse to fulfill their contract Then they re gone right So it s flexible You know they re signing a six month lease or a 12 month lease and you know that s it Sam Wilson 00 06 55 – That s really interesting How how does it work I guess you know from a buildout perspective Are you guys are you guys subleasing space from another you know are you guys buying the warehouse and then you know making it into smaller bays or are you guys buying are you guys subleasing space and then leasing that out again Like how are you guys finding the properties and then plugging the right tenant into the right spots Alex Morrison 00 07 17 – Yeah Like just to kind of exhibit an example is our our building in in Brooklyn we have a bunch of different strategies We do select releases but generally we re moving away from that We re doing mostly management deals now and then acquisitions through some of our capital partners or where our partner buys a vacant building and we come in and operate it and generate a pretty big increase in NOI because we re generally getting at least three times market rents on our on our our spaces because we re making them much smaller than a market lease is Alex Morrison 00 07 50 – so we ll take a 50 000 square foot warehouse and break it down into spaces that average about 500 or 700ft where 50 companies can operate out of And we have a logistics operational component where we help them with a bunch of services and give them an awesome space to work out of But for the most part you know they re doing their own business within their own space It s private but they share the logistics infrastructure so we re allowing companies that will never have access to things like a dock door because generally it s hard to find that when you when you are below 5000ft and don t want to sign a five year lease where do you find infrastructure like that We can provide someone who needs 200ft of space with a commercial you know dock door which which allows them to grow their business very quickly and grow with us Sam Wilson 00 08 36 – Got it So you guys are you guys moving I maybe I misheard this but you re moving away from the like actually buying of the of the warehousing and then leasing them out and more into the management model Sam Wilson 00 08 47 – Is that kind of what I m hearing Alex Morrison 00 08 50 – Yeah The last two deals that we did were management deals and one of them was an acquisition through a partner of ours and the other was a third party management deal And we re seeing a lot of opportunity with that as the as the product matures and and the track record kind of appears and it looks really good Really good Honestly our track record in terms of filling space or buildings or 100 full generating big premiums people are saying can you do this with us Can you do this in our building And we can take some of these funkier buildings that are in you know gentrifying pockets but are not class A industrial and generate like class A rents on those right Sam Wilson 00 09 24 – No that makes a lot of sense And I would think from a scalability model I mean that s far more scalable than you guys one building at a time taking it building it out doing whatever you re going to do then managing it and then going back to the next building Sam Wilson 00 09 37 – Like at this point your customer base is nationwide You re you re just running the management side of it How does that work Say I came to you today and I said hey I need 200ft and you know Salt Lake City like how do you how do you define what that 200ft is And where does a customer I mean what s what s that space even potentially look like Andrew Runnette 00 09 57 – It s pretty small but it works for a lot of people but it s already set you know it s got a it s got a key It s got a door you know it s it s already set We we ve modeled out how many we need of that size in each of our locations And we ve got 250ft 500 015 hundred square foot spaces that are just predefined And people make it work and they you know they can move in same day Really We ve made it really easy We ve automated everything Sam Wilson 00 10 27 – So it is a lot like I mean a storage unit It s just you walk in you get the keys Sam Wilson 00 10 32 – Hey this is the size you know like you said two 5500 was your next one 1500 square feet something along those lines You can pick one of those three sizes and boom you re ready to go Andrew Runnette 00 10 43 – Yeah And we ve we ve taken a lot of learnings from storage Right We ve taken a lot of learnings there and and really automated things and made it pretty easy We only have one general manager at each location so operating a 40 000 square foot warehouse Sam Wilson 00 11 00 – Right Okay What were you going to say Alex Alex Morrison 00 11 03 – I was going to say we mentioned earlier on the call that you know we see a lot of similarities between storage I think another another name for this product is could be like industrial Self Storage where it looks like self storage It feels like self storage Our customers are not people they re businesses and it s a very diversified rent roll And you know we re cutting up space It s a you know it s changing the model to a monthly model versus a per square foot model Alex Morrison 00 11 27 – And and that s what storage does And you can get some pretty big premiums when you do that so so we do think this is like an early asset class that you ll see more and more of and just like self storage you know 30 years ago it was mom and pop industry or maybe not institutional industry And now it s a darling of real estate So you know not to say that that will become of this but I think it could I really do Sam Wilson 00 11 52 – Got it So let s say you rent that 1000 square foot space or 1500 square foot space But I am looking at I think one of the things that you mentioned here was that all of your spaces have a services component that goes along with it maybe that you re not going to find I guess I m what I m searching for here is the differentiator between self-storage and what you guys are doing And I know there is one So maybe you guys can clarify that for me because when I see here 200ft I m thinking well why not just go rent to ten by ten roll up storage units and then you re at 200ft and it s probably less than maybe what you guys do Sam Wilson 00 12 23 – But there s got to be some differentiator there So tell me what that is Maybe Andrew Runnette 00 12 27 – I think there s two The docs as Alex Alex mentioned earlier Right You can t find a loading dock at it Such a small space Right and then second would be we receive goods for people So say you have 6 or 7 pallets coming in You let us know We ll grab them off the truck for you Pretty simple And we ll throw them in your unit if needed or you know if you can t be there So companies are saving you know that labor piece right They re saving the money right there by not having to have somebody out there warehouse at all times Sam Wilson 00 13 00 – Absolutely And if you don t know for those of you that s never been in a business that has receivables like that that come on trucks I was a long time ago And what a nuisance that is Man in the middle of the day you re trying to get something done and all of a sudden there s somebody knocking hey man there s a there s a semi trailer out back like crud okay let s go pull something Alex Morrison 00 13 19 – And we also help on more on the logistics side too I mean we help with the outbound and the inbound So you know we arrange pick ups from all the major carriers So from a if you re a small e-commerce brand sending out 100 packages a day all you need to do is give you past a product that s been packaged to us and we ll handle it from there And we aggregate that amongst the facility So we have economies of scale and get the past that labor cost and the shipping costs Savings on to our members So there s a big component of of the logistic services that you know we have a lot of companies that actually come to us from self-storage They re in 4 or 5 six self storage spaces and at some point that breaks and it s definitely a more affordable model But at some point you have to make a decision do I want to run my keep growing my business professionally or do I want to stay you know limited by storage units and in generally you know it breaks at some point Alex Morrison 00 14 10 – So you know our model is kind of the next stage If they re not ready to go lease a 2000 square foot industrial space if they can even find it where the next kind of stepping stone for that for that journey Sam Wilson 00 14 21 – Right Yeah Like you like you mentioned there if you can even find it let alone being able to find it on flexible terms you know which it sounds like that s another perk that you guys have where it s not hey we re not tied in for 5 or 10 years on an industrial space It is You know I don t know what you re I m sure there are varying lease terms but it s it s probably much shorter duration I would guess Alex Morrison 00 14 43 – Yeah it s 3 to 12 month terms And generally you know customers don t leave us after their initial term They just they like the flexibility Something changes We you know we ve had companies grow from our smallest space to our largest space 200ft to 2000ft over the course of a year Alex Morrison 00 14 59 – And then and then they re ready for their next you know traditional term And they ll go find a 5000 square foot building to lease on a five year basis But they might not be ready for that for you know a number of reasons when they first joined us Sam Wilson 00 15 11 – Right Oh that s really really cool You mentioned the term member And I m looking here at your website and one of the line items across the top on the menu bar I guess that s what that s called is this membership perks What is Andrew Runnette 00 15 22 – That Yeah we touched on some of it I mean that that s you know the technology partnerships meaning the shipping platform you know the receiving for customers the outbound So setting up you know they don t have to set up accounts with Fedex UPS right They can just come in to us and use our accounts and ship out to their customers You know And that way they get aggregated shipping discounts as well Andrew Runnette 00 15 47 – and then you know partnerships to help them scale their company If you need help building your Shopify store we have somebody that can help you you know if you need insurance we can help you there We ve just built a bunch of partnerships that people get access to just through becoming a member of portal Sam Wilson 00 16 04 – Got it And that s and why did you guys select the the term member versus you know client or something else or you know where did that name kind of or that idea of calling people members come from Andrew Runnette 00 16 17 – I think it builds community It builds you know being a part of something I mean there s you know a lot of folks that meet each other within the warehouse we just had a packaging company join us and he s he s now supplying packaging he started supplying packaging in one facility and now he s expanding to others and now he actually expanded to others So he s in he s in two maybe in three facilities here in the near future Andrew Runnette 00 16 43 – So you know that also helps him save on shipping to his customers outside of Porto as well right Sam Wilson 00 16 50 – No that s really really cool I love this model This is really unique And you guys are obviously you re aware that you re filling a gap in the market that s probably existed for a long time What are some challenges I guess that you guys see in scaling this And then how do maybe you intend on overcoming those Alex Morrison 00 17 08 – Yeah I d say one of the one of the biggest challenges in any real estate operating business has this challenges like is growing efficiently smartly and and quickly enough to to grow so you know we see demand for this all across the country you know some markets are hard to break into The coastal markets are very expensive on an industrial industrial basis Our base rent is a function of the base rent of the real estate So you know there s just some some markets are cost prohibitive And we re getting creative on deal structure to solve that Alex Morrison 00 17 39 – So I d say I d say our limiting factor is just is just real estate And which is a good problem to have because if we re having that issue we know that the companies that we re servicing are also having that issue but you know at this point we re just we ve really built out a really strong set of infrastructure We spent most of last year building out our operations from top to bottom And we think this year will be a big year for us on growth So but you know the more the more deal flow we get the faster we we can we can grow the company And it s just a matter of finding the right deals in a creative way Sam Wilson 00 18 13 – Right Very very cool Andrew you have any thoughts on that Andrew Runnette 00 18 17 – Yes I mean I think the challenge is you know come just in logistics but you know that s what we re solving for So it s I don t I think the way we ve built out our infrastructure and all of our systems over the last year just you know really set us up for scale Sam Wilson 00 18 36 – I got a question really I touched on this a little bit earlier but it was really about how you how you underwrite a deal like when you look at an opportunity like what makes it Yeah this is going to be a great place to put a co warehousing space or I guess again I m probably using the wrong word there But how do you do that I mean that s that s kind of yeah Just loving the answer to that if you can Alex Morrison 00 18 59 – Yeah We spent a significant amount of time underwriting markets doing our diligence you know generally before we open a facility will have a list of about 200 companies that have signed up for the product that are waiting for us to open so that we know that the demand is there and we do We ve built out a really powerful demand generating system that s proprietary that helps us basically determine the demand levels So you know we ll run ads across the internet across different platforms to to kind of market something that s coming soon and then hear from the actual customer Alex Morrison 00 19 32 – we want to make sure the demand is there We re not picking the wrong pocket And there s obviously better places in a city than others Like everything in real estate We want to make sure we re in the right space to make sure that you know the occupancy comes to us but we re you know in terms of our of our occupancy history we re really excited because you know we filled up our our two first facilities to 100 occupancy and under an under ten months and and that s that you know very you know premium market rents and honestly a wait list in these facilities So the demand is there it s just about being smart about making the right kind of decision on where where to place the facility Sam Wilson 00 20 12 – Is there a type of building in particular that works And one obviously maybe that s a stupid question because you just mentioned a building in Brooklyn with a seventh floor that you ve converted into this But I ask the question anyway but a type of building that works for this and the type of building that just doesn t Alex Morrison 00 20 26 – Yeah What we like the criteria that we look for is is generally like adequate You know we essentially we look for criteria like doctors parking location Those are the three main kind of things that we look for Clear height isn t as important to us So we can kind of fit into these buildings that you wouldn t think have have a useful life in industrial anymore because an Amazon wouldn t be able to work there Our companies generally have no issue with that So you know honestly most buildings most buildings work And what we really try to find is these class B and class C buildings that you know are relatively priced well in good pockets of town and gentrifying industrial neighborhood We like to say we go to where the breweries are because once a brewery starts to pop up you know you know these are industrial pockets that are turning over and our product would work well there Sam Wilson 00 21 15 – Got it And I think that s probably the the and again filling up an entire space and ten months that s that s that s impressive Sam Wilson 00 21 23 – But because you re getting premium rents like the the numbers make sense I would imagine a lot sooner in the process than maybe it would be if it was just a standard industrial building No Alex Morrison 00 21 34 – Yeah it all comes down to the real estate cost The base cost You know if we went and paid class A rent and it doesn t really provide value to our customers or you know class A pricing on a per foot basis we don t need to do that I mean it would work just as well but if we can find value in A in A B or C building in a good part of town that we know we can bring the rents to and bring the occupancy in we d rather do that than than pay up for a higher quality building Sam Wilson 00 22 03 – Got it Understood So can somebody approach you today if I called you to say hey Alex and Andrew I ve got a building that I think would be a great fit for this I own it Sam Wilson 00 22 12 – Am I an ideal client for you Alex Morrison 00 22 15 – Absolutely And you know we re looking at opportunities all across the country I d say to like an ownership to the audience out there that has a building you know we re generating the ownership like 25 to 35 no premiums on the real estate that on a per a market basis So it s compelling from from a from market rent perspective And we re also you know bringing breathing life into some properties that maybe have stagnated So absolutely we are looking at management deals across the country in our in our open open awesome Sam Wilson 00 22 48 – Know that s and if you re listening to this you know Alex just said it You know if you ve got a building that kind of fits this profile reach out to these guys And of course their information will be included here in the show notes at the end of it and just find out if this is a good fit Is there a particular size like what s a minimum size that you would need in order to turn a building into Yeah you guys are doing great Alex Morrison 00 23 07 – Great question Sam We generally look for 40 000ft and above So 40 to 80 000ft Size range is what we find works best from an economies of scale perspective Now we could we could flex down We can flex up But generally 40 000 is our starting point Sam Wilson 00 23 23 – Got it Okay 40 000ft or bigger This has been fantastic Alex and Andrea thank you for taking the time to come on today And really I mean I haven t I don t know whether we had 900 episodes or something on this show at this point and we haven t had anybody talk about what you guys are doing right now So obviously you re aware that you re on to something unique And obviously filling a building in under ten months proves that that is also true So certainly appreciate your guys s time today Any last thoughts on your business on the model or anything else you guys want to share here before we sign off Alex Morrison 00 23 55 – You know Thanks for having us Sam If you re ever out in Phoenix Sol la Brooklyn or maybe more markets come by check the space out and you ll you ll find it really cool Sam Wilson 00 24 05 – Fantastic Alex Morrison 00 24 06 – Appreciate you having us on Sam Wilson 00 24 07 – Absolutely No The pleasure was mine If our listeners want to get in touch with you and learn more about you What is the best way to do that Alex Morrison 00 24 15 – Yeah My email to alex join-portal com Andrew s Andrew at join dash Com or you can go to our website join-portal com and and reach out to us there Sam Wilson 00 24 25 – Fantastic We ll make sure we include that there in the show Notes join-portal com Alex and Andrew thank you again for coming on the show today Appreciate it Andrew Runnette 00 24 33 – Thanks Thanks Sam Sam Wilson 00 24 33 – Hey thanks for listening to the How to Scale Commercial Real Estate 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