From Mötley Crüe to Multi-Million Dollar Commercial Real Estate Deals With Mike Herl SIOR- RFP 88 Transcript
Gordon Lamphere (00:04): Hi, I’m Gordon Lamphere, and welcome to The Real Finds Podcast, where we have real conversations with key entrepreneurs, activists, and researchers who are shaping the real estate industry and, as a result, our world. On today’s podcast, we’ll be speaking with Mike Herl from Madison Commercial Real Estate. Mike is a commercial real estate industry veteran who has done some of Madison’s largest deals in the multifamily, industrial, retail, and office asset classes. On the podcast, we take a deep dive into what’s going on in Madison, how private equity is reshaping student housing in the Big Ten, and why new builds are shaking up the industrial market in Illinois and Wisconsin. Last, we look at how touring with Mötley Crüe, REO Speedwagon, and Cheap Trick translated well into dealing with the rock stars of the real estate game. Mike, thank you so much for hopping on the podcast today.
Mike Herl (01:03): Well, thank you very much for having me.
From Tour Manager to Broker
Gordon Lamphere (01:06): So how does one get from touring with rock bands to large commercial real estate deals? It seems like a unique path into the industry.
Mike Herl (01:18): In my situation, I spent the first half of my adult life, seventeen years, traveling around the world touring with rock bands, and I was preparing for an exit. I had a wife and a couple of kids at home, and touring with band members who act like children was just… well, I had real children who needed a dad around, not a babysitter. I’d already been preparing, taking the classes I needed when I came home from tours and starting to get to know the locals. For years, I knew how to get from the airport to my house and back, and I didn’t know much more about the Madison area than that for the first eleven or twelve years I lived here.
Mike Herl (02:20): 9/11 changed everything. It changed the entire touring business. It went from being a lot of fun to no longer being much fun at all. I knew pretty much everybody in the rock and roll business in the Midwest, a lot of the Chicago folks: Steve Albini, the Smashing Pumpkins, REO Speedwagon. I toured with Cheap Trick forever. Jam Productions. Those were the people I was around constantly, and that was my orbit for a long time. But 9/11 changed the entire business. I lasted maybe another eight months after 9/11, and then it was time to hang up the spurs because of all the new rules for touring. And it’s a young man’s game. I did thirty-five hundred rock shows. That’s a lot of rock shows in seventeen years, and I don’t know many tour managers who even come close to half of that. I was thirty-seven years old, and it was time to make a change.
Gordon Lamphere (03:42): That’s gosh darn impressive. Speaking of impressive, you’ve done a lot of pretty large deals in Madison. You probably had the chance to see a lot of markets all around the world while touring. Why did you choose to focus on Madison?
Mike Herl (04:06): Again, circumstances dictated where I was going to live. My wife was from Madison, we had two kids here, and after I hung up my spurs she informed me that she wasn’t leaving. She told me that I was going to have to find something to do here and take care of us.
I grew up in Loveland, Colorado, where my parents owned a large residential brokerage. I was not a residential kind of guy after years of watching all the ups and downs my parents went through. One of the key reasons I chose commercial real estate is that there’s too much emotion involved in a residential deal: people are making a house a home. With investment deals and businesses trying to find something where the numbers work, there’s very little emotion involved. That’s why I went that way.
I quickly found out that a lot of landlords and developers were just as egotistical and driven as rock stars, so it was actually quite an easy transition as far as dealing with personalities. To tell you the truth, I didn’t even really notice the difference. Instead of moving sixty pirates from one city to another, I’m sitting down with a developer or landlord and his team, cutting deals and getting things done. It was a lot easier of a transition than I thought it would be.
Building a Brokerage in Madison
Gordon Lamphere (06:01): There are definitely some developers out there who fashion themselves rock stars. You’ve built a pretty robust practice in Madison. How did you start out and build that practice? What was your path to going out on your own?
Mike Herl (06:28): When I first got off the road, I contacted three or four developers and investment real estate companies and simply asked the owners for about twenty minutes of their time, because I really didn’t know what I wanted to do. What can an old road dog like me do? I settled shows worth hundreds of thousands of dollars. You pick up half a million dollars one night for a rock show, and you’re going through everything, making sure the band has been compensated for the peanuts, the popcorn, the parking, and all of that. So you’re constantly going through contracts and things like that.
That’s what I talked to these folks about: this is my skill set, so what do you think someone like me can do in real estate? I think it was the third person I talked to who created a job for me immediately. I asked for twenty minutes, and he gave me four hours. When I got home, my wife asked how it went, and I said, “I think I got a job. I’m not quite sure.” The next day I got a phone call saying, “Come on in and meet the entire staff. We want to bring you aboard.” At the time, this firm had about thirty-five shopping center properties all over Wisconsin, and they wanted to take their brokerage in-house instead of using brokers all over the state. That gave me the opportunity to learn how to set up a brokerage and all the ins and outs that go with it, which was a wonderful exercise to go through. I’m forever indebted to my first employer here. He’s still a dear friend to this day.
I stayed with him for two and a half years, and the next thing you know, the headhunters were coming out. Office was really starting to take off in this area, and I’d cut my teeth in retail.
Mike Herl (08:44): But they kept trying to convince me that office was easier, so I jumped ship to another small brokerage and cut my teeth in the office world. I have to admit it was a lot easier path than the retail world. Then that small brokerage got swallowed up by a national tag, and I was the broker for that national tag’s Madison office for eleven years. Around late 2015, they decided to close the shop. Tertiary markets were no longer attractive to them.
So I sat down with my team and explained that they were going to shut us down in two months and we needed to find someplace else to go. As we traveled around and talked with other brokerages, and Madison is full of boutique brokerages, it dawned on us at dinner one night, all of us together: why join another boutique brokerage? Why don’t we just start our own? We had a pretty good team and very, very good clients who wanted to stick with us. So that’s why we decided to go out on our own. We have a very good team here. I think there are twelve of us now. We have general contracting and lab design, and we’ve done very well.
As soon as you start making big gains in the market, the national tags start knocking on your door again, asking you to join them. And I ask them very simple questions. Our signs are very unique, in Badger colors. Do we have to give up our color scheme? Yes. Do we have to give up the Madison Commercial name? Yes. Well, we named our company Madison Commercial because
Mike Herl (11:08): when people outside the area are Googling commercial real estate in Madison, Wisconsin, they’re going to get us first. I’ve already been through the national tag thing, and everyone here with me has been with national tags. So we decided that instead of living under the corporate thumb, we’d create our own little corporate thumb and make it more of a family-type organization. We never really wanted to get above six or seven people, but we’re about double that now. We’re just trying to be the best we can possibly be and make it a place people never want to leave.
Retail Versus Office, Then and Now
Gordon Lamphere (11:52): You touched on office being easier to broker than retail. What did you feel the big differences were?
Mike Herl (12:05): First of all, we’re talking twenty years ago, not today. It’s flipped today.
Gordon Lamphere (12:12): So now I’m really curious. What was easier about office twenty years ago, and what are you seeing now?
Mike Herl (12:26): As far as office twenty years ago, even if it was raw space, landlords were willing to do seventy, eighty percent, if not a hundred percent, of your build-out for you. In retail, you had to teach people what a warm white box is versus a cold shell.
Mike Herl (12:57): A tenant improvement allowance of $25 a square foot. People walk in and see a dirt floor in retail. There’s no bathroom, but they see the piping for it. There’s no sheetrock on the walls. And they say, “Okay, but I get $25 a square foot.” Yes, but that’s probably just going to cover your HVAC system. “So the rest of it is on me?” Yes, the rest is on you. You had to be really dedicated to your retail idea to pursue it.
The other thing I didn’t like in the retail world was young entrepreneurs coming into the market who weren’t really looking at virgin space. They were looking more at second-generation space, which still needs modifications. It was shocking to me that because they were new to business and couldn’t get loans, they were putting improvements on their credit cards or taking second mortgages to pay for everything and get their initial inventory together.
So I decided I was going to become a specialist at reading business plans. I’d walk them through their business plan and make sure that before they started putting charges on a credit card or taking a second mortgage on their home, they clearly understood what it means to run a retail business. There are no vacations. Your busy months are likely going to be over the holidays. You need to piece all of this together and let me look at it. I always explained that I’d much rather lose you now, at this point, going through your business plan and fully understanding the endeavor you’re about to embark on, than talk a landlord into getting you into a space
Mike Herl (15:17): where you do all these improvements, go out of business two years later, and leave the landlord to go in and gut a lot of what you did. The business plan for a retail business was imperative.
As far as office, people were already in some kind of office environment, or even operating out of an office at home. They knew how they wanted it set up and what worked for them. With second-generation space, they could make modest modifications and make almost anything work. Those were the big differences. Obviously, today it’s a little different. I got caught up in the office market. I personally purchased seven office properties, and I’m telling you, it’s been a struggle the last couple of years. I’m still licking my wounds a bit, but we’re finally starting to come out of the doldrums, so to speak. It’s interesting: twenty years ago I was doing ten, twenty, forty, sixty thousand square foot office deals. Today, thirty-five hundred square feet and below is where the majority of the action is.
From Brain Drain to Boom
Gordon Lamphere (16:53): It’s crazy. We just sent a ten thousand square foot office requirement through the SIOR network into another market, and people picked up the phone saying, “Wow, ten thousand feet!” We’re sitting there thinking, it’s a deal, but it’s not a huge deal. One thing that’s helped Madison get a lot of deals, not necessarily huge ones, is that you have a robust office culture driven primarily by the life sciences world, and the university system has been huge for that. We have a client who might be looking up there. Can you talk a little about how the Madison office market has evolved, and life science in particular?
Mike Herl (17:45): It’s really something to watch the ebbs and flows not just of the real estate market but of the Madison community in general. Literally ten or eleven years ago, the big topic city leaders and business owners were struggling with was what we called the brain drain. We have this massive university, with anywhere from 48,000 to 53,000 students every year, right smack in the middle of Madison, along with our state government. And we were growing so modestly. People would come into town, get a world-class education, and then skedaddle.
We laugh about it now, but in my first ten years in this business, we have the famous Graaskamp school here, one of the best real estate programs in the Midwest, if not the country.
Mike Herl (19:09): I know a lot of the professors there, and they’d call me up and say, “I’ve got this kid. You need to have him come in and intern for you. He wants to stay in the area.” I hired eighteen interns in a row out of the Graaskamp program, taught them what we know, let them apply what they learned in school to real-world experience with us, and within a year they saw greener pastures in Chicago, New York, and the other big cities. That’s where they wanted to go, and we couldn’t keep the talent here.
Then one day we were having an after-office mixer with our commercial brokers group, and we looked around and realized that literally two-thirds of the members were over fifty years old. We were really concerned: if we don’t get some youth to stick around, who are we going to hand this real estate market over to?
Well, when Epic Systems kicked into high gear hiring kids right out of college and growing its Verona campus by leaps and bounds, and then Exact Sciences did the same thing when it set up shop on the southwest side of Madison, all of a sudden these kids were either sticking around or coming in from other college campuses and loving the area, loving our lakes, and really liking the vibe of the whole culture here. That’s what really sparked it. Now we’re experiencing an average of about 7% growth in Dane County every year. Looking at the other 71 counties, it appears only about three are growing above 4% a year, and Dane County is the fastest of them all.
Mike Herl (21:34): We’ve had a migration of young folks, millennials and Gen Z, moving here in droves. It’s been something to watch. In a ten-year period, we went from brain drain, trying to keep any kid who graduated from the UW, to people suddenly coming from everywhere.
Politics, Scrutiny, and Student Housing
Gordon Lamphere (22:04): Every growing market has all sorts of friction. What are you seeing in Madison with that growth in terms of infrastructure challenges, zoning challenges, and, since Madison is a pretty political city, political friction?
Mike Herl (22:24): That’s an understatement. I’ve got to be very delicate here. When an application with my name on it comes through the city, it already gets a little extra scrutiny, so I’ve got to be careful. But what I’d say is this: yes, it’s a very political town, and yes, city government is very left wing. The problem comes when developers, especially from out of the area, come here and aren’t used to the amount of scrutiny a project gets. It shocks them. If they try to do it on their own, they usually fail the first time. What they usually end up doing is hiring people like us, or large builders like Findorff and others who specialize in dealing with the personalities downtown and walking developers through the process. As long as they team up with somebody here, you see things really happen.
We have a group that Madison Commercial is part of called Smart Growth Madison. It’s an influencing group of developers, real estate agents, title companies, and real estate attorneys. We try to influence municipal leaders, mayors, planning commissions, and so on, to understand the rules and regulations they’re putting up. They’re trying to make things easier for the bureaucracy to control, without realizing, because they’ve never built a treehouse themselves,
Mike Herl (24:45): what it does to us as developers and real estate people. The problem is that with turnover every two years in all these municipalities, you’re constantly educating the newcomers. That’s one of the hardest problems.
When Madison really started blowing up a few years back, we had some pretty good-size landlords and developers who capitalized on it massively. They controlled a lot of dilapidated product, old two-story student housing throughout downtown Madison and the campus area. When the UW started increasing enrollment and more kids moved here, those owners tore down their old run-down student housing and built beautiful new student housing facilities. Boy, did that catch the eye of outside developers who specialize in that kind of thing, and they swarmed in.
My partners and I were lucky enough to land one of the big ones out of Chicago, and I think we’ve done four or five of the biggest student housing projects. We assemble the properties for them, and they’re enormous and beautiful. I often joke that kids coming into college today don’t really have the college experience we had. They’re walking into one of the nicest places they’ve probably ever lived. It’s really quite something.
These outside developers have swarmed the Madison market, and we’re partly responsible. We were told we achieved the highest price per square foot for dirt in the history of downtown Madison, something like $785 a square foot last year. But when you’re going to put 1,700 student beds on it, you can afford that.
Mike Herl (27:11): What’s kind of funny is that landowners within half a mile of campus think their properties are now worth $785 a square foot, and they’re not. There’s no underground parking in these facilities. The kids are just walking across the street to campus. If they have to go half a mile in the winters we have here, forget it. So right around campus, yes, you’ve got a gold mine as far as what your dirt is worth. Just a few blocks away, you’re at half the price, but that doesn’t stop people from trying to get as much as they can. The local developers now say, “I can’t afford the dirt price anymore,” and with inflation and everything that’s happened, they’ve taken a back seat. Meanwhile every student housing and multifamily developer has poured in here, and it’s insane how many apartments they’ve built.
Gordon Lamphere (28:33): Why do you think student housing is able to attract so much institutional money? We’ve seen it across the board in so many of our markets. There’s a lot of institutional money in multifamily generally, but nothing to the degree of student housing.
Mike Herl (28:53): What’s interesting is the return institutional money expects versus a guy out there wildcatting on his own project. Ten years ago, the norm was that if we were going to build something, we needed a fifteen percent return to make it worth the gamble. When institutional money comes in and tells us all they need is a four or five percent return, they’re willing to spend a lot more on either high-end existing product or dilapidated stuff to tear down. And you’ll see that a lot of these huge developers either have, or are in cahoots with, a REIT of some sort. They develop it, collect their developer’s fee, and then flip it right over to the REIT.
Industrial: Tilt-Up Versus Metal Skin
Gordon Lamphere (29:57): We’ve seen that with some institutional deals in industrial as well. Most of who we work with, I’d say, are medium-size and sub-institutional investors getting much larger percentage profits on deals. Then you see folks at the bar afterward from some of the larger firms working with institutional players, look at how a deal pencils, and it’s a very different world. Speaking of industrial, how has Dane County fared in industrial compared to the other asset classes we’ve talked about?
Mike Herl (30:55): Again, what’s crazy is the ebbs and flows. Six or seven years ago, the metal skin buildings that had been built around here for the last fifty to seventy-five years were the norm. Then suddenly, tilt-up became mandatory. People used to paying five, six, seven dollars a square foot net found that the only newer product with higher clear heights, bigger doors, loading docks, and all that was tilt-up, and it was double the cost.
We went through a period, especially during the COVID years when everybody needed warehousing for distribution and so on, when there wasn’t enough available. We saw a huge spike in pricing for product that a few years earlier would have sold for forty to fifty dollars a square foot, and suddenly it was going for $80, $90, even $100 a square foot. A lot of Chicago-area companies came up here and started building mass tilt-up all along the interstate system, got aggressive on pricing, and started stealing away some of the larger tenants around here.
Literally in an 18-month period, we saw the value of old metal skin buildings plummet. Pricing dropped by 25% in 18 months because of all the tilt-up that was built and companies needing the bigger clear heights,
Mike Herl (33:20): thicker concrete, and levelers on all the loading docks, things of that nature. It took a few years for people to buckle down and say, “This old building isn’t working for me anymore, but I can’t afford tilt-up. So instead of getting 25,000 square feet of tilt-up, maybe I can adjust my business plan, fit it all into 2,500, and stack things higher.” That’s what we’ve seen happen in the last few years.
In our business parks around here, and in the greater Madison area, they’ve redone their zoning. They do not want heavy manufacturing around the communities at all, so they’ve rewritten their zoning codes to keep heavy manufacturing users out. We’re working with several heavy and light manufacturers right now who want to come into this market, but, A, you can’t find anything existing for them, and B, it’s hard to find land with the zoning, infrastructure, and utilities they need. So that’s the part of the business we’re in right now: figuring out where we can locate these businesses and which community is going to open its arms. We saw DeForest do it, and Verona. They see where Madison’s weakness is.
A few years back, Madison instituted a policy of no more big box. They want no more big box stores. Lowe’s wants to come to town? No, we don’t want it. So the communities outside Madison are saying, “Come to us,” and businesses have. You’ve seen communities like DeForest, Verona, and Middleton explode. They’ve done a lot to try to stop urban sprawl, but when you say no to everything, businesses have to go somewhere.
Gordon Lamphere (35:42): Then the sprawl just moves right across a municipal line. Speaking of lines, you drew a line in the sand earlier about the change in product, with a lot of older product partially left behind. Are users going into some of that older, outdated product, or are we seeing large vacancies in older product in Madison?
Mike Herl (36:13): Sales of those types of properties are definitely hot items. Companies may have a larger unit outside the city of Madison, but they want something inside Madison too, so they’re snapping them up. I’m still seeing ridiculous prices, like a six thousand square foot building with one loading dock and four parking spaces asking $120 a square foot, empty. You’re seeing crazy stuff like that. I don’t know if they’ll get it, but we’ve seen pricing for that type of old product moderate into the eighty to ninety dollar range. So yes, it’s backfilling.
What’s kind of funny is that you’ll see a space perfectly set up for a user, like one on the west side of town, twelve thousand five hundred square feet that can’t be demised, and they’re having a heck of a time finding someone to lease it. It’s been out there for months. The brokers have called me a couple of times asking if I know of anything or can do anything to help. But if that building went up for sale, it would be snapped up in a heartbeat. Leasing that size of space was a no-brainer a couple of years ago, but right now it’s the size people don’t want. That’ll change in a year.
Gordon Lamphere (37:57): We definitely see those troublesome sizes in our market too. For us, it’s properties somewhere between fifty and a hundred thousand square feet. Those seventy thousand foot buildings sit for ages. It’s a weird conundrum: your operations guy says, “I need a fifty,” or “I need a hundred,” and somebody built a seventy-five thousand foot building, and it sits.
Mike Herl (38:32): In southeast Wisconsin, there’s a three-letter developer out of Chicago that has built an enormous amount of tilt-up up and down the interstate corridors. I drive by them all the time, and they’re empty. They built and built and built.
Gordon Lamphere (38:52): I’m pretty sure I know who you’re talking about, and I’m not going to mention them directly, but I think a lot of our listeners will know, and if you want to call me, I’ll tell you on the phone. I can only speak to the Kenosha, Racine, and Walworth markets, since those are the markets I primarily operate in, and even up into Waukesha. There’s been a lot of development there, and I’m sure in Madison as well, much of it in 2022 and 2023, and some of the financing constraints on those deals have made pricing pretty rich for some of those leases. We see some leases where they’re looking for, say, a $10 net on an industrial property, and it just doesn’t make sense for a lot of users in a market that’s not New York or Chicago.
Data Centers and the “Madison Disease”
Mike Herl (39:54): I agree. But now there are these data centers, and it’s shocking to me. Down in the Mount Pleasant area, which you’re familiar with, the number of data centers they’re going to build is crazy, and God bless, I think it’s absolutely terrific. One of the big ones built a mega facility outside of Beaver Dam, and of course there’s the mega one up in Port Washington.
What’s fascinating, again, is what we call the Madison disease. We want to keep a small-town feel, and we don’t want to give up our farmland. But I can’t think of anything less intrusive to a community than a data center. They just killed one outside of DeForest earlier this week. It was going to be four hundred fifty acres. To me, it was a perfect site for it, but they’ve decided they don’t want data centers around here now. So this thing of Dane County wanting to pick and choose what it has, to the detriment of the community, makes things more and more difficult.
I think about the sheer amount of property tax such a facility would have generated for DeForest. It would have been incredible. Just like when Epic Systems built its mega campus in Verona. They gave them
Mike Herl (41:56): a heck of a TIF deal, where they didn’t have to pay anything for about twenty years. But man, that first year they did, boy, the city went on a spending spree, and they’re still doing wonderfully from it. I’m afraid that’s the next part of this. I honestly think the communities just outside Dane County are going to be the big winners over the next 10 years.
A case study: anybody who’s into hunting and guns knows Vortex. Vortex is the most elite optics company. The military, big DOD contracts, you name it. They started off in Middleton, as a guy and his wife who wanted to build a better binocular for bird watching, and it exploded. They wanted to stay in Middleton, and all their employees were from Middleton. When they wanted to expand, Middleton said no, we don’t want a facility like that here. So they went down Highway 151 and are now in Barneveld, right over the Dane County line. It’s a mega structure, an absolutely incredible, state-of-the-art facility. And when you look at where their employees come from, they live here in southwest Madison, Verona, and Mount Horeb. They drive down to work and come home at night. Just look at the property taxes you gave up.
The Final Four
Gordon Lamphere (43:54): It’s crazy. One thing we won’t give up on is our Final Four. It’s a nice, fun way to wrap up the episode. One of the topics I love is: what’s the one topic we haven’t discussed today that the industry isn’t talking about enough?
Mike Herl (44:16): Honestly, I think it’s the migration that’s taking place. When you look at Wisconsin, yes, we have three counties that are growing, but in 20 years they’re predicting the statewide population will go down by four percent. We have a lot of young people moving to Dane County, but so many of our older folks are dying off or moving to warmer climates, and that’s worrisome. I think Dane County will be insulated from it, but as far as the state of Wisconsin, I think we need a policy change, politically, to keep bringing in business and data centers and things that will make people move to other parts of the state.
Every morning at 5:30, I go into my home office, and there are nine trade emails I get every morning to stay up on things. One thing that’s fascinating to watch is the self-inflicted wounds states make on themselves, where they’re literally forcing out the entrepreneurs, the people who have made money, and the businesses with bad policy. The migration out of those states to warmer climates is kind of staggering. My God, if you’re not making money in real estate in Texas,
Gordon Lamphere (46:08): Yeah.
Mike Herl (46:16): get out.
Gordon Lamphere (46:18): And Georgia and Arizona. We’ve had a lot of folks on the podcast, and we’re going to have more, who are policy experts dealing with this exact topic. I can speak to Illinois and the southern counties of Wisconsin, because those are the areas I know. There’s not enough housing for people, and not enough emphasis on keeping businesses here, and as a result it becomes hard for businesses to stay and provide jobs, and for people to find places to live. For us, I don’t really care who’s in the statehouse in Madison or in Springfield, to a degree. As my wife would say, y’all have to do that. You’ve got to provide housing and jobs, because those are the opportunities that keep people here and keep the economy going. Whoever does that has my vote. That’s my perspective, and it’s a topic we’re not talking about enough.
Mike Herl (47:32): I agree. I don’t know what property taxes are like in Illinois right now, but we got zinged the last two years. My goodness. I’m not a big fan of this mayor, but they’ve gone on a spending spree, trying to make us as much like Manhattan as they can, with mixed use absolutely everywhere and trying to get everybody to ride the bus. One thing after another. It’s been an overwhelming push, and people are saying, “This is way too much change too fast,” and they’re pushing back.
You have so many older folks who have lived here their entire lives saying, “I can’t afford my property taxes.” So we have several people running for county board this April who have an incredible opportunity to say, “We’re going to push back on the property tax situation, because you’re forcing older folks to figure out what they’re going to do.” It’s an overwhelming problem. They keep piling up debt in Dane County and the city of Madison, and something’s going to break. I hope we don’t lose our seasoned citizens because they can’t afford to stay in their homes.
On top of that, on national fiscal policy, my goodness, there needs to be even more easing on interest rates, because of the sheer number of kids moving here. We’ve got what we call Soviet-style apartment buildings.
Mike Herl (49:34): A box with a bunch of boxes in it.
Gordon Lamphere (49:37): I agree. I’ve got a bunch of Badgers in our family, so I’ve been up to Madison plenty of times.
Mike Herl (49:43): In my travels, it looks like what you’d see in communist countries. It’s the same style: a box with a bunch of boxes in it.
Gordon Lamphere (49:55): To be fair, there are often more colors in the Madison market.
Mike Herl (49:59): That is true. I’ll give you that one. But when you have kids putting off having kids and getting pets instead, that’s a problem. We’ve got to get these kids into their own American dream and allow them to have families. It’s just so hard to do that in apartment buildings. That’s one of the things I really hope we get under control soon, because we’re starting to see bedroom communities spring up all around the Dane County area, and it’s unfortunate that that’s where young folks have to go. The last number I saw, on average about a hundred fifty-five thousand people travel from outside the county into Dane County to work every day, and about forty thousand in Dane County travel outside the county. That tells you a lot right there.
Gordon Lamphere (51:09): One of the questions we love to ask on the podcast, and we get some great answers, particularly from men and women in the arena: where do you think commercial real estate is going ten years from now?
Mike Herl (51:31): Going back to the trade emails I read every morning, it’s really quite something. You see two paths people are predicting. You’ve got the Elon Musk crowd saying that ten or twenty years from now, no one will have to work anymore. AI is going to take over, robots will do all of this, and people will be able to afford a home again and live a more leisurely life. The other side shows that we need more skilled workers. There are certain things robots and AI aren’t going to be able to do. You can’t really have a robot climb up on a roof to fix the HVAC, or have plumbers get underneath and fix plumbing issues. So you see it going in two different directions.
I see a consolidation of mega companies. I really don’t know how long this private equity craze is going to last. They’re swallowing up everything, but I’m not seeing great returns from private equity firms that I think are overpaying for all these so-called family businesses. But I do see consolidation among bigger businesses. I see data centers being huge and being around for the rest of my life, at least. But my money is on service-based real estate for entrepreneurs. I don’t think that entrepreneurial spirit is ever going to leave.
Mike Herl (53:49): They said we weren’t going to have retail anymore, that everything would be delivered to your door. Well, three or four years later, people want to see things before they have them shipped to their house, because they’re seeing how inconvenient it is to try something on and then have to send it back. They’re going back to stores. They want to see things and feel things again. So I honestly think that…
Gordon Lamphere (54:14): That’s a huge movement in Gen Z that people who aren’t looking closely at retail are missing. I’m a millennial, and our generation was less about going to places and seeing things. But my younger brother is Gen Z, and his generation wants to go to the store. There’s the power of the tactile, of being able to hold something in your hands and say, “Yes, this is the right product for me.”
Another question we love, and that many of our listeners hold dear, since we bring on people who’ve often been very successful in their careers, is traveling back to the start of your career. If you had thirty seconds to give your young self one tidbit of advice, what would it be?
Mike Herl (55:14): I’m a product of the ’80s, when doing everything to excess was the minimum. I’d tell my young self: touring around the world was an incredible experience, and I wouldn’t trade it for anything, but I shouldn’t have waited until I was thirty-seven to break into this business. I should have done two or three world tours instead of thirteen, gotten off the road, gone into real estate, and had more of a family life and put down roots faster. When you’re thirty-seven and introducing yourself to people for the first time, they’re more interested in saying, “My God, you were out on the road. Tell me what that’s like.” And I’m trying to say, “Trust me as your real estate broker.” I hadn’t done anything yet, but I toured with Mötley Crüe. What do you think they’re going to want to talk about?
So that’s what I’d tell myself: get off the road, and go get some world experience. I tell my kids the best education you can have is two years of business school at a tech college and then two years of traveling around the world to see just how lucky you are to be here. Get that real-world experience, figure out what you want to do, and jump into it with a vengeance and attack it.
Gordon Lamphere (56:52): I think that’s great advice. Now, one thing we’ll never let you get away with is leaving the podcast without telling us the next person we should have on, somebody influencing the world of real estate or policy. Who should be our next guest?
Mike Herl (57:14): Becoming an SIOR and going to the conventions, I see the young talent in real estate from around the country and around the world. I’m sixty-one years old, and I’m absolutely enamored with a couple of folks in their late thirties. Is it all right if I give you a gentleman’s name out of Houston?
Gordon Lamphere (57:41): Yeah, sure.
Mike Herl (57:42): Ryan Hartsell. That’s H-A-R-T-S-E-L-L. He runs a brokerage out of Houston, and to me, he’s probably my biggest influence in SIOR right now.
Gordon Lamphere (58:05): We’ll have to have him on. There’s one last, important question we’ll ask you: if somebody wants to get in contact, what’s the best way?
Mike Herl (58:17): The best way to get in contact with me is directly by cell phone or by email. My email address is [email protected]. That’s H-E-R-L, not H-U-R-L.
Gordon Lamphere (58:47): Mike, thank you so much for hopping on the podcast today, and we’d love to have you on in the future.
Thanks again to Mike. We appreciate his insights. If you enjoyed the podcast, please give us a like, a five-star rating, and a review. Your comments, subscriptions, and interactions truly matter and help us continue to bring on quality guests. You can find us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere with The Real Finds Podcast. Thank you for listening.
Van Vlissingen and Co. has been the Midwest’s oldest commercial real estate brokerage, development, and management firm since 1879, and today is independently ranked the #1 commercial real estate agency in Chicagoland, home to the #1 independently ranked agent, Gordon Lamphere, and the region’s #1 ranked commercial property management team. If you own, manage, or invest in energy-adjacent, mixed-use, or transit-oriented property across Lake County, the North Shore, the Northwest and O’Hare corridors, DuPage and the I-88 corridor, Will County, or southern Wisconsin’s Pleasant Prairie, Kenosha, and Racine markets, contact Van Vlissingen and Co. at 📞 847-634-2300 or 🌐 vvco.com. For a market-wide view of where these dynamics sit today, see our State of the Chicagoland Commercial Real Estate Market for Q3 2026.